Bernanke: Three Factors Continue to Drag Down Housing

Federal Reserve Chairman, Ben Bernanke continues to blame three factors for the lack of housing recovery.  Those factors include tight credit, the overhang of foreclosed property, and the large number of no equity homes in the mortgage market.

The different problems are interrelated.  The problems in the housing and mortgage markets may be holding down job growth and “normalization of credit conditions.”

Lenders appear unwilling or unable to lend to qualified borrowers, and this problem is inhibiting sale of homes to first time buyers and to those who want to move up. Mortgage credit has contracted by at least 13% because lenders have been unwilling to underwrite loans that would otherwise be accepted by the GSEs, according to Bernanke.  He commented that fewer than half of lenders will offer a mortgage to a buyer with FICO score of 620 and a 10% down payment despite willingness by the GSEs to guarantee such a loan.

Bernanke spoke during an international show hosted by the National Association of Home Builders in Orlando, FL.