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It is unfortunate that the focus seems stuck on lowering mortgage interest rates. While not harmful, it does nothing for the real problem, which is that, for the most part, owners and buyers lack the cash required to refinance or acquire a home (SFH or Condo) under the current lender requirements (down payment and cash reserves). Add that to the phantom equity in the housing stock, and we are stuck. We need a bold solution for the latter, and I would perhaps a Federal bond issuance to fund the capital losses lenders will incur when they write-down principal on their loans, or a special tax break with a short term window that would achieve the same end result for the lenders. Yes, there is the potential for moral hazard, but I would observe that at this point, we should accept moral hazard, and get on with it.
Posted by charlescecil | Wednesday, February 01 2012 at 2:15PM ET