Thursday, May 10, 2007

Housing Lump Not Over Yet

And now, a sober look at the housing market from Freddie Mac’s CEO Richard F. Syron. Rising interest rates on high-cost mortgages could cause a spike in foreclosures in the next few years, he said in an interview with The Associated Press. He sees the mortgages issued in 2006 as “the most troublesome”, because of the loose lending standards that spread throughout the industry. Payments on these loans will only begin to adjust in the next few years, potentially causing yet another wave of delinquencies and foreclosures.

Freddie Mac and Fannie Mae, the two government-sponsored loan financiers and largest buyers of home mortgages, are currently developing programs to help keep troubled lenders in their homes. These will include new types of hybrid adjustable-rate loans with longer fixed-rate terms and mortgages with longer repayment terms. Freddie Mac also announced that it will purchase $20 billion in mortgages to help consumers avoid foreclosure. According to Syron, these measures will not suffice to save everyone. They’re rather aimed to help “individual people”. Reversing the market dynamics, however, will take a lot of time.

He also spoke at the “Housing Boston 2012” conference. He said zoning restrictions are standing in the way of providing affordable housing and that residents of established neighborhoods need to rethink their reasoning behind such restrictions. In cities like Boston, lack of supply makes Real Estate harder to afford.

No comments: