William C Dudley: Housing and the economic recovery Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the New Jersey Bankers Association Economic Forum, Iselin, New Jersey, 6 January 2012. *  *  *  Housing and the economic recovery It is a pleasure to join you today for the annual meeting of the New Jersey Bankers Association. In a recent speech1 I talked about a number of the challenges facing the economy as we seek to secure the recovery and build for the future. Today I will focus on one of these: the problems in the U.S. housing market. In focusing today on housing, I would emphasize that this is only one factor behind the frustratingly slow economic recovery. Nevertheless, it is an important one that deserves our attention. As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System. The New York Fed is deeply committed to contributing to efforts to resolve the housing crisis that still afflicts our nation. Our economists monitor the housing market and analyze its impact on the national economy. My outreach staff work with community groups and housing practitioners to support local programs that aid distressed homeowners.
Persistent weakness in housing is particularly problematic because it acts as a drag on spending and job creation in an environment in which such weakness can not be easily offset  8  A number of these issues were documented by an interagency task force that included the Federal Reserve and are being addressed through consent orders requiring supervised institutions to remedy deficiencies. 9  When the amount of debt secured by a property exceeds its likely net sales price, a “short sale” can be a less costly alternative to foreclosure. The short sale agreement between the homeowner and lender often grants the lender final approval of the sales price and may release the homeowner from any deficiency. 4  BIS central bankers’ speeches  by other policy adjustments. Housing policy should seek to break adverse feedback loops, promote more economically efficient outcomes in housing and support growth. In recent speeches,10 I have called for a “comprehensive approach” to stabilize the national real estate market and lay the foundations for recovery. I believe this should include measures to improve access to mortgage credit, reduce obstacles to refinancing, lessen the flow of homes into foreclosure through bridge financing and accelerated principal reduction, and to facilitate the absorption of REO back into use as owner- or renter- housing.