Is President Barack Obama's latest plan to allow millions more struggling homeowners to refinance their mortgages actually further stalling a housing market recovery? Critics of the proposal, announced last week, say the chief drawback is that it's setting up a delay in foreclosures, which, in turn, prevents home prices from hitting bottom.
Republicans, who believe government should stop intervening and let foreclosures work through the system to allow the housing market to finally recover, are questioning the viability of this latest effort. "One more time? One more time? How many times have we done this?" Republican House Speaker John Boehner said in the Wall Street Journal.
Obama countered by stating: "It is wrong for anybody to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit bottom."
Only four months ago, Obama announced the second version of the Home Affordable Refinance Program, allowing more people in underwater mortgages to refinance. That program is restricted to those who are current on their payments and whose mortgages are held by Fannie Mae and Freddie Mac. The newest proposal extends the benefit to homeowners with private mortgages, but requires Congressional approval because it comes with a cost.
One of the niggling questions concerning these government refinance programs is whether they are setting up a "moral hazard" by allowing a bailout for people who shouldn't have taken on debt in the first place or who want to walk away from their obligation. For this reason, the assistance programs are complicated to design.
Do you think additional government refinance programs will help or hurt the housing market recovery?
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