Monday, August 13, 2012

From Utah Association of Mortgage Professionals

The One Remaining Solution For Housing

In a recent Opt-Ed piece for NYT two of the leading economic minds shared what they postured is the only solution for housing. The two great minds are Joseph E. Stiglitz, a professor of economics at Columbia and Mark Zandi, chief economist at Moody's Analytics. In their article title “The One Housing Solution Left: Mass Mortgage Refinancing” the authors made the following points:
- More than four million Americans have lost their homes since the housing bubble began bursting six years ago.
- An additional 3.5 million homeowners are in the foreclosure process or are so delinquent on payments that they will be soon.
- With 13.5 million homeowners underwater — they owe more than their home is now worth — the odds are high that many millions more will lose their homes.
- Housing remains the biggest impediment to economic recovery.
- Since the Great Recession began almost five years ago, housing has been at the heart of our economic woes.
- Top regulator overseeing Fannie Mae and Freddie Mac blocked a plan to let the companies forgive some of the mortgage debt owed by stressed homeowners (while half a million homeowners could be helped with a principal writedown).
- With rates at record lows, refinancing would allow homeowners to significantly reduce their monthly payments, freeing up money to spend on other things. A mass refinancing program would work like a potent tax cut.
- Refinancing would also significantly reduce the chance of default for underwater homeowners.
- Since the Great Recession began almost five years ago, housing has been at the heart of our economic woes.
- Well over half of all American homeowners with mortgages are paying rates that would appear to make them excellent candidates to refinance.
- Senator Jeff Merkley, an Oregon Democrat, has proposed a remedy. Under his plan, called Rebuilding American Homeownership, 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.

- The Merkley plan has a successful precedent in the Home Owners’ Loan Corporation, established in 1933. It swept more than a million Americans out of foreclosure and into the long-term, stable mortgages that would become the hallmark of the middle class during the 1950s and ’60s.
- It’s time to revive this idea. At least this is a workable option. If we do nothing, the problem will eventually resolve itself, but with significant pain and a long wait.

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