Will housing plan help everyone?
TEXT OF STORY
Kai Ryssdal: The stimulus plan is now official. President Obama signed the $797 billion package in Denver today. He’ll be back tomorrow with more economic recovery news: a proposal to help millions of homeowners fend off foreclosure, and — you know, just for good measure — stabilize the housing market while he’s at it. We asked Marketplace’s Nancy Marshall Genzer to find out whether one plan can do all that.
NANCY MARSHALL GENZER: President Obama wants to put a shiny hardwood floor under falling real estate prices. Obama’s plan aims to reduce some mortgage payments and stabilize the market. Guy Cecala is publisher of Inside Mortgage Finance. He says in this economy more people could lose their jobs and get behind on their mortgages, compounding the foreclosure crisis.
GUY CECALA: I don’t think there’s any solution that can really put a significant dent in it. That doesn’t mean we don’t try to limit the problem in any way we possibly can.
Notice he said limit the problem, not solve it. Cecala says the housing market has to work out some of its own kinks. But that’s painful. Morningstar analyst Eric Landry says President Obama’s plan could minimize that pain.
ERIC LANDRY: Maybe the government will be able to put off some of these foreclosures so that the market could reach equilibrium, a little bit less painfully so.
But most of us are feeling no pain — as far as housing goes. We’re not in danger of foreclosure. How would a stable housing market help us? Allen Mendelowitz is director of the Federal Housing Finance Board. He says, look at how falling home prices affect the big economic picture.
ALLAN MENDELOWITZ: People who see their asset values deteriorate feel poor, and they spend less and they create a vicious spiral that adds to the downward momentum in the economy.
And Mendelowitz says, if your bank knew the price of your house would remain fairly stable, you’d have a better chance at refinancing, or getting a home equity loan.
In Washington, I’m Nancy Marshall Genzer for Marketplace.
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