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EMANUEL, FRANK CALL ON CONGRESSIONAL BUDGET OFFICE TO ANALYZE PROPOSALS TO HELP KEEP AMERICANS IN THEIR HOMES |
| WASHINGTON, D.C.—In a letter to Congressional Budget Office Director Peter Orszag, House Democratic Caucus Chairman Rahm Emanuel and Financial Services Committee Chairman Barney Frank today called on the Congressional Budget Office to evaluate a series of proposals from leading economists that would help stabilize home prices and keep Americans out of foreclosure and in their homes. A copy of Emanuel and Frank’s letter is below. October 7, 2008 Peter Orszag Director, Congressional Budget Office Ford House Office Building, 4th Floor Second and D Streets, SW Washington, DC 20515-6925 Dear Director Orszag: As policymakers consider additional steps to stabilize the financial markets and strengthen the economy, we wanted to bring to your attention ideas that have been put forth by a number of economists to stabilize home prices and keep families out of foreclosure, and ask for a comparative analysis of these plans. In a February 24th New York Times op-ed entitled “From the New Deal, a Way Out of a Mess,” Professor Alan Blinder proposed creating a new agency similar to the Homeowner’s Loan Corporation (HOLC) which was created in June 1933 to help distressed families avert foreclosures by replacing mortgages that were in or near default with new ones that homeowners could afford. Professor Blinder recommends limiting refinancings to owner-occupied residences and excluding “very expensive” real estates, as well as second or vacation homes. He also suggests that mortgages obtained via misrepresentation by borrowers should be ineligible for refinancing, but cases of fraud or deception by the lender should be “treated generously.” Mr. Blinder suggests that a new agency of this kind might be asked to consider refinancing one to two million mortgages and borrow and lend as much as $200 to $400 billion. In an October 2nd Wall Street Journal op-ed entitled “First, Let’s Stabilize Home Prices,” Professors Glenn Hubbard and Chris Mayer proposed allowing all residential mortgages on primary residences to be refinanced into 30-year fixed-rate mortgages at 5.25% and then placing those mortgages with Fannie Mae and Freddie Mac. Under their proposal, investors and speculators should not be allowed to qualify. In addition, they propose capping the amount of the mortgage that could be written down to $75,000. In an October 4th Wall Street Journal op-ed entitled “Problem is Still Falling House Prices,” Professor Martin Feldstein proposed having the federal government offer any homeowner with a mortgage an opportunity to replace 20% of the mortgage with a low-interest loan from the government, subject to a maximum of $80,000. This offer would be available to first-time homebuyers, in addition to those with existing mortgages. Under Feldstein’s proposal, the loan would not be secured by the house, but would be a full recourse loan, allowing the government to take property or income in the event that the individual does not fully repay the government loan. Others have made similar proposals, most notably Federal Deposit Insurance Commissioner Sheila Bair who proposed having the government make up to $50 billion in low-cost government loans to help borrowers pay down unaffordable mortgages in a May 16th speech at the Brookings Institution. Specifically, we would like the Congressional Budget Office to analyze which of these proposed methods presents the most cost-effective option to stabilize home prices in the United States. Thank you for your time and consideration of this request. Sincerely, ______________________ ______________________ Rahm Emanuel Barney Frank Member of Congress Member of Congress |
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