No quick fix for housing market
A foreclosure sign in front of a house in Miami, Fla.
TEXT OF STORY
KAI RYSSDAL: Even though Congress has reached a deal on the stimulus package, there's one big part of the economy that's still struggling. Housing, of course. For those who say, "Hey, why not throw a big chunk of stimulus that way?" Marketplace's Dan Grech reports that's easier said than done.
DAN GRECH: The housing bubble came with its own lingo: There were terms for risky borrowers, like "subprime" and "Alt A."
And then there were the risky loans: neg am, interest-only, option ARMs.
Mahmoud El-Gamal is economics chair at Rice University.
Mahmoud El-Gamal: What the exotic mortgages did was to put a lot more risk on the banks' balance sheets without those banks realizing how much risk they were taking.
Those exotic mortgages were then chopped up and sold to investors who, just like banks, had no clue about the risks. The mortgages mature at different rates, or are pegged to different indices, or are split between multiple lenders.
No one knows what these mortgages with funny names are actually worth.
Real estate expert Ilyce Glink.
Ilyce Glink: There's no one central database where you can click on 10,000 loans at a time, modify all of the terms, click okay, and, Voila! It's all modified.
Glink says we now need to create jobs, so people can pay their mortgage. Loosen up credit, so people can buy again. Work through the millions of foreclosures, and set a price floor. To restore confidence in a system that's clearly broken.
GLINK: I think it's silly to talk about a single stimulus as solving everything, because last year we had a whole bunch of different kinds of stimuli, with trillions of dollars being spent, and all of that is just starting to work.
So what's the quick fix, then? On this point, at least, experts agree: There isn't one.
I'm Dan Grech for Marketplace.