By Karey Wutkowski
WASHINGTON, March 4 (Reuters) - U.S. housing markets are stabilizing but the number of 'underwater' mortgages remains a major source of concern, Federal Deposit Insurance Chairman Sheila Bair said on Thursday.
Bair said the FDIC is attacking the problem by looking at principal writedowns within the loss-share agreements it strikes with institutions that acquire failed banks.
'As loss mitigation efforts continue, we need to recognize the evolving nature of the mortgage problem,' Bair said in remarks to a real estate conference.
She said the initial phases of the crisis involved poorly structured mortgages that included rate spikes, making monthly payments unaffordable. Now, a core problem is underwater mortgages in which the owner owes more on the mortgage than the home is worth.
Bair cited estimates that show almost 16 million U.S. homes are currently underwater.
This negative equity has been a bane of homeowners, making many unqualified for home loan refinancing and preventing some from selling.
Bair said as a result, the FDIC is 'actively looking' at provisions encouraging principal writedowns -- which would reduce the overall burden of the mortgage -- through its failed bank programs.
The FDIC has already been advocating the buyers of failed banks that receive government loss-share agreements to temporarily reduce mortgage payments for troubled borrowers.
The FDIC has been extending the large loss-share agreements on pools of failed banks' assets to make the institutions more attractive to potential borrowers.
Bair, who for months pushed for a nationwide loan modification effort before the administration finally rolled one out late in 2008, also highlighted some bright spots in the housing market.
She noted the Case-Shiller home price index rose slightly for seven consecutive months to close out 2009, and said the National Association of Realtors housing affordability index has risen to a historically high level.
Bair also pointed out that more investors and buying with cash and families are taking advantage of low mortgage rates and homebuyer tax credits.
'After three long and difficult years for housing and mortgage finance, I think we're seeing some progress in stabilizing our housing markets,' she said.
(Reporting by Karey Wutkowski, editing by Matthew Lewis) Keywords: FDIC/HOUSING (karey.wutkowski@thomsonreuters.com; + 1 202 898 8374) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, March 4 (Reuters) - U.S. housing markets are stabilizing but the number of 'underwater' mortgages remains a major source of concern, Federal Deposit Insurance Chairman Sheila Bair said on Thursday.
Bair said the FDIC is attacking the problem by looking at principal writedowns within the loss-share agreements it strikes with institutions that acquire failed banks.
'As loss mitigation efforts continue, we need to recognize the evolving nature of the mortgage problem,' Bair said in remarks to a real estate conference.
She said the initial phases of the crisis involved poorly structured mortgages that included rate spikes, making monthly payments unaffordable. Now, a core problem is underwater mortgages in which the owner owes more on the mortgage than the home is worth.
Bair cited estimates that show almost 16 million U.S. homes are currently underwater.
This negative equity has been a bane of homeowners, making many unqualified for home loan refinancing and preventing some from selling.
Bair said as a result, the FDIC is 'actively looking' at provisions encouraging principal writedowns -- which would reduce the overall burden of the mortgage -- through its failed bank programs.
The FDIC has already been advocating the buyers of failed banks that receive government loss-share agreements to temporarily reduce mortgage payments for troubled borrowers.
The FDIC has been extending the large loss-share agreements on pools of failed banks' assets to make the institutions more attractive to potential borrowers.
Bair, who for months pushed for a nationwide loan modification effort before the administration finally rolled one out late in 2008, also highlighted some bright spots in the housing market.
She noted the Case-Shiller home price index rose slightly for seven consecutive months to close out 2009, and said the National Association of Realtors housing affordability index has risen to a historically high level.
Bair also pointed out that more investors and buying with cash and families are taking advantage of low mortgage rates and homebuyer tax credits.
'After three long and difficult years for housing and mortgage finance, I think we're seeing some progress in stabilizing our housing markets,' she said.
(Reporting by Karey Wutkowski, editing by Matthew Lewis) Keywords: FDIC/HOUSING (karey.wutkowski@thomsonreuters.com; + 1 202 898 8374) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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