TEXT OF INTERVIEW
Kai Ryssdal: Robert Gibbs, the president’s press secretary, is doing his best to manage the news on the administration’s mortgage plan. Gibbs said today — and here I quote — “don’t set an unreasonable series of expectations based leaks from God only knows where.” It’d be pretty tough to have unreasonable expectations, seeing as how it’s been the better part of two years now since housing collapsed and nobody’s come up with the answer yet.
To help figure out what the president’s plan might look like we’ve called Chris Mayer, he’s professor of real estate at Columbia University. Welcome to the program.
Chris Meyers: Hi, Kai.
Ryssdal: Not that we really need it, but refresh our memories as to how bad the housing market is. Is it worse than it was 18 months ago? About the same?
Meyers: Well, we’ve seen house prices fall more than 20 percent in the last 18 months. And unfortunately things are getting worse, not better.
Ryssdal: Alright. So, the White House came out today and said that next Wednesday the president is going to announce his mortgage and foreclosure relief plan in a speech in Arizona. What do you suspect that might look like?
Meyers: Well, I think we’re going to certainly see some significant help to deal with the foreclosure problem. And I think they’ve talked about providing some payments to people who are facing foreclosure and trying to create a standardized process to do this, both of which are helpful. I think, unfortunately, without legislation there are going to be some additional barriers that they’re going to need and I think that they may also call for Congress to help. One proposal that I’ve put forth — that was actually cut from the stimulus bill, but I think will eventually come back — is one that gets rid of any restrictions on foreclosures for servicers and provides a safe harbor for them to modify mortgages.
Ryssdal: This is all a little bit hypothetical, because we won’t know what the president says until next Wednesday, but let me get you on the record here about some details that are sort of starting to emerge, some rumors. One, that government might subsidize some losses on the part of lenders if there’s some kind of deal worked out. What do you think?
Meyers: I guess I’d really want to know a lot more details about that. How to decide who to subsidize under what circumstances I think is a very difficult thing. And I, you know, frankly that wouldn’t be my preferred solution to the problem. I think we ought to, instead, try and encourage lenders to make good decisions and we should really be providing the credit on the home-owner side.
Ryssdal: None of those things are easy to do, right, because you have to figure otherwise, we’d have done it already?
Meyers: That’s correct. You know, part of it is that I think people haven’t really understood what the problem is and they haven’t been willing to take the hard steps. And that’s changed. The banks are doing their part. It’s really the servicers of these privately securitized mortgages, which are only 15 percent of the mortgages outstanding, but more than half of the defaults. Those are the ones that are the problem and it’s become clear that existing measures haven’t worked and we need much stronger actions.
Ryssdal: When all is said and done, Chris, a year into this recession and 18 months, two years into the housing collapse, do you think that fixing real estate is still the key to turning this whole thing around?
Meyers: I think it’s clear that fixing real estate is the key to turning this around. Just imagine the pain we’ve gone through with house prices having fallen close to 25 percent so far. A recent Morgan Stanley report predicts another equal decline. Just imagine, we’re going to lose our banks, completely. We’re going to have almost no private lenders. We’re going to have many millions of people not making their mortgage payments. I don’t see how we emerge from this crisis without putting a floor on the housing market. I think that was obvious to me a year ago. It’s really become clear today, given the correction that’s now happened.
Ryssdal: Chris Meyers, a professor of real estate at the Graduate School of Business at Columbia University. Chris, thanks a lot.
Meyers: Sure. Thanks a lot, Kai.