The recent focus on the economy and the jobless rate has, in the popular press, pushed the housing market from the front pages of the mainstream press. The continued weakness in the housing markets, however, is a major factor in the sapping of consumer confidence and the resulting lack of a robust rebound. While housing and mortgage lending remains entangled in a seemingly intractable web of investigations, negotiations and unimplemented regulations, an important short-term goal should be to make headway against the huge backlog of nonperforming loans.
The housing market remains under severe pressure almost five years after the mortgage crisis first erupted. While this is due to a host of factors, the counterproductive and destructive role played by the government and its various representatives cannot be overlooked as a major impediment to progress. Particularly frustrating are the conflicting positions taken by various regulatory agencies. As an example, the Federal Reserve is charged with ensuring the "safety and soundness" of the banking system; at the same time, they are (as owners of securities held in their Maiden Lane facilities) a party to the legal action and settlement with Bank of America that will (if approved) cost the bank $8.5 billion of its capital. Even more bizarre, the FDIC (as the owner of securities inherited from failed institutions) has objected to the settlement even though their actions may be harmful to a bank that they are regulating (and whose deposits they are insuring.) Such actions have stalled the resolution of the mortgage crisis; as someone recently quipped, time in the mortgage market seems to pass in "sequoia years."