Economy Watch: GSEs Pressured to Modify More Mortgages
- Dec 09, 2010
December 9, 2010
By Dees Stribling, Contributing Editor
Fannie Mae and Freddie Mac are reportedly in talks with various government officials about reducing the balances of mortgages they own or control in cases of underwater homeowners, something the GSEs have so far been loath to do. The Wall Street Journal reported earlier this week, citing “people familiar with the situation,” that such a deal would prevent further foreclosures–maybe 500,000, maybe more, strategic or otherwise–at the cost of losing the GSEs more money.
The Obama administration is keen to see Fannie and Freddie join a program run by the Federal Housing Administration that allows banks who agree to write down mortgages to fob off the reduced loans to the FHA. So far the program has been a nonstarter: it has received 61 applications in its first three months, and has modified precisely three loans.
But perhaps the larger goal is to persuade lenders to participate in mortgage modifications in one way or another, whether within the FHA framework or not. If the GSEs started doing it through the FHA, that would put more pressure on private banks to do so too, a kind of peer pressure among bankers.
Leisurely Retirement Might Be Thing of the Past
According to a new study by Wells Fargo & Co. released Wednesday, 72 percent of middle-class Americans ages 25 to 69, which would be most of them, expect to work till they drop. Drop dead, that is, or less dramatically, work as long as they are physically and emotionally able to, which could be quite a number of years, considering the generally better health that the elderly now enjoy, compared to previous generations.
The sentiment reflects considerable anxiety, which may or may not be justified, about the ability of entitlement programs to keep up with seniors’ even most basic needs in the coming decades. But it also points to a solution (a partial one, anyway) to a problem prognosticators have been wringing their hands about for years: what happens when the baby boom retires?
The assumption had been that the baby boomers would retire no matter what, and slowly starve on inadequate pensions, public and private. The prospect of people working later in life never seemed to have been seriously considered, especially during the years when housing prices and their equity did nothing but increase. But people make more-or-less rational choices about their incomes, and given the choice of working into one’s 70s and 80s or being idly poor, people are going to opt to work.
Survey Says: Americans Down on Their Economic Prospects
The latest Allstate/National Journal Heartland Monitor poll, the results of which were released on Wednesday, suggest that Americans are in a dour frame of mind. And why wouldn’t we be? In other poll news, water is considered wet by most Americans.
Flippancy aside, only about 20 percent of those surveyed said the U.S. economy is the world’s strongest. Nearly half (47 percent) picked China. Eleven percent choose Japan (maybe they are nostalgic for the late 1980s). Only one in three thought that the U.S. economy will be the world’s strongest in 2030.
Wall Street wasn’t that glum on Wednesday, with the Dow Jones Industrial Average eking out a 13.32 point gain, or 0.12 percent. The S&P 500 gained 0.37 percent, and the Nasdaq advanced 0.41 percent.