Monday, January 9, 2012
FED Considering Expansion into Principle Reduction on Existing Home Mortgages
On Friday, the influential head of the New York Fed, William Dudley, broached the taboo subject of principal write-downs for distressed buyers. It was this very issue, and the accompanying sense OF outrage among some Americans at the prospect of helping homebuyers who they saw as irresponsible borrowers, that spawned the Tea Party.
Dudley framed principal reductions in moral as well as economic terms, saying many borrowers simply had the bad luck to buy just before the bubble burst.
He said the New York Fed believes the waves of foreclosure will continue as more and more Americans give up on their mortgages, a move which would threatening the momentum that appears to have begun to build in the U.S. economy.
"We have to recognize that there is more to economic policy than just monetary policy," Dudley said. "There are workable solutions to our housing problems at costs that I deem very reasonable relative to the economically inefficient path we are on."
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Posted by BullRun at 10:58 AM