The head of the Federal Deposit Insurance Corporation warns over the next two years an additional four to five million mortgages will enter foreclosure if Congress fails to get a handle on the nation’s foreclosure crisis.
The remarks by Sheila C. Bair, the FDIC chairwoman, were made before a Congressional committee charged with the task of coming up with solutions to the nation’s economic crisis. The comments reflect what Housing Predictor has been forecasting for more than a year.
Under Bair’s plan, mortgages would be modified, reducing the amount of the payment for homeowners by lowering their interest rates for those who qualify to keep more homeowners in their homes. The program could cover as many as 2.2 million homes not already covered by Fannie Mae and Freddie Mac programs, and would be part of the $700-billion bailout plan already approved by Congress. However. the plan has not received support from the Whitehouse, which would be needed to implement the program.
“An additional 3 million non-GSE loans are projected to become delinquent by year end 2009,” according to the FDIC web site. “Of this total of approximately 4.4 million problem loans, we expect that about half can be modified, resulting in some 2.2 million loan modifications under the plan.”
Housing Predictor forecast the foreclosure epidemic nearly two years ago, and is currently forecasting a total of 6.4 million foreclosures through 2011 if major Congressional intervention to halt the spread of foreclosures is not taken. More than 3 million foreclosures have already taken place.
Bair is pushing to get relief for homeowners threatened with foreclosure as a result of higher mortgage payments. The program she has proposed to the Department of Treasury may help homeowners avoid foreclosure, and is intended to help keep the nation’s economy out of an economic depression.
The nation’s financial crisis is rooted in the housing market, which is seeing deflation in home values in the over-whelming majority of housing markets throughout the U.S. Deflation in some markets is being witnessed at double-digit levels.
Efforts made by the Fed and Treasury have helped to aid financial markets, according to some financial analysts but have failed to assist in the return of healthier housing markets. It is widely accepted by economists until the government gets a handle on the nation’s foreclosure crisis the overall economy will not be able to stabilize and find a road to recovery.
The head of the Fed, Ben Bernanke and Treasury Secretary Henry Paulson also testified before the Congressional panel. The Bush Administration has decided to defer reaching more deeply into the $700 billion bailout until President-elect Barack Obama’s administration takes over Jan. 20th.