Fed's push on housing crosses a line, critics sayTopic: Mortgage
Senior Federal Reserve officials are injecting themselves into a noisy debate over how to solve the housing crisis, drawing criticism from some lawmakers who say the Fed has no business straying from its traditional role as the U.S. central bank.
Amid complaints that the Fed has encroached on Congress's territory, Chairman Ben S. Bernanke has tried to allay concerns on Capitol Hill over the past few weeks, in the latest flap in a broader debate about the Fed's proper role in the economy.
That discussion began after the Fed started taking unorthodox measures in 2008 to address the financial crisis, including several rounds of massive bond purchases and steps to shore up lending markets. All the Republican presidential candidates have criticized Bernanke on various counts, saying he has printed too much money, damaged the value of the dollar and carried out programs that simply haven't worked.
In Washington, the reaction to the Fed's efforts to bring down unemployment has divided along partisan lines. Democrats say the steps are necessary, but Republicans say they risk sparking inflation and undermining the currency.
The latest commotion follows the Fed's release last month of a report analyzing housing policy, which central bank officials say is closely related to their efforts to reinvigorate the economy. The report suggested that additional federal efforts to help homeowners could be worthwhile, even at taxpayer expense.
Democrats have seized on the "white paper" as ammunition in arguing for billions of dollars in new federal relief for beleaguered borrowers. Some Republicans have accused the Fed, which generally avoids addressing policy questions before Congress, of potentially compromising the central bank's independence.
"It appears the Fed may have overstepped their bounds in recommending fiscal policy actions," said Michael Feroli, chief U.S. economist at J.P. Morgan Chase. "It does get a little bit into dangerous territory."
After Rep. Scott Garrett (R-N.J.) complained this month that the Fed had crossed a line, Bernanke said publicly that he was sorry if the lawmaker thought that the white paper intruded on a congressional debate. And after Sen. Orrin G. Hatch (R-Utah) released a letter he sent to the Fed, warning it "to refrain from providing any hint of activism," Bernanke called him to explain the central bank's actions.
Some Fed officials, in particular New York Fed chief William Dudley, have advocated a variety of new efforts to aid homeowners. Many of the white paper's ideas to help the housing market echo Obama administration proposals, such as helping homeowners refinance into more affordable mortgages and selling foreclosed buildings for use as rental properties.
Speaking at a national conference of home builders this month, Bernanke explained that the Fed has a keen interest in the health of the housing and mortgage markets because they are related to the central bank's main missions of supporting the economy, regulating banks and protecting consumers.
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I am a mortgage bnkaer. On the FHA loan program regardless of whether you have 20% equity in the property the loan requires MI at the time you OBTAIN the loan. But it will drop off after 5 years if you have at least 22% equity in the property. At the 5 yr mark, if you do not have 22% equity it will not come off until you do. You will need to contact the lender to drop the MI premium.
but this months inracese was much greater than expected. Low prices and the federal tax credit/housing stimulus programa0offered by the governemnt to first time home buyers was probably a huge boost to the
At first glance you prlabboy should not be purchasing a home. There are a few questions that come to mind. In this senior community what are the HOA fees and taxes? Where is your income coming from? If you work what are the chances you will need to change jobs? Why do you want to buy a home? What has happened to the home values in this community? The appreciation in these communities is usually not good.
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