Bernanke's speech: we're getting there

Economist David H. Wang said Bernanke's comments indicate that the Fed chair "knows that more needs to be done to lower the number home foreclosures, and that the policy must be comprehensive, with both banks and public institutions involved."

"The tone of his speech was one of 'We've met this first wave of resets, and handled it reasonably well, but there's a second wave up ahead, so we better get ready,' " Wang said. "You get the sense from the speech that he [Bernanke] feels we're about 30-35% through this mortgage crisis, which would be an accurate calculation, in my view." Resets are variable interest rate mortgages that are adjusted to a new and frequently higher rate, after a set period of time.

Bernanke did not comment on monetary policy in his speech. However, he did say that accelerating home foreclosures may push home prices lower in 2009, Bloomberg News reported Monday.

Wang said data he's reviewed indicates up to another 1 million homeowners may face foreclosure in 2009. Of these, as many as 700,000-750,000 homeowners may require some form of mortgage restructuring/reduced payment plan to enable them to keep their homes, he said.

And like Bernanke, Wang agreed that additional private-bank mortgage assistance programs, like the Bank of America's plan, must be part of the mix, along with federally-administered programs, as the nation continues the long, slow journey back to real estate health, amid the worst housing slump in more than 20 years.

"The mortgage restructurings are not without cost. They do lower a lender's current earnings, or at least their paper earnings. I'm not sure how much money lenders would actually collect from those at-risk mortgages with no restructuring packages," Wang said. "As with most economic decisions, there are trade-offs. But if the U.S. can lower the number foreclosures on a grand scale and cap the inventory of homes for sale, that would be a step in the right direction for the economy."