I just noticed that the gentleman I was on the KJZZ radio program “Here and Now” with recently (Anthony B. Sanders the former ASU economics professor who is now a professor of finance at George Mason University and senior scholar at the Mercatus Center) had an article in Bloomberg last week about a proposed federal housing program.
The administration had been pressuring… to eliminate a portion of the loan amount owed to the lender or investor.
Fannie and Freddie have 4.6 million underwater borrowers… and 75 percent of them are current on their loans.
That always floors me, the incredibly high percentage of people who are underwater, many very underwater, but who are still current on their mortgage payments!
If the Treasury Department essentially puts up signs saying, “If you’re 90 days late on your mortgage, you’ll get a Fannie/Freddie principal reduction,” imagine how many households would suddenly stop paying their mortgages.
In my mind, such a program could be the economic equivalent of Kurt Vonnegut’s ice-nine.