The U.S. government must do more to ease the housing crisis, says real estate mogul Mort Zuckerman.
Washington will either have to subsidize "underwater" mortgages or retool its unsuccessful mortgage modification program. Homeowners are considered to be "underwater" if they owe more on their mortgage than their home is worth
“America’s housing crisis has not gone away,” the chairman of Boston Properties wrote in the Financial Times. “If anything, it is getting more severe.”
Home prices have plunged more than 30 percent from their 2006 peak and are likely to dip another 10 percent, according to Fusion IQ.
“Sooner or later, the government may be forced to subsidize the mortgages of underwater homeowners,” Zuckerman maintains.
“One solution might be to revive the depression-era Home Owners’ Loan Corporation. Such a body would buy mortgages that were close to or in default from banks and replace them with ones homeowners could afford.”
Banks would receive government loans in exchange for troubled mortgages.
“Alternatively, the government must simplify its unsuccessful loan modification program, which subsidizes lenders to rework bad loans,” Zuckerman says.
“Underwater borrowers need principal reductions, not just lower rates.”
The alternative is bleak, Zuckerman notes. “Until the housing crisis is remediated, it is almost impossible to envision anything resembling a major recovery.”
Joshua Shapiro, chief economist for MFR, isn’t optimistic.
"While much of the impact of the sub-prime disaster on prices at the bottom end of the market may well be behind us, there is likely more pain to come further up the price spectrum," he told MarketWatch.com.
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