Mr. Obama’s so-called mort­gage-res­cue plan amounts to $275 bil­lion in new debt that will have lit­tle if any last­ing im­pact […]

The Washington Times Weekly - - Commentary -

lit­tle im­pact on home prices, as Har­vard pro­fes­sor Ed Glaser has shown. And by the way, re­de­fault rates on mod­i­fied mortgages have been run­ning at be­tween 50 per­cent and 60 per­cent. This won’t change. So why should we throw more good money af­ter bad?

Mean­while, Wall Street is awak­en­ing to the dis­ap­point­ment that the se­cu­ri­tized mortgages be­hind the toxic as­sets that have done so much dam­age to banks and the credit sys­tem are not be­ing treated in the Obama pro­gram. The over- per­cent of this bank-owned pa­per is per­form­ing. It’s the se­cu­ri­ti­za­tions that have clogged up the world credit sys­tem.

Then there’s the bankrupt­cy­judge cram-down, which would al­low the courts to rene­go­ti­ate in­ter­est rates and loan prin­ci­pal. This would ab­ro­gate pri­vate con­tracts and throw out the rule of law. Do we think fu­ture in­vestors will put up mort­gage cap­i­tal if they fear judges will over­turn the terms of con­tracts? Home-loan sup­plies will fall and mort­gage rates will rise.

Then there’s Fan­nie and hard­est-hit ar­eas of the coun­try, mar­kets are al­ready solv­ing the hous­ing prob­lem. Writ­ing on his Carpe Diem blog, Uni­ver­sity of Michi­gan pro­fes­sor Mark Perry notes that while Cal­i­for­nia home prices dropped 41 per­cent in 2008, home sales in the state jumped 85 per­cent. It now looks like 2008 sales for sin­gle-fam­ily houses will ex­ceed lev­els reached in 2007.

What’s more, the un­sold-in­ven­tory in­dex for ex­ist­ing sin­gle-fam­ily de­tached homes in De­cem­ber 2008 was 5.6 months com­pared with 13.4 months for

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