Powerful Voice Joins Call For Homeowner Help

William Dudley

National Association of Realtors (NAR) chief economist Lawrence Yun has been a voice crying in the wilderness, pleading month after month for mortgage lenders to make it easier for qualified consumers to buy homes.

Now that lonely voice has some powerful company. William Dudley, President of the New York Federal Reserve, says he believes helping the housing market should become an economic priority. Housing has always been a strong economic driver, and anemic sales over the last three years have coincided with an economy that just can't seem to get any traction.

Dudley has called for an effort to make refinancing “broadly available on streamlined terms and with moderate fees to all prime conforming borrowers who are current on their payments.” He would also like to see principle reduction for “underwater” homeowners who have continued to make their payments.

Unable to refinance

Allowing these homeowners to take advantage of record low interest rates would pump more money into the economy. As it now stands, consumers who owe more on their homes than the homes are worth are stuck with whatever interest rates they have, since no bank will consider refinancing the loan.

Dudley also thinks banks should be willing to take on a bit more risk so that more prospective home buyers can qualify for loans. That must come as music to Yun's ears, as he and others in the real estate industry having been saying much the same thing for years.

White paper

NAR this week hailed the release of a Fed “white paper” that quantifies many of Dudley's assertions about housing and the economy.

“Improving access to affordable mortgage financing for qualified home buyers and investors and aggressively pursuing more loan modifications and short sales is necessary to help reenergize the housing market and spur an economic recovery,” said NAR President Moe Veissi.

To date, government policy has been anything but supportive of the beleaguered housing market. A proposal to eliminate the mortgage interest deduction was floated in Washington earlier this year as a possible deficit-reduction measure, but was never seriously considered. The suggestion that government might help find away to make more loans happen is welcome news in the real estate industry.

Financing is key

“Expanding financing opportunities to qualified buyers could help reduce distressed property inventories, minimize the negative impact those homes have on local markets and restore vibrant housing markets and neighborhoods,” Veissi said.

Yun says that, were lenders to simply return to pre-housing bubble lending standards, home sales would rocket ahead by 15 percent. Industry experts say that would stabilize prices and help prevent foreclosures, since distressed homeowners would find it easier to sell homes.