Wednesday, September 28, 2011

Can the Government Help the Housing Market?

US News -
Politicians, policy makers, and even the president have acknowledged the economic toll of the dysfunctional U.S. housing market, and yet struggling homeowners still haven't seen much aid from Washington.
Trillions of dollars have been poured into ailing banks and corporations in the hopes that these institutions, on firmer financial footing, would pass along the benefits to average consumers through generous lending, low interest rates, and plentiful job opportunities.
But the trickle effect that proponents were hoping for hasn't materialized--unemployment remains high, consumer and business confidence has sunk to all-time lows, and but for a slight uptick in prices over the past few months, the housing market continues to bump along at the bottom.
After two years of nudging, hinting, and all but pleading with banks to start lending again, the government needs to take a heavier hand in facilitating and expediting refinancing activity, some experts think.
"The idea is speculative but certainly reasonable," wrote Tim Manni, managing editor of HSH.com, in a recent article. "Since Fannie and Freddie are already under the government's control, it stands to reason that a large pool of underwater mortgages could be refinanced via HARP, packaged into mortgage-backed securities and sold to the Federal Reserve again, who declared their renewed interest in purchasing mortgage investments."
While the extent of Congress' and the Obama administration's involvement in the housing market remains to be seen, it's clear that policy makers need to come up with some measure to repair the gash the housing market has left on the economy. Otherwise the slow bleed of dropping home prices coupled with a host of other domestic and international economic worries could keep the economy on the brink of another, possibly deeper, recession.

2 comments:

  1. I don't think the government can do much to help....if they could, they would have already, right?

    I do think the recent changes with the Home Affordable Refinance Program (HARP) will help thousands of people in parts of California, like Riverside County, reduce their interest rate and payment. This could give a home owner an extra $200/month cash flow to use for saving or spending...or paying off debt.

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  2. The HARP program can possibly assist a lot of homeowners with underwater mortgages, but it's not for everyone. The owner has to be current on payments and the program doesn't stop foreclosure.

    Lots of people still need other options to modify their home loans to be more affordable.

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