On the heels of the news that home mortgage loan applications are down, Ben Bernanke took the stand to testify before Congress today. He is expected to continue his remarks, and they are likely to continue his addressing of the current US economic situation. The New York Times reports on his views on the financial sector, including mortgage lenders:

“Financial markets remain under considerable stress,” Mr. Bernanke said, in remarks prepared for delivery Wednesday morning to the Joint Economic Committee. “The capacity and willingness of some large institutions to extend new credit remains limited.”

This is troublesome to many. It means that even though there are some buyers out there, they may not be able to qualify for the loans that they need. While it is generally a good thing that mortgage lenders are requiring better income verification and better credit scores, some have overdone it and are making it very difficult to get through the home mortgage loan approval process.

Bernanke also warned that the economy is likely to see very limited growth, or even contracted growth, throughout the first half of 2008. He did express optimism for the second half of 2008, and suggested that a “sustainable pace” for growth could be seen in 2009.

Some of the problems Bernanke expects to see in the near future include the following:

• Unemployment rate to rise.
• Payrolls to fall.
• New home construction to continue its decline.
• Inflation will likely be a concern.
• Continued strain on credit markets.

While there is no way of telling whether a recession has occurred until after the fact, some are already saying that our economy is in a recession. Whether or not this is the case, though, it is prudent to exercise caution and common sense in matters of debt and personal finance.

Tags: mortgage loan approval, mortgage lenders, home mortgage loan, mortgage loan blog,
mortgage loan application, Ben Bernanke, limited credit

Yesterday’s flurry of proposals to overhaul the financial system (not to mention the resignation of Alphonso Jackson), have the nation buzzing today. However, some of the talk is about what the Democrats have already proposed in terms of fixing the mortgage market mess. And there is the usual talk about whether or not yesterday’s proposals would truly help the housing market (and by extension the rest of the financial market).

Some mortgage industry experts feel that the steps already taken — interest rate cuts, broader roles for Freddie Mac and Fannie Mae, and lending on a massive scale by the Fed — are enough. But some feel that while the mortgage industry is likely to recover, individuals are going to have a harder time of it.

And that is what the Democrats are proposing: more help for individuals.

One of the more sweeping bits of legislation proposed includes allowing the Federal Housing Administration to actually guarantee loans issued to help troubled homeowners refinance — to the tune of between $300 and $400 billion. The thinking goes like this: The government is already committing billions to bail out Bear Stearns and offer preferential terms to other financial institutions. Why not help the American people with their own taxpayer dollars?

The International Herald Tribune summarizes some of the other plans that have been floated as ways to alleviate the mortgage market mess:

Other ideas pushed by Democrats include letting bankruptcy judges rewrite the terms of distressed mortgages and providing federal grants to help communities with large numbers of foreclosed properties.

But, like yesterday’s proposals, the Democrats’ ideas will take time to implement, since they have to be agreed on in Congress. Plus, most of the ideas favored by the Democrats don’t have the same support in the mortgage industry as the Bush Administration proposals.

In any case, such short term mortgage mess fix ideas probably won’t help in the long run. Even if laws are changed to guarantee more oversight of States’ loan origination processes, or even if bankruptcy judges were offered more leeway in home mortgage loan restructuring, lasting changes will only be made when the American people look at lending differently.

Tags: mortgage market mess, Democrats ideas mortgage market, home mortgage loan, mortgage loan blog,
mortgage industry news, Bear Stearns bailout, Bush Administration mortgage market