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KAI RYSSDAL: Remember all those stories you heard about the home buyer tax credit, and how when it went away, the housing market would get a serious case of the blahs? Welcome to today’s Standard and Poor’s Case Shiller home price index. The August numbers came out this morning. Prices were down for the second month in a row.
You throw in the botched foreclosure paperwork still gumming tens of thousands of bad mortgages and you’ve got a housing market firmly stuck in the mud. The Obama administration’s rolled out a bunch of mortgage and foreclosure modification programs — without too much success. Nothing lately, though, as political Washington has been sidelined by the election. But once the votes are counted, might something happen on housing?
Marketplace’s John Dimsdale looked into it.
JOHN DIMSDALE: The nation’s housing mess is keeping courts busy. State investigators are sending mortgage lenders subpoenas. Homeowners are filing class action lawsuits.
At a housing conference yesterday, FDIC Chairman Sheila Bair said she’s worried about the growing foreclosure mess.
SHEILA BAIR: I fear that the litigation generated by this issue could ultimately be very damaging to our housing markets if it ends up prolonging those foreclosures that are necessary and justified.
Instead, Bair suggested a deal where regulators could shield lenders from lawsuits in return for reducing interest rates and/or principle on troubled mortgages. Another possible government solution includes more tax credits for home buyers. But after the mid-term elections, Congress isn’t likely to bite.
BOSE GEORGE: Coming up with ideas where they can do something without increasing the deficit is probably the only thing that’s going to fly at this point.
That’s KBW mortgage finance analyst Bose George. He suggests using Fannie Mae and Freddie Mac to offer investors in foreclosed properties a cheaper loan.
GEORGE: Which gets paid back over time, with interest. So there’s no outlay on the part of the government in terms of funds.
Another idea — from former mortgage banker Clifford Rossi — set up a a new type of mortgage where the lender and borrower share in the home’s equity. But the lender also shares in any losses if the home’s value drops.
CLIFFORD ROSSI: So they could take a 40 percent share of the loss, a 40 percent share of the upside appreciation.
He says regulators could endorse these deals, which wouldn’t cost taxpayers another dime.
In Washington, I’m John Dimsdale for Marketplace.