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Redo more loans, Rosengren says

Bloomberg News / September 29, 2011

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NEW YORK - Eric Rosengren, president of the Federal Reserve Bank of Boston, is calling for more government efforts to help homeowners refinance mortgages while saying the Fed’s plan to buy longer-term securities will probably spur growth.

Consumption will rise and gross domestic product will expand if more borrowers refinance and reduce their mortgage payments, he said yesterday in a speech in Stockholm. “Getting more money into the hands of homeowners who would spend it could help to fuel GDP growth,’’ he said.

The central bank decided last week to purchase $400 billion of longer-term Treasuries and sell $400 billion of short-term securities. Rosengren said he supports the program. He also endorsed a related plan to reinvest maturing housing debt into mortgage-backed securities, which he said should also help revive real estate.

The average rate on a 30-year fixed rate mortgage was a record low 4.09 percent as of last week, according to Freddie Mac.

Rosengren called for steps to help borrowers refinance even if their mortgages exceed the value of their homes. The government should also try to reduce the supply of vacant homes, he said.