Fed: Action needed on housing market

The Federal Reserve on Wednesday issued a white paper to Congress in attempt to fire up policy makers about the housing market’s problems, the New York Times reported on its Economix blog.

The paper chastises government-controlled Fannie Mae and Freddie Mac for showing more concern with their own short-term financial conditions than with the health of the overall housing market.

The Fed is concerned that the collapse of mortgage lending during the financial crisis is hardening into “a potentially long-term downshift in the supply of mortgage credit.” One reason for this, the paper says, is that Fannie and Freddie, which provide the money for most mortgage loans, are scaring lenders by aggressively seeking refunds on defaulted loans.

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