Credit check — Federal Reserve chairman says banks holding economy back
by Martin Crutsinger
Associated Press Writer
November 16, 2012 12:00 AM | 624 views | 0 0 comments | 4 4 recommendations | email to a friend | print
Federal Reserve Chairman Ben Bernanke puts his speech away into his jacket pocket after offering the keynote address at the Operation HOPE Global Financial Dignity Summit on Thursday in Atlanta. Bernanke said that banks' overly tight lending standards may be holding back the U.S. economy by preventing creditworthy borrowers from buying homes. <br>The Associated Press
Federal Reserve Chairman Ben Bernanke puts his speech away into his jacket pocket after offering the keynote address at the Operation HOPE Global Financial Dignity Summit on Thursday in Atlanta. Bernanke said that banks' overly tight lending standards may be holding back the U.S. economy by preventing creditworthy borrowers from buying homes.
The Associated Press
slideshow
WASHINGTON — Federal Reserve Chairman Ben Bernanke said Thursday that banks’ overly tight lending standards may be holding back the U.S. economy by preventing creditworthy borrowers from buying homes.

Some tightening of credit standards was needed after the 2008 financial crisis, but “the pendulum has swung too far the other way.” Bernanke said. Qualified borrowers are being prevented from getting home loans, he said during a speech to the Operation HOPE Global Financial Dignity Summit in Atlanta.

Operation HOPE is a nonprofit organization that provides free economic education and financial counseling to lower- and middle-income Americans.

Bernanke’s comments came on a day when mortgage buyer Freddie Mac said the average rate on the 30-year fixed mortgage fell to a record low of 3.34 percent. Rates have been low all year but have fallen further since the Federal Reserve started buying mortgage bonds in September to encourage more borrowing and spending.

The rates have helped boost home sales and have led more people to refinance existing loans. Yet many have been unable to take advantage of the low rates because banks now require higher credit scores, stricter income documentation and larger down payments before approving loans.

The Fed has tried to make home-buying more affordable through its bond purchases. Minutes from the central bank’s October meeting released on Wednesday indicated the Fed may pursue more bond purchases in the month ahead. A new program could be announced when the Fed next meets on Dec. 11-12.

In his speech, Bernanke gave no hint of what future moves the Fed might take. But he said officials at the central bank understood the problems still facing the U.S. economy.

Bernanke said the housing has shown signs of recovery this year. But he said construction activity, sales and prices remain much lower than they were before the crisis. About 20 percent of mortgage borrowers remain underwater, meaning that they owe more on their mortgage than their home is worth, he noted.

Bernanke said that the Fed and other regulators would continue to pursue efforts to make credit more available to potential home buyers.
Comments
(0)
Comments-icon Post a Comment
No Comments Yet
*We welcome your comments on the stories and issues of the day and seek to provide a forum for the community to voice opinions. All comments are subject to moderator approval before being made visible on the website but are not edited. The use of profanity, obscene and vulgar language, hate speech, and racial slurs is strictly prohibited. Advertisements, promotions, spam, and links to outside websites will also be rejected. Please read our terms of service for full guides