MBS MID-DAY: Lagging the Rates Rally

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10:38AM  : 
Bernanke: Time to Clean Out Foreclosure Pipeline
(Reuters) – Federal Reserve Chairman Ben Bernanke has a recipe for helping the housing market: Modify more loans and speed up foreclosures to get rid of a glut of distressed properties clogging the system. Still, even that approach may be slow going, with persistently high unemployment making would-be borrowers cautious, and tighter credit standards for mortgages locking out the bottom third of buyers who would otherwise take the plunge. There is “evidently a lot of uncertainty about employment, about the economic recovery and that is affecting people’s willingness to make the commitment to buy a house,” Bernanke said at a press conference on Wednesday following the end of the Fed’s two-day policy meeting. Although other parts of the U.S. economy have shown signs of recovery, the housing market remains in a slump, with March home prices at lows not seen since March 2003, years before the housing market peaked. Demand for houses is weak and data on Wednesday showed that applications for mortgages fell last week. The Obama administration and federal regulators are trying to give struggling homeowners a reprieve by permanently modifying their loans. But only a fraction of qualified homeowners are winning lower mortgage payments, housing counselors and consumer advocates say. “I would like to see just further efforts first of all to modify loans where appropriate, and where not appropriate, to speed the process of foreclosure and the disposition of the foreclosed homes in order to clear the market,” Bernanke said.
“Get these homes out of the pipeline and allow people to operate in a market where they are more confident that prices will be stable rather than falling,” he said. Aside from using monetary policy to help boost employment, Bernanke said the Fed was also trying to help the housing market by leaning on the banks it regulates to modify loans “where appropriate.”

10:33AM  : 
Mortgage Poll: Are Strategic Defaults Ethical?
(Reuters) – I know a guy — let’s call him Fred — who has a plan for walking away from his home and the $400,000 mortgage on it. Fred lives in Phoenix, one of those particularly hard hit real estate markets in a state that prohibits banks from coming after borrowers for additional money once a home has gone into foreclosure. The home he bought for more than $400,000 is now worth about $225,000, by his estimates. He’s saved up quite a bit of money and can keep making the payments. But he’s nearing retirement, and figures that, the way he’s going, he’ll never have home equity. So he’s buying another house; similar to the house he has now, for about half the price he paid the first time. Once that loan and settlement is done, he’s going to stop making payments on his existing house, sending it into foreclosure. “That’s going to really slam your credit score,” I said, ever the personal finance geek. “What do I care? I’m going to be 70, and I’ll already have my low-rate mortgage and my credit cards,” said Fred. So, what do you think? So-called strategic defaults make up 17 percent of defaults and may even be spreading, according to a new study by Experian. That study found that the folks who voluntarily cast off their mortgage burdens are wealthier than average, have high credit scores and are very savvy about the way they manage their money. So, what do you think? Take the Reuters poll: http://blogs.reuters.com/reuters-wealth/2011/06/23/mortgage-poll-are-strategic-defaults-ethical/

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