|CENTER FOR ECONOMIC AND POLICY RESEARCH
CEPR Co-Director Dean Baker Testifies Before Senate Banking, Housing and Urban Affairs Committee
*Baker Argues Mortgage Insurance Will Not Help Homeowners in Bubble-Inflated Markets*
WASHINGTON, D.C. - In his testimony before the Senate Banking, Housing and Urban Affairs Committee today, Dean Baker, Co-Director of the Center for Economic and Policy Research (CEPR) argued that the mortgage guarantees at the heart of the Hope for Homeowners Act of 2008 may help to stabilize prices in depressed markets, but would not benefit homeowners in bubble-inflated markets and unnecessarily puts taxpayer dollars at risk.
Baker began his testimony by emphasizing that the collapse of the housing market is potentially the largest economic crisis the nation has faced since World War II and to properly address this meltdown, Congress must realize that different approaches may be necessary in different parts of the country.
"As Congress considers legislation to address the housing market meltdown, policy makers should be aware that efforts to prop up prices in markets where the housing bubble was concentrated will likely end in failure," stated Baker.
In his statement, Baker also pointed out that since prices as still far above trend levels, as they continue to fall, people in bubble-inflated markets will accrue no equity and will find themselves paying far more to own a home than it would cost them to rent a comparable property.
Attempts to guarantee mortgages in these market will also make homeownership harder for young buyers and new families moving into these areas.
In the course of his testimony, Baker also detailed his own-to-rent proposal that would guarantee moderate-income homeowners facing foreclosure the right to remain in their home as long-term tenants paying the fair market rent.
The full testimony can be found here www.cepr.net..