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The way to fix our nation's housing mess is through mass mortgage finance refinancing that is.
That's according to a recent op Ed by two housing industry experts Columbia economics professor and Nobel Prize winner Joseph stiglitz.
And -- chief economist Mark Zandi a frequent guest on this program.
-- those say -- the government needs to find a way to facilitate masks refinancings.
Now my next guest agrees with and I think given the government's failed track record and housing.
Is more involvement really the answer Susan doctor is professor -- real estate and finance at the Wharton school of business professor thanks for coming in tonight appreciate your time.
How does work as a practical matter.
Well we -- are already working on the private sector side.
Mortgage rates of course are at historical lows.
And they are putting.
Money in people's pockets.
The question is whether they -- that are not happening could head to the housing market recovery.
Now as I understand -- what they're suggesting these two.
-- and stiglitz is that there would be a government trusted by mortgages while -- folks can rebuild equity.
And that this would be financed by the federal government and that it could cost as much as I think I've seen 300 billion dollars.
But you bring up an interesting point is is the private market already in recovery enough that maybe we shouldn't tinker with that.
About tinkering is press at the -- is okay this of course is a large step -- it would require considerable.
Political force to make it happen it would require legislation to make it happen.
I'm not sure at this -- moment that the political lift is there.
-- drawn to -- the increased government at this moment well you can see why can't you -- his previous housing programs.
They really haven't done -- -- and this is what we're talking about president Obama's programs -- President Bush's programs.
They really haven't made a big difference in the housing market today would you agree.
Yes but the one -- -- -- program is on explicit program but it is low interest rates is where the recovery is.
It's what's driven the recovery and the refi as part of that but the -- says I said before.
Are happening on the private sides -- real key problem out there is what's the role of the private sector providing capital going forward.
We need private sector accountability and funding and this doesn't quite get to there how do you do that -- Well that's -- that's it recovery is what's going to bring the private sector back and so then -- a bit of a chicken neck breaking other recovery is happening as we speak and we do have to thank.
Low mortgage rates for that should the government be doing anything else to boost the market -- it may get better.
You know mortgages are long term instruments and the question is where will the future mortgages come from from Fannie Freddie from the federal government.
Right now we have a federalized.
Mortgage system that cannot prevail along when -- consensus on what is going to replace that.
-- to about Fannie and Freddie here in May be getting rid of them and doing something different.
-- was -- was another solution out there that I wanted you to respond to add it was just turned down by Ed DeMarco who is the principal regulatory.
Figure in this arena.
And it would essentially.
Provide for mortgage reductions so writing down principal which was incredibly controversy -- You think of that idea.
Well you know there's a lot of complexity there DeMarco is in favor.
He's not it's true -- principal for -- as opposed forgiveness so that means that the upside if the market recovers.
Mortgage borrowers would in fact repay the federal government whereas -- -- total forgiveness than the taxpayer does recover.
So you can see that there are costs and benefits on both sides his arguments on both sides.
Note notably FHA doesn't also doesn't do it DeMarco doesn't want to do so there really are.
Two sides of this issue as of course many of these issues.
And I believe he is said and here I'm quoting him about that this potential program which -- but the kibosh on.
The potential benefit to small relative to the costs and the risks.
Professor thanks for coming it's -- it's a fascinating conversation now and that probably one that will be continuing to have for another -- -- few months if not years thank you so much.