NEWS    RECALLS    COMPLAINT FORM    SCAM ALERTS   RESOURCES  
Small Claims Guide   Class Actions   Lemon Laws   FAQ   Newsletters  
Share


Complain about a product or service

Automotive    Education    Employment    Electronics    Family    Finance    Health    Homeowners    Insurance    Pets    Shopping    Travel     Print This     Email This    



NEWS   Latest |  Archives |  Auto |  Cells, etc. |  Computers |  Financial |  Health |  Homeowners |  Parents |  Privacy |  Scams |  Seniors |  Travel

Economists Offer Plan for Stabilizing House Prices

Success of bailout plan rests on revitalizing housing market





October 5, 2008

Mortgage Crisis? Act Now to Avoid Foreclosure
Avoiding Foreclosure Takes More Than Hope
---
Nearly One In Four Homeowners Under Water
Existing Home Sales Jump 10 Percent
Mortgage Delinquencies Still Climbing
Realtors See Signs Of Housing Turnaround
Zillow.com: Fewer 'Underwater' Homeowners In Third Quarter
Distressed Homeowners May Be Able To Rent Their Homes
Should You Walk Away From Your Underwater Mortgage?
Home Prices Rise Four Months In A Row
Consumer Credit Plunges In August
Study: Action By Feds Made Housing Crisis Worse
Mortgage Lender's Collapse Leaves Borrowers Adrift
Bank of America, Wells Fargo Hit With Class Action
Bank Sees Dim Future For Homeowners
Ohio Sues Mortgage Servicer Over Lack Of Modifications
---
More ...

The success or failure of the government’s newly enacted bailout plan may rest on stabilizing the housing market. Two Columbia Business School economists have offered a plan to do just that, by shoring up the mortgage market and stabilizing home prices.

Writing in The Wall Street Journal, economists R. Glenn Hubbard and Chris Mayer call on the government to push down residential mortgage rates to 5.25%, close to where mortgage rates would be in a normally functioning mortgage market and matching the lowest mortgage rate in the past 30 years.

The authors point out that falling housing values have caused the credit market to seize up, perpetuating further declines in house prices and contributing significantly to the current financial mess. They propose lowering the mortgage rate to stop this decline, with the following terms:

• All residential mortgages on primary residences could be refinanced into 30-year fixed rate mortgages at 5.25% through Fannie Mae and Freddie Mac, under the conservatorship of the U.S. government, and the Federal Housing Administration. Investors would not qualify.

• Homeowners would have to give up the right to refinance their mortgage if rates fall, although they would have the option of paying off their mortgages if they sell their homes.

• For borrowers with lower credit scores, the mortgage rate would be greater than 5.25% but likely less than their current rate.

Negative equity

Mortgages on homes that are worth less than the total amount of the loan (homes with "negative equity") could be refinanced into 30-year fixed-rate loans to be held by a new agency modeled after the 1930s-era Home Owners' Loan Corporation.

The new agency would split the losses on refinancing a mortgage with servicers and owners and take an equity position in return for the write-down (which could be capped to limit liability), allowing taxpayers to profit once the market recovers.

Expected outcomes include:

• Raising the value to taxpayers of trillions of dollars worth of existing home mortgage assets already owned or guaranteed by the FDIC, the Fed, the Treasury, Fannie Mae and Freddie Mac, by putting a floor under house prices.

• Recapitalizing the banking industry by moving an appreciable amount of mortgages off bank balance sheets to the government's balance sheet.

• Increased investment and consumer spending (an estimated additional $100 billion annually) in response to improvements in household and financial institution balance sheets.

• Restoring the confidence of potential new homebuyers and reducing housing inventory by making owner-occupied housing more affordable. (In a recent study, Chris Mayer has shown that the cost of buying a house is now 10 to 15% lower than the cost of renting in most parts of the country.

The authors conclude that this plan could be enacted quickly, as the government now controls nearly 90 percent of the mortgage market. They predict the cost to taxpayers would be modest: while the government could end up assuming trillions of dollars of additional mortgages on its balance sheet, these would be backed by houses and the verified ability of millions of Americans to pay back the debt.

Finally, they suggest that this plan would help the economy independent of the Emergency Economic Stabilization Act of 2008 passed by Congress. Stabilizing house prices increases the value of the securities that the government would buy, thereby minimizing the net cost to taxpayers if the plan currently before Congress were to be implemented, they say.



Report Your Experience
If you've had a bad experience -- or a good one -- with a consumer product or service, we'd like to hear about it. All complaints are reviewed by class action attorneys and are considered for publication on our site. Knowledge is power! Help spread the word. File your consumer report now.

Share

Follow us on Twitter.

FREE CONSUMER NEWSLETTERS

The Daily Consumer
Afternoons M-F

Sign up now!


Consumer News & Alerts
Every Sunday

Sign up now!





CONSUMER NEWS

SAFETY RECALLS

Back to the top |

Advertisement


Custom Search
AUTOMOTIVE
• Dealers
• Manufacturers
• Service
• Extended Warranties
• Lemon Laws
• Recalls
• Tires
• Transporters

FAMILY
• Aging
• Children, Parenting
• Recalls
• Dating
• Education
• Entertainment
• Pets
• Weddings
FINANCE
• Annuities
• Banks
• Credit Cards
• Debt Collection
• Debt Counseling
• Insurance
• Investing
• Loans
• Mortgages
• Payday Loans
• Student Loans
• Tax Prep

HEALTH
• Doctors
• Drugs, Pharmacies
• Health Clubs
• Hearing Care
• Hospitals
• Nursing Homes
• Nutrition, Diets
• Vision Care
• Weight Loss
HOUSE & HOME
• Appliances
• Cookware
• Furniture
• Home Improvements
• Lawn & Garden
• Movers
• Pools & Spas
• Realtors, Rental Agents
• Recalls
• Utilities

ELECTRONICS
• Cable TV/DBS
• Cameras
• Cell Phones
• Computers
• Home Electronics
• Internet Access
• Local Phone Service
• Long Distance
• VoIP
SHOPPING
• In-Home
• Online
• Retail Stores
• Sporting Goods
• Supermarkets
• Telemarketers

TRAVEL
• Airlines
• Bus Lines
• Car Rental
• Cruises
• Hotels
• Travel Agents
• Trains

RESOURCES
• Class Actions
• Complaint Form
• Small Claims Guide
• Lemon Laws
CONSUMER NEWS
• Latest News
• Automotive
• Telecom
• Financial
• Health
• Homeowners
• Scams
• Seniors
• Travel
• More ...

RECALLS
• Automotive
• Children's Products
• Drugs
• Food
• Household Products
• Sporting Goods

ABOUT US
• FAQ
• Privacy Policy
• Advertise With Us
• Newsroom
• Syndication
• Terms of Use

Terms of Use Your use of this site constitutes acceptance of the Terms of Use

Advertisements on this site are placed and controlled by outside advertising networks. ConsumerAffairs.com does not evaluate or endorse the products and services advertised. See the FAQ for more information.

Company Response Welcome If complaints about your company appear on our site, we welcome your response. Please see the Response Form for more information.

For more information, see the FAQ and privacy policy. The information on this Web site is general in nature and is not intended as a substitute for competent legal advice.  ConsumerAffairs.com Inc. makes no representation as to the accuracy of the information herein provided and assumes no liability for any damages or loss arising from the use thereof. 

Copyright © 2003-2009 ConsumerAffairs.com Inc.  All Rights Reserved.    The contents of this site may not be republished, reprinted, rewritten or recirculated without written permission.