The housing market has improved slightly and prices are starting to stabilize, but we could see another downswing this winter, James Lockhart, vice chairman of WL Ross & Co. and former director of the Federal Housing Financial Agency, told CNBC Tuesday.
“We are bouncing along the bottom in the housing market, but we’re not out of the woods yet,” he said. “I think we still have a ways to go.”
Lockhart said foreclosures and re-defaults could spark the downswing but noted that government initiatives, such as the Home Affordable Modification program and refinancing programs, would help slow down foreclosure activity.
Commercial mortgages are “really worrisome” for banks right now, added Lockhart.
“One problem for banks is a lot of these construction loans they made for housing developments, raw land and commercial properties,” he explained. “They sold off a lot of their single family mortgages, but they kept these kinds of mortgages, and that’s going to be a problem and continue to be a problem for banks.”
He predicted we will see additional bank failures but would not predict how many. His new boss, Wilbur Ross, expects the number of failed banks to balloon to 500.
In closing, Lockhart said he is mildly positive on the overall economy but expects some downward swings in various areas before a full recovery.
“Things like housing, certainly defaults, foreclosures, unemployment lag the economy, and I would like to say we’re going to see a V (shaped recovery), but there’s no real signs of that at this point," said Lockhart.
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