Article Courtesy of The Palm
By Kimberly Miller
Published April 13, 2011
A combined effort of lender and government intervention is needed to fix the nation's delinquent mortgage dilemma and repair a real estate market still searching for a bottom, says Bank of America's chief economist, Mickey D. Levy.
Levy, the keynote speaker at the International Economic Forum of the Americas at the Palm Beach County Convention Center this week, said housing and unemployment are the nation's two biggest weaknesses.
He expressed concern about a "bottleneck" of 1.8 million bad home loans nationwide that threatens to drive sale prices lower if they go to foreclosure.
With the federal Making Home Affordable program under fire for helping a minimal number of home-owners modify their loans, Levy suggested setting up a transition fund of public and private money that would give financial support to people as they move from homeowner to renter.
"What I'm arguing is these distressed mortgages need to be addressed because the problem is not going to go away on its own," said Levy, speaking as an economist, not a Bank of America representative.
"Rather than being adversarial, the government and the banks need to sit down and develop a strategy for breaking the logjam."
A recent study by the National Association of Realtors found that Florida has 441,461 homes in its "shadow inventory," which is defined as bank repossessions, homes with delinquent loans, and ones in foreclosure but not yet listed for resale.
Levy said he couldn't comment on bank paperwork problems, such as "robo-signing," and allegations of forged documents, which are contributing to the backlog.
He did criticize the effort by the 50 state attorneys general to investigate the banks and mediate a solution.
"Let's not have the whole process bottlenecked by state attorneys general who have their gripes with the process, but holding the process up is not good for anybody," Levy said. "We need to get a grip on the composition of these distressed mortgages and do something about it."