Housing and the Financial Crisis
Columbia Business School’s thought leadership on issues related to the U.S. housing crisis has gained the attention of the media and policymakers alike. This page is a guide to related background and analyses.
Now is the Time to Consider Widespread Refinancing
by Alan Boyce, R. Glenn Hubbard, Christopher Mayer, and James Witkin
"Estimated Benefits from Refinancing by State and Congressional District" (1/24/2012 Excel)
“Streamlined Refinancings for up to 12 Million Borrowers"
(3/9/2012; draft, PDF)
Comprehensive Analytical Model for the Boyce/Hubbard/Mayer/Witkin Plan (4/21/2012, Excel)
CBO Analysis Strengthens Case for Major Refinancing Program (PDF)
With the 10-year Treasury rate near its lowest point since the Great Depression, there is a new opportunity for the Federal Government to implement a new economic stimulus program…helping over 12 million borrowers with government guaranteed mortgages at today's record-low rates. Under our plan, homeowners could save more than $25 billion per year in interest payments at no cost to the US Treasury. More than one-half of the savings would go to middle class households whose mortgages started at less than $200,000.
Economic Stimulus Through Refinancing
by R. Glenn Hubbard and Christopher Mayer
Our latest proposal for stimulating the economy involves providing an opportunity for all borrowers who have government-backed mortgages to refinance their loans to today’s record-low interest rates. This will have two intertwined benefits: more homeowners will be able to stay in their homes thanks to the reduction in monthly payments that comes with the lower mortgage rate, while much of the extra money will be spent and go into the economy. As a bonus, thanks to the inexpensive design of this program, the initial government spending associated with the mass refinancing will be minimal, and it will likely reduce the government deficit in the long term.
Frequently Asked Questions about this proposal.
New York Times op-ed: “How Underwater Mortgages Can Float the Economy” by R. Glenn Hubbard and Christopher Mayer
Loan Modification Proposal
by Christopher Mayer, Edward Morrison, and Tomasz Piskorski
“A New Proposal for Loan Modifications” (1/07/2009; full proposal, PDF)
This proposal aims to stem foreclosures through loan modifications by targeting privately securitized mortgages, which are at the core of the housing crisis, accounting for more than 50 percent of foreclosure starts. We estimate that the plan would prevent nearly one million foreclosures over three years, at a cost of no more than $10.7 billion.
This proposal, coupled with Prof. Mayer and Dean Glenn Hubbard's earlier proposal (below) for the federal government to reduce mortgage rates, is part of a two-pronged approach to stabilize the housing market and prevent foreclosures.
"A New Proposal for Loan Modifications" (Yale Journal on Regulation, Vol. 26(2) 2009)
December 17, 2008
House Prices and Interest Rates
by R. Glenn Hubbard and Christopher Mayer
In the paper, we demonstrate that house prices are strongly related to mortgage rates, using evidence from the U.S. and countries around the world. We also argue that house prices are already at or below where they should be based on fundamentals. Finally, the paper provides more detailed arguments in favor of our original housing policy proposal.
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The Original Hubbard Mayer Proposal
by R. Glenn Hubbard and Christopher Mayer
In this original proposal, we recommended allowing all residential mortgages on primary residences to be refinanced into 30-year fixed-rate mortgages at 5.25% (matching the lowest mortgage rate in the past 30 years), and placed with Fannie Mae and Freddie Mac.
Our plan would cover any existing homeowner or new purchaser of a home who was able to document their income, show that they can afford the mortgage that they are taking out, and document that they are residing in their home as a permanent residence.
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