Washington must do more to help housing market -FHFB

By Natsuko Waki

MADRID, May 4 (Reuters) - The U.S. government must actively intervene in the domestic housing market to fix the subprime mortgage problems that interest rate cuts and tax rebates alone cannot, a Federal Housing Finance Board official said on Sunday. Allan Mendelowitz, a member of the Board of Directors of the FHFB -- a regulatory agency for banks providing home loans -- noted the demand and supply situation painted a bleak picture for the U.S. housing sector.

"The problems in the housing sector are not over... Even statistics that look positive are an illusion of a much more problematic situation," Mendelowitz told delegates at the annual meeting of the Asian Development Bank.

"There is still tremendous excess supply. Demand is not coming back, if for no other reason than the fact that potential buyers are sitting on their hands."

He added: "My own view is you need to intervene in the housing supply side to avoid foreclosures and keep additional supply from coming out into the crowded market. You need to jumpstart demand -- intervention to incentivise (potential buyers) so they get off the sidelines and start buying again."

The U.S. House of Representatives Financial Services Committee last week approved a sweeping bill to enable the government to finance $300 billion in distressed mortgages with the aim of helping two million homeowners.

The legislation would provide an infusion of capital and a new mandate for the Federal Housing Administration to backstop home loans that have sunk in value since they were made.

Declining home values and rising foreclosures over the past 12 months have darkened the mood of consumers and pushed the U.S. economy towards recession.