AgentIndustry News

Housing fixes fall short

New focus should be on write-downs, negative equity

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The government's efforts to combat the worst financial crisis since the 1930s can be divided into three phases. Phase one, executed in good part in catch-as-catch-can fashion, was directed toward shoring up financial firms that were undercapitalized and had lost the confidence of their creditors. The goal was to prevent their failure, which would have made the crisis worse -- far worse. Phase one is still far from over, new flare-ups continue to arise, and new approaches for recapitalizing banks are being considered. But the threat of major failures that would further destabilize the system has largely receded. Phase two, executed in much more deliberate fashion, was to reduce interest rates to mortgage borrowers. Where phase one had the highest priority, phase two is low priority, adopted largely because it is easy to implement and helps some homeowners, even if not those who most need it. Lower rates have generated a refinance boom in the midst of a growing recession, li...