With the housing crisis still plaguing America’s economic recovery and the Obama administration’s housing programs not doing much to help, Congressional Democrats and progressive groups have recently upped their calls for a broad mortgage relief program that reduces the amount struggling homeowners owe on their loans.
Thursday, those calls got a boost from International Monetary Fund chief Christine Lagarde. Speaking at the Brookings Institution in Washington, Lagarde reiterated that mortgage relief was a “long-standing position” for the IMF, and that the U.S. should institute such a plan in order to return consumption and the appropriate level of indebtedness back to the American economy:
LAGARDE: This is something that the IMF has had a long-standing position of. The housing problem is something that needs to be addressed as a matter of urgency. And measures have been taken, there are proposals made by the administration. The big boys and girls, Fannie and Freddie, have to be a part of the equation. Because clearly, American households have to be able to unload a bit. Just in the way we’ve encouraged banks to lend, the households have to helped to borrow, so that consumption and appropriate indebtedness can be reinitiated. That’s our position.
The IMF has, indeed, had a long-standing position on mortgage relief for homeowners in the United States and around the world. In April 2011, it issued a report calling for mortgage relief, noting that American banks could withstand the losses principal reduction would bring about, despite their claims to the contrary. Lagarde called for mortgage relief in her initial speech as IMF head in August, and the IMF has made similar calls for struggling economies in Ireland and other countries, and recently issued another report calling for such a program in the United States.
Federal Housing Finance Agency head Edward DeMarco has thus far resisted calls for principal reduction, claiming that it “would protect big banks” at taxpayer expense, despite studies showing that it would save taxpayers money in the long-term. With progressive Democrats calling for DeMarco’s ouster and outside analysts criticizing his opposition to principal reduction, however, he has started to change his tune. Tuesday, DeMarco finally showed openness to principal reduction, and he is expected to make a decision on such a program sometime this month.