Financial services companies and mortgage companies must do more to reduce preventable home foreclosures,
Federal Reserve chairman Ben S. Bernanke said today.
"Measures to reduce preventable foreclosures could help not only stressed borrowers but also their communities and, indeed, the broader economy," Mr. Bernanke said, speaking at the Independent Community Bankers of America Annual Convention in Orlando, Fla. "At the level of the individual community, increases in foreclosed-upon and vacant properties tend to reduce house prices in the local area, affecting other homeowners and municipal tax bases."
He added that on a national level, the increase in expected foreclosures could add significantly to the inventory of vacant unsold homes — which already stand at more than two million units at the end of 2007 — putting further pressure on house prices and housing construction.
"Although lenders and servicers have scaled up their efforts and adopted a wider variety of loss-mitigation techniques, more can, and should, be done," he added.
Meanwhile,
Federal Reserve vice chairman Donald Kohn told the Senate Committee of Banking, Housing, and Urban Affairs that the U.S. banking system remains in "sound overall condition," having entered a period of recent financial turmoil with solid capital and strong earnings.
"The problems in the mortgage and housing markets have been highly unusual and clearly some banking organizations have failed to manage their exposures well and have suffered losses as a result," said Mr. Kohn.
"But in general these losses should not threaten their viability."
On the inflation front,
Federal Reserve Governor Fredric Mishkin said that the recent increase in inflation would fade away.
"The recent bump up in inflation also likely reflected a reversal of unusually low readings earlier last year for apparel, prescription drugs, and so-called nonmarket items in the index, and the contribution of these items to core inflation is likely to wane," he said in a speech to the National Association for Business Economics in Washington.
He added that he expects inflation pressures to wane over the next few years, as product and labor markets soften and the rise in food and energy prices abates.
