For some homeowners, that wolf at the door is actually the Federal Reserve:
James Currell is struggling to prevent his Minnesota home from being foreclosed. But his lender isn’t a bank. It is the U.S. government.
The Federal Reserve Bank of New York is facing the prospect of foreclosing on a number of properties in the coming months, from homes to commercial buildings, a result of a souring mortgage portfolio it took over when it helped bail out Bear Stearns in 2008.
As it deals with delinquent borrowers, a team of New York Fed officials and outside advisers are trying to avoid having the U.S. government, along with local sheriff’s departments, seize commercial properties and homes as it copes with falling real-estate values. In the process, the New York Fed is getting a hard lesson in the challenges of mortgage lending.
Wondering what the Fed holds? Here’s a chart of the Bear assets courtesy of the WSJ:
If the Fed starts foreclosing, many elements make this situation a hot mess:
- The Fed has obviously been touting the importance of mortgage modifications, working with borrowers, etc… so, foreclosing on homeowners is in some ways an admittance that the programs designed to keep people in their homes are doin it rong
- Legislators aren’t going to want anyone in their districts kicked out of their homes by the gov’mint (and don’t try to give me that “the Fed is an independent entity” line…)
- This was a taxpayer funded bailout. Doesn’t it give you warm fuzzies that despite your tax dollars being put to work, people are still getting kicked out of their homes?
- Oh, and the whole “losses on the Fed’s books” part of the equation (NY Fed’s holdings of commercial-real-estate debt lost 35% over the two years ending March 2010, while residential loans dropped about 60%)
It also sounds like the Fed owns a lot of strip malls in flyover states now, and while they could repurpose a couple of those to set up large scale printing presses I am not sure what else they might want to do with those, either.