Although Congress remains in recess over their Easter break this week, that doesn’t mean it has been a dull week in the reverse mortgage world.
A study by First American CoreLogic indicates that “underwater” borrowers may remain that way for longer than previously thought. While some had speculated that home values would rise in the next few years, the study indicates that it could take until late 2015 or early 2016 for the typical underwater borrower to have positive home equity. Even worse, some of the nation’s hardest hit markets could take even longer to return to positive equity. The report, which examined 10 real estate markets across the country, did not expect the typical Detroit homeowner to have positive home equity until 2020.
Former Federal Reserve Chairman Alan Greenspan testified in front of the Financial Crisis Inquiry Committee today (FCIC). His testimony came in the first of three panels during the first of three days of testimony into “Subprime Lending and Securitization and Government-Sponsored Enterprises.” Greenspan’s remarks contain some interesting comments on the future of the financial system. He writes:
In closing, let me reiterate that the fundamental lesson of this crisis is that, given the complexity of the division of labor required of modern global economies, we need highly innovative financial systems to assure the proper functioning of those economies. But while, fortunately, much financial innovation is successful, much is not. And it is not possible in advance to discern the degree of future success of each innovation. Only adequate capital and collateral can resolve this dilemma.
Greenspan also noted that the Federal Reserve is not an enforcement agency, but a rule-making agency. It cannot implement the kinds of reforms HUD could implement. Finally, he added that the “extraordinary changes” in the marketplace as well as the actions of Fannie Mae and Freddie Mac prevented the actions taken by the Fed to prevent the crisis from being effective.
The Federal Reserve also stopped purchasing mortgage securities on March 31, the end of a $1.25 trillion program and its largest effort to prop up the American economy. The program had been credited with helping keep mortgage rates low and slowing the decline in home prices.
Finally, Florida’s proposed reverse mortgage bill, SB 1532, passed the Florida Senate by a unanimous vote and now waits to be considered by the House of Representatives. The House version of the Bill, HB 845, is on the agenda to be reviewed by the Policy Committee on Friday.
Written by Reva Minkoff