Freddie Mac says foreclosure problems may drain recovery
Freddie Mac economists said recent problems in the banks' foreclosure processes could slow what little momentum the recovery holds, and perhaps send the housing market down to a new low. In the broader economy, October payrolls, manufacturing production and consumer spending picked up in the third quarter. Housing, the October job report and struggles in other major economies are keeping the recovery too gradual. "There has been a spate of good news in recent weeks that suggests the fears earlier in the year about a so-called 'double dip' recession were overblown," according to the report. "The recovery, though, remains too sluggish to do much good right now for the unemployment rate or the housing market." Banks and the government-sponsored enterprises, including Freddie Mac, are working through the glut of foreclosures that is hampering credit lines. Many including Bank of America (BAC), JPMorgan Chase (JPM), Ally Financial (GJM) and Wells Fargo (WFC) had to begin resubmitting improperly signed affidavits in many states, delaying that work and pushing down foreclosures in October. Freddie Mac, itself reported $120.1 billion in nonperforming assets in the third quarter, up 33% from a year ago, and more than $6 billion in REO that needs to be sold. Even with the Federal Reserve's plan to purchase $600 billion in Treasury securities through quantitative easing, Freddie still expects "sub-par" growth in GDP over the near term with a slow acceleration through 2011. "The sluggish nature of the recovery means the unemployment rate will likely remain at or above 9% through much or all of next year, with a decline in unemployment only gradually providing relief to the housing market," according to the report. Write to Jon Prior.