The economy is benefiting from a modest housing recovery even though federal fiscal policy remains a significant headwind to growth, Federal Reserve Chairman Ben Bernanke told reporters Wednesday.

Bernanke spoke to the press after the release of the Federal Open Market Committee minutes.

If the recovery continues, the Fed plans to taper off mortgage-backed securities purchases once the unemployment rate hits 7%, the Fed Chair suggested.  And while reporters grilled Bernanke about inflationary risks and the impact of MBS purchases, he remained cautiously optimistic.

The Fed Chair’s more optimistic tone stemmed from improving market fundamentals, with Bernake highlighting increases in household wealth and fewer large scale layoffs. State and local governments also are improving somewhat financially, he said.

The only major drag is federal fiscal policy.

The nation’s housing recovery also continues to benefit the economy, Bernanke added, with low interest rates sparking home sales and rising prices providing an equity cushion for once underwater borrowers.

With the government now the only major player in the secondary mortgage market, reporters asked Bernanke about the impact of a government pullback. Specifically, they wanted to know the fate of the 30-year, fixed-rate mortgage without government support.

It is entirely possible that there will be a major change in the government’s role in the mortgage market, and if so, there will be a different structure for mortgages,” the Fed Chair said.

“It is possible that we find a different structure is better for some people,” he added.


About the Author

Most Popular Articles

Freddie Mac: Mortgage rates reverse course from last week’s low

This week, the average U.S. fixed rate for a 30-year mortgage jumped to 3.69%. That’s still more than a percentage point lower than the 4.85% of the year-earlier week.

Oct 17, 2019 By

Latest Articles

Dallas tornado leaves 15 miles of homes with at least 50% damage probability

Tornados hit Dallas Sunday night, one gliding along the ground for about 15 miles. The area has at least 50% destruction probability, CoreLogic data shows.

Oct 21, 2019 By