The unemployment rate will remain above 7% for the next three years and the country won’t be at “maximum employment until 2016,” Federal Reserve Bank of San Francisco president and chief executive John C. Williams said Friday.
Economic recovery is “frustratingly slow and halting,” and the “massive destruction of wealth” the crisis caused by pushing down home and stock prices, the tightening of credit, and uncertainty about the European situation all contributed to the slow recovery, Williams told the Central Bank of Chile, according to prepared text released by the Fed.
But the drop in home prices “also wiped out the home equity of millions of mortgage borrowers,” in some cases making them owe more than their homes are worth, unable to borrow or refinance, and in worst cases at the point of delinquency and foreclosure, he said.
Small businesses often use their equity in their homes to get loans, but they can’t do that now, creating “a broad-based credit crunch that is restraining both consumer and business spending,” he said.
“In this environment, monetary policy alone would take a very long time to bring about the desired outcome of maximum employment,” Williams said.
“Fiscal policy actions that reduce uncertainty and stimulate recovery are badly needed,” he said. “What would be especially helpful at this juncture are fiscal policy actions that work in tandem with monetary policy to stimulate the economy.”
“One example of such a policy is the recently announced U.S. government initiative to make it easier for underwater homeowners to take advantage of very low rates and refinance their mortgages,” he said. “This will trim monthly payments for some households and could reduce foreclosure rates. And it could also eventually provide a modest boost to consumer spending. Other actions that address the continuing problems in the housing market could help spur recovery and enhance the effectiveness of monetary policy as well.”
Daily Briefing | Wednesday, November 23, 2011
PMI Files for Chapter 11 Bankruptcy
The PMI Group Inc., Walnut Creek, Calif., has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware.
Conforming Loan Limits Rising in Only One County in 2012
Only one county in the countryFairfield, Conn.will have a higher conforming loan limit in 2012. The ceiling in the other 3,200-plus counties will remain unchanged.
30-Year Rate Slips Below 4% Again
The average weekly rate for a 30-year loan slipped slightly below 4% and rates for adjustable-rate mortgages averaged new record lows in Freddie Mac’s survey Wednesday.
Freddie Reports Higher Refis Delinquencies
Freddie Mac reported a 24% jump in refinancings from September to October while total loan volume rose by less than 4%.
Massachusetts Foreclosure Activity Reverses Yearlong Trend
After more than a year of declines, foreclosure activity rose in Massachusetts in October, according to the Boston-based real estate data publisher The Warren Group.
FHFA, GSEs: Dec. 1 UCDP Deadline Will Be Enforced
The government-sponsored enterprises’ Uniform Mortgage Data Program has been marred with delays and setbacks since the earliest steps began at Fannie Mae two-and-a-half years ago with the precursor to the Uniform Collateral Data Portal, the technology platform that will accept full electronic appraisal reports in a new XML-formatted data file.
Purchase Apps Up But Refinancings Sink
Application volume fell by 1.2% on a seasonally adjusted basis for the week ended Nov. 18, as purchase apps were up to their highest level since August, but refinancings were down to their lowest point since July, according to the Mortgage Bankers Association. The data for the previous week (Nov. 11) was adjusted to take into account Veterans Day.
Permits Up Again in California
For the third consecutive month, builders in California pulled an increasing number of permits compared to the previous year.
Lennar Adds to Debt Offer
Lennar Corp. has upsized its senior debt offering to $350 million and priced it at a 3.25% interest rate. It first proposed selling $300 million in debt. The over-allotment for the offering was also increased to $50 million from $45 million.