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Fed Urges Entrapment of More Americans with Mortgage Debt

Jan 9 (Reuters) – The Federal Reserve has launched a potentially controversial push to revive the battered U.S. housing market, calling on other government officials to act after largely exhausting its own tools to support the fragile economic recovery.

After the Fed slashed interest rates to near zero more than three years ago and amassed $2.3 trillion in bonds to spur growth, the U.S. economy showed some momentum toward the end of 2011. But many analysts are doubtful the recovery will achieve take-off velocity in 2012 and housing is one of the biggest drags.

House prices have fallen 33 percent from their 2006 peak, resulting in an estimated $7 trillion in household wealth losses, the Fed said last week as it took the unusual step of making an array of recommendations on housing policy to Congress.

Currently, about 12 million homeowners are saddled with mortgages worth more than their properties, a situation which affects roughly half of all mortgage borrowers in states suffering from the worst of the slump, such as Florida and Nevada.

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