By: Leslie Black-Plumeau

January 10, 2012

In a paper delivered to Congress last week, Ben Bernanke and his staff describe the complex and interdependent issues hampering today’s housing market.

Policy makers are challenged to find measures that “adapt the existing housing stock to the prevailing tight mortgage lending conditions” such as encouraging the conversion of foreclosed properties to rental properties and a housing finance system that is both less restrictive than the current environment without becoming as lax as during the prior decade.

The paper also describes steps to minimize foreclosures through a variety of loan modifications, including incentives to servicers to pursue alternatives to foreclosure, and policies that facilitate deeds-in-lieu of foreclosure and short sales.