Because the housing market isn’t recovering from the folly of government intrusion at break-neck speed, the New York Times is calling for…more government intrusion:
Mortgage rates are averaging 4.3 percent for a 30-year fixed-rate loan, and the Federal Reserve is considering pushing them even lower. In theory, those low rates should unleash a wave of refinancings, giving homeowners and the economy a boost.
Here is the catch: Millions of people who are current in their payments cannot qualify for low-rate refinancing because their home values or credit scores have declined during the recession.
That is bad news for everyone. But there is a way out. Many of the disqualified mortgages are owned or backed by Fannie Mae and Freddie Mac, the government-controlled mortgage companies. The Obama administration could direct the companies to refinance the loans of anyone who is current. That could pave the way for up to eight million refinancings, for a savings to borrowers of roughly $24 billion a year.
Essentially, the NYT wants to add an unnatural amount of risk to the market (again) to counter the natural correction of home prices instead of allowing home equity to return to market levels over time. As the Times itself points out, this is part of the cause of the original housing bubble:
Loosening loan standards may seem like a replay of what caused the mortgage mess, including the costly failure of Fannie and Freddie. But both companies and taxpayers are on the hook if borrowers default.
Taxpayers are only on the hook if the government does precisely what it has already done: subsidize risky lending thus ballooning the default rate and promising to pay for the negative effects of their folly with taxpayer money.