This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Fed's Housing Fix Means Everyone Loses

Stocks in this article: BACJPMWFCFNMA.OBFMCC.OB

Bank of America (BAC), JPMorgan Chase (JPM) and Wells Fargo (WFC) are the biggest mortgage originators in the country.

The Fed also urged policy makers to find a balance between "prudent lending and appropriate consumer protection" on one hand and "not unduly restricting mortgage credit" on the other, suggesting that the current tightness in mortgage credit might be overdone.

"Policymakers should recognize that steps that promote healthier housing and mortgage markets are good for safety and soundness as well," the paper argued.

The paper does not address the fate of Fannie Mae (FNMA.OB) and Freddie Mac (FMCC). Instead it makes a case for the agencies to take further action to boost the recovery in the market even if it means further losses to taxpayers in the near term.

"In many of the policy areas discussed in this paper--such as loan modifications, mortgage refinancing, and the disposition of foreclosed properties--there is bound to be some tension between minimizing the GSEs' near-term losses and risk exposure and taking actions that might promote a faster recovery in the housing market," the Fed wrote. "Nonetheless, some actions that cause greater losses to be sustained by the GSEs in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery."

The Fed also suggested that banks actively consider alternatives to foreclosures such as deeds-in-lieu of foreclosure or short sales, which can help reduce transaction costs and minimize negative effects on communities.

The central bank warned that failure to take action would mean the adjustment process in the housing market will take longer adding to "deadweight" losses, pushing house prices lower and prolonging the downward pressure on the wealth of current homeowners and the resultant drag on the economy at large.

--Written by Shanthi Bharatwaj in New York



>To contact the writer of this article, click here: Shanthi Bharatwaj.

>To follow the writer on Twitter, go to http://twitter.com/shavenk.

>To submit a news tip, send an email to: tips@thestreet.com.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,828.24 +0.49 0.00%
S&P 500 2,067.56 -5.27 -0.25%
NASDAQ 4,791.63 +4.3130 0.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs