Mixed views on housing plan
Law professor Alan M. White welcomed Hillary Rodham Clinton's plan to get the mortgage crisis at the center of the nation's economic slowdown under control.
Law professor Alan M. White welcomed Hillary Rodham Clinton's plan to get the mortgage crisis at the center of the nation's economic slowdown under control.
"The sad thing is, a lot of this needs to be done before January 2009," said White, who left Philadelphia's Community Legal Services last year to join the faculty at Valparaiso University School of Law in Indiana.
Clinton's proposals include a new role for the Federal Housing Administration in restructuring troubled mortgages. Changing the terms of loans is central to her plan that the FHA serve as a buyer of last resort in auctions of mortgages that need to be restructured to make payments affordable. They would then be resold to investors.
Clinton and others said yesterday that specifics of the plan would still need to be worked out.
Bob Angelucci, president of Cardinal Mortgage Inc. in Warminster, which was not involved in subprime lending, worried that bailing out borrowers would teach people to take advantage of the system. "People are going to end up getting something for nothing," he said.
At Drexel University, finance professor Joseph R. Mason wondered why the auctions being proposed by Clinton and others would work any better than those that are failing now on Wall Street, where trading in mortgage-related securities is gummed up because of uncertainty over the value of housing.
As to the role of the FHA as a backstop buyer of troubled mortgages, Mason said: "If you think that's an appropriate use of taxpayer money for the FHA to buy them, that's fine." But ultimately, the housing market has to go through a painful and unavoidable adjustment, he said.
"There's a lot of unsustainable homeownership out there" because people borrowed too much money to buy a house, he said. "Before this crisis is through, sustainability has to be reestablished."
