Home, Home I'm Deranged, Part 26

Finally the Obama administration is considering doing something about the largest single sticking point in our economy:  the millions of homeowners trapped in underwater mortgages.

The Obama administration is considering further actions to strengthen the housing market, but the bar is high: plans must help a broad swath of homeowners, stimulate the economy and cost next to nothing.

One proposal would allow millions of homeowners with government-backed mortgages to refinance them at today’s lower interest rates, about 4 percent, according to two people briefed on the administration’s discussions who asked not to be identified because they were not allowed to talk about the information.

A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers’ mortgage bills right away and allow them to spend elsewhere. But such a sweeping change could face opposition from the regulator who oversees Fannie Mae and Freddie Mac, and from investors in government-backed mortgage bonds.

Administration officials said on Wednesday that they were weighing a range of proposals, including changes to its previous refinancing programs to increase the number of homeowners taking part. They are also working on a home rental program that would try to shore up housing prices by preventing hundreds of thousands of foreclosed homes from flooding the market. That program is further along — the administration requested ideas for execution from the private sector earlier this month.

But refinancing could have far greater breadth, saving homeowners, by one estimate, $85 billion a year. Despite record low interest rates, many homeowners have been unable to refinance their loans either because they owe more than their houses are now worth or because their credit is tarnished.   

Yggy says this would literally be a capital idea and it's something that Republicans couldn't block:

I know some progressives are already looking beyond this leak to poo-poo the impact of refinancing and talk about the need for principle write-downs. That’s fine. But I do urge people to pay attention to the precise veto points in the system. Right now there’s an idea — mass mortgage refinancing — that will help millions of households and stimulate the economy. By stimulating the economy, it will make it easier to advance progressive goals on every single front. And it will be done if FHFA Acting Director Edward DeMarco decides that it’s a good idea. Persuading FHFA Acting Director Edward DeMarco to do this will make it happen. But if he’s not persuaded, it won’t happen. So for the moment, at least, I would really urge people to focus their energies on this point. The FHFA has conveniently put contact information for key officials on its website if you want to let people know how you feel. 

Sounds like a winning plan to me.