In his State of the Union address, President Obama let us know that he will be “sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates.”
The recently released Federal Reserve White Paper on the Housing Market has received considerable attention, at least for its policy proposals. I found one of the more interesting pieces of data in the paper to be the number of mortgages with negative equity, reproduced below (Figure 3 in the Fed paper).
Recent actions against Fannie Mae and Freddie Mac by the Securities and Exchange Commission (SEC) also produced the standard reaction by GSE apologists. The New York Times’ Joe Nocera was quick to denounce the SEC, arguing that Fannie and Freddie were late to subprime. While I agree that the SEC case is likely a weak one, that, however, is for the opposite reason than Joe supposes.
A recent report from the Federal Reserve Bank of New York examines the role of speculators in driving the housing bubble. Setting aside the fact that almost everyone who bought a house was “speculating” to some degree, the researchers focus on those who were buying homes they did not intend to live in.
In case you missed it, President Obama gave a big speech out in Las Vegas about both his “jobs” plan and a new plan to help underwater borrowers re-finance their mortgage.
The Washington Post is reporting that President Obama has assigned his staff with the task of designing a new set of government guarantees behind the U.S. mortgage market. Although as the Post also reports the “approach could even preserve Fannie Mae and Freddie Mac.” That’s correct. Despite their role in driving the housing bubble and the already $160 billion in taxpayer losses, President Obama appears to be considering just putting the same failed system in place. Of course, we’ll be promised that it will all work better this time.