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Fed boss seeks US homeowner help Fed boss seeks US homeowner help
(30 minutes later)
The chairman of the US Federal Reserve, Ben Bernanke, has said more should be done to prevent homeowners facing foreclosures unnecessarily.The chairman of the US Federal Reserve, Ben Bernanke, has said more should be done to prevent homeowners facing foreclosures unnecessarily.
He said there had been a 50% rise in foreclosures in 2007 to one and a half million, and this is expected to worsen as mortgage repayments rise.He said there had been a 50% rise in foreclosures in 2007 to one and a half million, and this is expected to worsen as mortgage repayments rise.
Mr Bernanke told a meeting of US bankers that the situation called for a "vigorous response".Mr Bernanke told a meeting of US bankers that the situation called for a "vigorous response".
This would help communities and the wider economy, he said.This would help communities and the wider economy, he said.
"At the national level, the rise in expected foreclosures could add significantly to the inventory of vacant unsold homes-already at more than 2 million units at the end of 2007-putting further pressure on house prices and housing construction," Mr Bernanke said. "At the national level, the rise in expected foreclosures could add significantly to the inventory of vacant unsold homes - already at more than 2 million units at the end of 2007 - putting further pressure on house prices and housing construction," Mr Bernanke said.
Foreclosures rise
The number of foreclosures and people defaulting on repayments is expected to rise in 2008.The number of foreclosures and people defaulting on repayments is expected to rise in 2008.
One and a half million US homeowners will see their fixed rate loans expire in 2008, "imposing stress on many households", Mr Bernanke said. Although lenders have scaled up their efforts...more can, and should, be done Ben Bernanke, Chairman, Federal Reserve
One and a half million US homeowners will see their fixed- rate loans expire in 2008, "imposing stress on many households", Mr Bernanke said.
The average monthly payment for homeowners coming off these special deals is expected to rise by more than 10% to $1500 (£750).The average monthly payment for homeowners coming off these special deals is expected to rise by more than 10% to $1500 (£750).
Mr Bernanke said solutions should be "prudent", and should take care not to reward irresponsible borrowers.Mr Bernanke said solutions should be "prudent", and should take care not to reward irresponsible borrowers.
"We want to help borrowers in trouble, but we do not want borrowers who have avoided problems through responsible financial management to feel that they are being unfairly penalised.""We want to help borrowers in trouble, but we do not want borrowers who have avoided problems through responsible financial management to feel that they are being unfairly penalised."
Industry work
The Fed chairman recognised the work the industry was already doing to help borrowers, but urged them to go further.
"Although lenders have scaled up their efforts and adopted a wider variety of loss-mitigation techniques, more can, and should, be done," he said.
Mr Bernanke emphasised the financial cost to the banks of foreclosing in terms of taxes and legal fees as well as the detrimental impact on the value of the properties.
Lenders should consider offering borrowers lower interest rates or extending their loan period to help them stay in their homes wherever possible, he said.
Ben Bernanke's speeches are always closely watched by traders in the United States and around the world.
His comments on the rising number of foreclosures added to the negative mood on Wall Street, where the Dow was trading down around 1%.