The government still can’t keep its hands off the housing market, even after its previous interventions wound up leading to our current economic problems. Obama’s plan lowers mortgage rates (following Bush) to just about everyone, which is just another stimulus program in a different guise that will hardly impact house prices. The plan rewards the homeowners who took out the worst mortgages, whom it defines as “at risk,” with interest rates that can be as low as two percent, less than the best mortgage applicant can receive in the market. It plans to lower monthly payments even for homeowners who are current on their mortgage and have not had a change in circumstances, if they are deemed to be paying too much or the house is underwater. In spite of its rhetoric, the plan rewards speculators and people who lied about their income on their mortgage application. Yet the government asks nothing in return from those being helped, even though it wouldn’t lend money to business without asking for something in return. Yet it would be easy to design a plan that had any helped homeowner pay back the help they are receiving out of any future capital gains on future house sales.
— Stan Liebowitz is Ashbel Smith Professor of Economics and director of the Center for the Analysis of Property Rights and Innovation, at the University of Texas—Dallas.