End of housing crisis a year off?

Published 11:11 pm Thursday, December 11, 2008

WASHINGTON — The housing crisis likely will last into 2010 until the credit market revives and government rescue programs have time to make an impact, the head of the Federal Deposit Insurance Corp. said Thursday.

FDIC Chairman Sheila Bair said regulators were bracing for a difficult year ahead as the economy staggers under the worst crisis since the 1930s and mounting job losses push new multitudes of struggling home borrowers into default.

“We think we’re going to have a tough year next year, and we’re preparing for that,” Bair said. “But we’ll work through it.”

“By 2010 we’ll be seeing the light at the end of the tunnel,” Bair said.

She spoke as industry reports showed that the number of U.S. homeowners dragged into the housing crisis fell in November to the lowest level since June as new state laws lengthened the foreclosure process.

More than 259,000 homes nationwide received at least one foreclosure-related notice last month, down 7 percent from October, but 28 percent higher than a year ago, according to RealtyTrac.

The government’s rescue plan includes hundreds of billions of dollars in direct federal investment in U.S. banks, as well as an FDIC program of three-year guarantees for as much as $1.4 trillion in new loans between banks.

The goal is to thaw the credit freeze gripping the economy and encourage banks to lend, Bair said.

But on action to provide struggling homeowners with the ability to switch into affordable loans and help stanch the foreclosure wave, “we’re still behind, very much behind, the curve,” she added.

Debate on that issue has been intensifying as Democrats, including President-elect Barack Obama, insist that the government must use some of the $700 billion in bailout funds to halt rising foreclosures.

That also is the stance of Bair, an independent regulator and moderate Republican, who broke with the Bush administration in pushing her proposal to use $24 billion in government bailout funds to help 1.5 million borrowers avoid foreclosure by guaranteeing modified home loans through the end of next year.

Bair said she “wished a structured program would have gotten under way sooner” and expressed frustration about not having seen her plan prevail. But she said, “I think we do need to look forward. There are a lot of borrowers to help.”