Policy Focus Needs to Shift on Foreclosures
Policy Focus Needs to Shift on Foreclosures by Karen Dylan
The problem that the White House does not want to address is that many of the underwater mortgages are federally owned.
The GSE's refuse to take their medicine quickly, so instead they will take it slowly as borrowers default. There is a great deal of wishful thinking at play here, as many thing a rebound in housing prices is just around the corner.
If the GSEs were sold to the Federal Reserve, they would do with underwater GSE mortgages what they are already doing with the ones they have already purchased - mortgage modification.
What makes more sense - giving stimulus to everyone, even to people who don't need it while giving too little to those who do or instead dealing with those borrowers whose difficulties are at the heart of the current liquidity crisis?
Writing down principal for 10% of households (with clawbacks at sale) is much better for the economy than giving almost everyone a tax cut.
The problem that the White House does not want to address is that many of the underwater mortgages are federally owned.
The GSE's refuse to take their medicine quickly, so instead they will take it slowly as borrowers default. There is a great deal of wishful thinking at play here, as many thing a rebound in housing prices is just around the corner.
If the GSEs were sold to the Federal Reserve, they would do with underwater GSE mortgages what they are already doing with the ones they have already purchased - mortgage modification.
What makes more sense - giving stimulus to everyone, even to people who don't need it while giving too little to those who do or instead dealing with those borrowers whose difficulties are at the heart of the current liquidity crisis?
Writing down principal for 10% of households (with clawbacks at sale) is much better for the economy than giving almost everyone a tax cut.
posted by Michael Bindner at 3:29 PM
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