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Joining us now with more on their revamped housing program is Ed Pinto American enterprise and he's resident fellow and you heard where rates just laid out we know that we have the housing problem and lenders in need of assistance but the president has tried to make it dent in this problem before.
It hasn't worked will -- be.
A step in the right direction.
I think guess about it's going to be a small step to put this in perspective Fannie and Freddie have about.
Three and a half million.
-- loans that are current.
In payments that are underwater.
In the first two and a half years of this program.
About a 100000 of those borrowers were helped.
This may help another 678%.
But it's not gonna help the -- the majority of them.
-- but not the vast majority of them and also.
You know but.
Pretty low standards in terms of being able to access as all you need to do is be able to show that you -- last six.
Mortgage payments I mean is that a stringent enough policies -- to get people to take on potentially more debt door.
Eight you know trying tackle this housing situation because six payments doesn't seem like a a good track record of me.
Well you have to realize again these three point five million loans dirty owned by Fannie Freddie -- have the credit risk on them.
And so what they're trying to do is reduce their risk and so if you take a borrower and reduce the payment.
Or speed up the amortization instead which is that's one of the features of this revamped program.
You are reducing the risk and so that's why you can.
Have some things like.
-- -- the last six payments or using.
And automated valuation rather than a full appraisal.
Ed I -- talk a lately about the notion of would you believe this -- been promoted on.
By the left for a long time on the Internet and things like then the notion is that a second Obama term might bring like almost full forgiveness.
Ultimately is it gonna take something like massive principal reduction.
To get the housing market moving in is that possible.
I think what it's gonna take is a combination two things.
Additional efforts to speed up the amortization on these loans number one.
Which will start solving this problem.
Much more quickly what we've done in the past has not.
I've done that it's reduce the payments but it hasn't sped up the amortization and secondly.
Effective job policies that actually create.
Long term private sector jobs through a fundamental tax reform lowering the marginal tax rates doing some other things on not corporate rates.
There it -- various ideas for immigration visas you know lots of different ideas that actually create demand for housing and it what people forget.
Is that it's jobs they create demand for housing it's not building more houses -- its demand for jobs if they have it backwards you have to have.
Jobs first then you great demand for housing.
But Ed what about people in these homes in -- these homes are down like 50% of what they pay formed.
You know are you are is that the assumption is that they had -- walk away now they never will walk away does that continue to be no during possibility.
That -- -- that's a very much a real possibility.
There is expected that of the ones that are underwater.
By 25% or more.
Probably 25 to 30% will ultimately for clothes which again.
If Fannie and Freddie you have a lot of these loans.
That's a lot of foreclosures that still could come down the pipeline.
So trying to deal with deleveraging and -- -- create.
Real demand again not through one offs but through real job growth really -- the two things that have to be done.
Well let's hope that the president is listening this American jobs that we know he's trying to push through and is trying to create jobs but we'll see if it actually ends -- materializing thank you very much and contempt.
American Enterprise Institute -- -- Well we have some breaking.
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