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Duke Calls on the Government to Limit Costs of Foreclosures

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By : John Cutts    99 or more times read
In her speech, delivered before participants at the American Bankers Association National Conference for Community Bankers, Federal Reserve Governor Elizabeth Duke has called on the government to reduce the costs of foreclosures as a way to prevent the rise in the number of repossessed homes.

At the conference, which was held in Phoenix, Arizona, Duke informed participants that housing finance schemes are not only limited to the subprime loan market.

She noted widespread problems in various mortgage payment categories which contribute to the foreclosure crisis.

According to Duke, the worsening housing problem reflects the difficulty of homeowners to honor their mortgage payment obligations and the weakening macroeconomic conditions. She adds that the unabated flood of foreclosures also showed that borrowers have difficulty in refinancing their mortgages.

This, she said, is a result of tighter mortgage credit and reduced home equity that impaired the ability of homeowners to pay their mortgages.

She cited data which showed that 13 percent of the total near-prime loans and 25 percent of the total subprime loans are in the brink of foreclosure. She claimed that prime mortgages have a delinquency rate of 3 percent to 4 percent, lower than the delinquency rate for nonprime loans. However, prime mortgages’ delinquency rate almost doubled in 2008.

The data, according to Duke, suggested that mortgage lenders initiated over 2 million foreclosures in 2008, almost double compared with the 2006 figures.

In the past, she explained, about 50 percent of foreclosed homes were saved through repayment schemes or other arrangements, while the remaining 50 percent were lost to foreclosures.

But now, she countered, the percentage of home loss could be higher because of the increasing number of distressed homeowners and bleak economic conditions.

She reiterated the need for an immediate action to solve the housing problem which she noted affected not only the homeowners who lost their properties but also the entire community.

Duke also called on financial institutions to find ways to create partnerships with local governments and community groups to support programs to stabilize communities and neighborhoods affected by the foreclosure crisis.

She suggested that banks support programs to reuse real estate owned properties by offering home loans to first-time homebuyers and providing funds to nonprofit organizations for the purchase and rehabilitation of real estate owned properties.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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