With the housing market in the doldrums, it is difficult to have an economic recovery.
Home prices are on average one-third below where they were in 2006. Mortgage interest rates are at record lows but most of the homeowners who most need a refinance can not get one because their home is underwater (more is owed on the mortgage than it is worth).
President Obama plans to intervene yet again in the housing market. He wants to subsidize the losers with money taken from people who’ve made more responsible financial choices.
(Bloomberg) — President Barack Obama answered Ben S. Bernanke’s appeal for more action to fix the U.S. housing market that’s restraining the economic recovery by proposing a plan to help borrowers reduce their monthly mortgage payments.
Obama is sending Congress legislation that would allow homeowners to tap record-low borrowing costs, potentially boosting housing as he seeks re-election this year. The proposal could save participants about $3,000 a year, Obama said in his State of the Union speech to Congress.
Even with unemployment at the lowest level since February 2009 and housing sales increasing, homeowners have been blocked from refinancing by house prices that are 32 percent below their 2006 peak and tightened bank lending. While parts of the plan may face opposition in a divided Congress, and it’s important to see details, the approach is “a big step forward,” said Christopher Mayer, a Columbia Business School professor.