A New Proposal for Loan Modifications (PDF) Professors Mayer, Morrison, and Piskorski discuss the incentives and legal issues surrounding loan modifications.

Securitization and Distressed Loan Renegotiation: Evidence from the Subprime Mortgage Crisis (PDF) Professors Tomasz Piskorski (Columbia), Amit Seru (University of Chicago), and Vikrant Vig (London Business School) argue that a failure to renegotiate securitized loans may have substantially contributed to the recent surge in foreclosures.

House Prices, Interest Rates, and Mortgage Market Meltdown (PDF) Dean Glenn Hubbard and Prof. Chris Mayer propose bolstering housing prices will improve the intent of the Treasury’s bailout.

Stochastic House Appreciation and Optimal Mortgage Lending (PDF) Professors Piskorski and Tchistyi show that many features of subprime lending observed in practice are consistent with rational behavior. It is optimal for lenders to help borrowers who were in good standing before the crisis by reducing their mortgage balance and interest rate.

Note on Mortgage Market Meltdown and House Prices (PDF) This note examines the impact of the recent mortgage market meltdown on the relative cost of owning a home.

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.

August 25, 2011

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)

Alan Boyce addresses questions about Freddie Mac's trading in Inverse IO Floaters (2/5/2012)

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.

September 20, 2010

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

January 7, 2009

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.
Read more...

October 2, 2008

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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Congressional testimonies