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Monday, August 13, 2012

Mass Mortgage Refinancing

Joe Stiglitz and Mark Zandi endorse the Merkely plan for mass mortgage refinancing: 

The One Housing Solution Left: Mass Mortgage Refinancing, by Joseph E. Stiglitz and Mark Zandi, Commentary, NY Times: ...With 13.5 million homeowners underwater ... the odds are high that many millions ... will lose their homes.
Housing remains the biggest impediment to economic recovery, yet Washington seems paralyzed. ... Late last month, the top regulator overseeing Fannie Mae and Freddie Mac blocked a plan backed by the Obama administration to let the companies forgive some of the mortgage debt owed by stressed homeowners. ...
With principal writedown no longer an option, the government needs to find a new way to facilitate mass mortgage refinancings. With rates at record lows, refinancing would allow homeowners to significantly reduce their monthly payments... A mass refinancing program would work like a potent tax cut. ...
Well over half of all American homeowners with mortgages are ... excellent candidates to refinance. ... But many ... can’t refinance because the collapse in house prices has wiped out their home equity.
Senator Jeff Merkley, an Oregon Democrat, has proposed a remedy. Under his plan,... underwater homeowners who are current on their payments and meet other requirements would have the option to refinance to either lower their monthly payments or pay down their loans and rebuild equity. ...
If the program was very successful, we envisage that two million outstanding loans could be placed in ... trust at its peak. If the average mortgage balance was $150,000, then at the peak there would be $300 billion outstanding. ...
Since the Great Recession began almost five years ago, housing has been at the heart of our economic woes. If we do nothing, the problem will eventually resolve itself, but only with significant pain and a long wait. Mr. Merkley’s plan would speed the healing.

    Posted by on Monday, August 13, 2012 at 12:33 AM in Economics, Housing | Permalink  Comments (59)


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