Foreclosure Sky-High Rates – Janet Yellen “Deeply Concerned”

At a conference on community stabilization in the wake of the housing crisis in Los Angeles, the President of the San Francisco Federal Reserve Bank, Janet Yellen, has expressed her concern about the raising rate of foreclosure. She is very much worried about its negative effects on not only real estate owners but also on the society. According to Yellen, it would be alarming to the U.S. economy, too. She has said that record high commodity and crude oil prices along with credit policies and crisis in the real estate market are the responsible factors for this situation.

She has evolved her view towards the monetary policymakers to vigilant the situation closely in an order to meet a low and sustainable inflation rate and to maximize economic growth and sustainable employment. She has included that it’s “an urgent problem” for which both the private and public sectors should take initiatives and control further cases of unnecessary foreclosure.

She has focused on the rising rate of foreclosure in her district also. To Yellen, the people facing this situation as a result of sudden and substantial rise in foreclosure, in Arizona, California and Nevada are of more concern compared to those facing it for a long while. She is afraid of the ‘devastating’ impact of foreclosure; even on the surrounding communities along with the real estate property owners.

For borrowers, foreclosures add more hardships to their lives. They are subjected to loss of their home equity and impaired credit, says Yellen. She adds that it may reduce their chances to live in a ‘stable and decent’ housing environment, and disrupt them from participating in the labor market.

However, for the surrounding communities, this rising number of foreclosed properties initiates the process of the “self-reinforcing cycle of decline” as the Fed Bank President calls it. According to her, this rising rate affects the local real estate market in a way that can lead to add more foreclosed properties to the list.

Yellen has said that the condition is worse for people living in the lower income groups. More and more people belonging to these communities are prone to lose their homes and equity. As a result of this, the ongoing process of neighborhood revitalization would also be affected. The effect of foreclosure hurts the low income communities the most. She has added it needs strong, sound and direct responses at local as well as federal levels to challenge the situation and control the sky-high rate of foreclosure.

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