Refinancing Mortgages Won’t Fix Housing Market: Edward Glaeser

Aug. 30 (Bloomberg) -- The New York Times reported lastweek that the Obama administration was considering a proposal to“allow millions of homeowners with government-backed mortgagesto refinance them at today’s lower interest rates, about 4percent.”

The measure’s supporters tout this as an almost cost-freeway to stimulate the economy, boost the housing market andreduce foreclosures. But universal refinancing is far from free,and is poorly designed to stimulate either the economy or thehousing market. Certainly, Fannie Mae and Freddie Mac, the hugefinance companies now under government control, will have toallow some mortgage modifications in order to reduce theirforeclosure losses. That calls for smart, selective policies,not universal refinancing.