Economist Advises National Moratorium on Home Mortgages

Just recently, the two government-controlled mortgage giants, Freddie Mac and Fannie Mae declared a six-week freeze for all evictions and foreclosures which would last through the holiday season until January 9. Freddie Mac and Fannie Mac own $5.2 trillion of the nation’s $12 trillion home mortgage market. Bloomberg News reports that this was done to give servicers the opportunity to implement their own programs for troubled mortgages.

Now, Economist Richard Felson says that the moratorium should be done on a national scale for at least 3 months to give the Obama Administration time to implement an adequate foreclosure prevention program, something which the Bush administration has been unable to do. There is still a remaining $7 trillion in home mortgage foreclosures.

According to Felson, the move would stem foreclosures and allow the housing sector to recover. He also said that the Obama administration should implement the Federal Deposit Insurance Corp. (FDIC) refinance plan which FDIC Chairman Sheila Bair has been campaigning for, but which Treasury Department Secretary Henry Paulson has rejected.

Felson says that the plan’s non-implementation has led to continuing foreclosures and a worsening financial system. However, he also opted for historians to judge the current administration’s housing market recovery plan. The important thing, says Felson, is to look towards the said national moratorium.

According to Felson, the FDIC plan, which is based on an Indy Mac model, would most likely eliminate $150-$200 billion in state or federal social service expenses and enable a GDP growth of $350-$500 billion. As much as $75-100 billion each year would be added to the U.S. budget deficit, but this expense will be worth the program’s short and long-term benefits.

Aside from this, Felson suggests that Sheila Bair should be appointed to work with Treasury Department Secretary Timothy Githner to implement the FDIC foreclosure prevention scheme.

Related Posts:

• Bush Administration’s Rescue Plan for Foreclosed Properties
• Part of Obama’s Foreclosure Crisis Plan Includes Backing Revised Loans
• FDIC’s Bair Intensifies Federal Effort to Abate Foreclosure Problem
• Lawmakers Reluctant to Release $350 Billion Foreclosure Bailout
• Obama Team Promises to Use Part Of Bailout Fund For Reducing Foreclosures