fb-pixel Skip to main content

Boston Fed chief seeks more help for housing

‘‘Vacant homes have been sitting around for quite some time now,’’ Rosengren said. ‘‘That is an impediment to the recovery.’’Pat Greenhouse/Globe Staff/Globe Staff

Efforts to fix the nation’s struggling housing market should focus on converting foreclosed homes into rental properties and making it easier for homeowners to refinance, Eric Rosengren, president of the Federal Reserve Bank of Boston, said yesterday.

Historically, housing has spurred US recoveries, but the huge number of vacant, foreclosed homes continues to weigh on the real estate market and the economy, pushing home prices lower and undermining confidence, said Rosengren, who spoke with Globe reporters and editors.

He called on the government-owned mortgage companies Fannie Mae and Freddie Mac to adopt policies that would help developers buy vacant homes and turn them into rental properties. That would not only clear the market of distressed properties, but help to moderate rents, which have risen quickly along with the demand for rentals.


“Vacant homes have been sitting around for quite some time now,’’ Rosengren said. “That is an impediment to the recovery.’’

Housing was one of several issues Rosengren discussed during an hourlong interview that covered interest rates, budget deficits, and the outlook for the New England economy.

Overall, he said, the economy is improving, here and nationally, but at a pace that is too slow to make a big dent in the jobless rate.

It was certainly good news that the US unemployment rate fell to 8.5 percent last month, compared to 9.1 percent at the beginning of 2011, but not good enough, he said. “We want to get to 6’’ percent, he said.

Rosengren has consistently supported additional stimulus to accelerate the recovery. In recent days, he has called on the Federal Reserve, Congress, and the Obama administration to do more to improve housing and expand the small-business sector.

The Fed’s benchmark short-term interest rate is near zero, but Rosengren said the Fed could further reduce long-term borrowing rates, such as by purchasing mortgage-backed securities to push historically low home loan rates even lower. That could boost home sales and values.


Rosengren conceded that low rates so far have not provided the boost they have in the past. “People are afraid that one of these negative shocks will hit the economy,’’ he said, “so they don’t want to buy a house, they don’t want to make a big investment.’’

That’s why government policy makers need to consider creative approaches, he said. For example, many homeowners cannot refinance at a lower rate because home values have fallen below loan balances, and banks will not lend to them. Programs to help these homeowners refinance would make it easier for them to make payments, reducing the chances of foreclosure, Rosengren said.

Fannie Mae and Freddie Mac, which own or guarantee millions of US mortgages, could play important roles in devising such a program, he said, just as they could in getting vacant homes off the market.

Aaron Gornstein, outgoing executive director of the Boston nonprofit Citizens’ Housing and Planning Association, welcomed Rosengren’s proposals. Gornstein said Massachusetts communities already have acquired and fixed up hundreds of vacant properties for rentals or affordable home ownership, but more can be done.

“We need more resources from the federal government to do it. We need more cooperation from banks and servicers who own properties,’’ said Gornstein, recently appointed as the state’s undersecretary of Housing and Community Development. “This will help the overall housing market and the economy.’’


Some economists, however, have argued that the nation should cut programs, not add or expand them. They say that unless the nation gets control of its burgeoning debt, it is heading for the type of crisis buffeting Europe.

Rosengren said now is not the time to slash budgets. While the United States must reduce deficits over the long term, austerity measures could hurt the recovery and push unemployment higher. Slower economic growth, in turn, would make it harder to lower deficits, he said.

Most forecasters expect the US economy to grow a modest 2 to 3 percent this year. Rosengren said the Fed needs to maintain stimulative policies in the short term, particularly given threats from the European debt crisis and rising oil prices.

“A positive trend is not sufficient to start pulling back,’’ he said. “We need to see some more sustained growth.’’

Rosengren said New England is doing better than the nation as a whole, but it could be hurt by changes in federal policies.

Massachusetts biotechnology and health services could be affected by the federal health care overhaul, while universities, research institutions, and defense-related firms could be hard hit if federal funding shrinks or disappears. “It’s a potential problem,’’ he said.

Globe reporter Jenifer B. McKim contributed to this report. Erin Ailworth can be reached at eailworth@globe.com. Follow her on Twitter @ailworth.