Another day removed from President Barack Obama's address to Congress on job creation and the economy, some reporters and commentators are narrowing in on an omission they see in his plan: What's he going to do about all those mortgages?
Mortgage debt continues to hold down consumer spending and imperil the financial security of American households. Short-term stimulus, like Obama's calls for an extended payroll tax cut and new spending on infrastructure, will not make that debt burden go away, economists tell The Washington Post:
Americans, millions of whom owe more on their mortgages than their homes are worth, are still paying off that debt. Without a plan to reduce that debt, these economists warn, all stimulus can provide is temporary relief.
“Once stimulus fades away, households are back on the street,” said Atif R. Mian, an economist at the University of California at Berkeley. But he added, “Once you have removed the debt burden from households, you’ve taken care of the problem.”
The Obama administration says it is continuing to work on a plan to reduce the mortgage burden homeowners face each month — in particular by working with federal housing regulators to support more mortgage refinancings. But administration officials have rejected big proposals to cancel mortgage debt for fear of rewarding mortgage holders who borrowed far beyond their means.