Five years after the mortgage crisis began, housing is still one of the biggest factors dragging the economy down. There's just one option left, economists Joseph Stiglitz and Mark Zandi write in the New York Times: Mass refinancing. "Well over half of all American homeowners with mortgages are paying rates that would appear to make them excellent candidates to refinance," they observe. But they can't because the collapse "has wiped out their home equity."
So they're supporting a plan, which has been introduced by Sen. Jeff Merkley, to help underwater homeowners refinance, setting up a government-backed trust to buy their mortgages while they build up equity. They'll have three years to refinance, during which time they'll pay a modest interest rate. The program will thus cost taxpayers nothing, while working "like a potent tax cut," all while freeing up lenders to seek new loans. Without government help, expect "significant pain and a long wait" for relief. Click for Stiglitz and Zandi's full column.