Prof. Ed Morrison, Mortgage Expert: Will Geithner's Housing Proposal Succeed?

Professor Ed Morrison, Mortgage Expert: Will Geithner's Housing Proposal Succeed?

Law School Professor Ed Morrison, Mortgage Expert:
Will Geithner’s Housing Proposal Succeed?

Media contact: Erin St. John Kelly, 212-854-1787, [email protected]
Public Affairs Office,
212-854-2650, [email protected]

New York, February 17, 2009 — As the nation waits for Treasury Secretary Geithner to address the housing crisis on Wednesday, February 18, Columbia Law School Professor and economist Ed Morrison has strong views on what Geithner’s plan should contain. After the announcement, he can offer expert analysis of the plan and alternative solutions.

Working with Professors Chris Mayer and Tomasz Piskorski (Columbia Business School), Morrison recently put forward a loan modification proposal that was incorporated into the stimulus bill initially passed by the Senate. Morrison testified before the House Committee on Financial Services on February 3.

“We offer a detailed roadmap for resolving the crisis,” Morrison said. “We hope Secretary Geithner takes a look as he adds content to his policies.”
The loan modification proposal states:
  • The country’s foreclosure crisis can be stopped by prompt government action that targets securitized subprime and Alt-A mortgages. These privately securitized mortgages account for 15 percent of mortgages but over 50 percent of foreclosures.
  • First, the government should pay servicers for long-term success in avoiding foreclosures; and
  • Second, the government should eliminate legal barriers that deter servicers from taking steps to avoid foreclosures.
  • These two steps could reduce foreclosures by about one-third, averting nearly one million foreclosures at an estimated cost of about $10 billion.
  • The proposal is good for homeowners, good for investors, and good for taxpayers: It helps homeowners keep their homes, minimizes investor losses, and minimizes the burden on taxpayers relative to alternative policies.
Morrison is an expert on proposed bankruptcy reforms, such as “cramdown” bills that would allow homeowners to reduce their mortgage debts in bankruptcy.

“Bankruptcy cramdown is costly and unnecessary,” Morrison said. “We need government policies that yield quick results without bankrupting taxpayers and our financial system. Cramdown legislation goes in the wrong direction. Bankruptcy amendments, allowing cramdown of home mortgages, would be costly, generate serious risks and unintended consequences, and likely delay the resolution of our housing crisis.”
Morrison can also comment on problems with other programs and proposals for addressing the foreclosure crisis, including Hope for Homeowners and the FDIC proposal (announced by Sheila Bair) to pay mortgage servicers to modify mortgages.
Law School has a TV and radio studio on campus equipped with IFB and ISDN lines. Reporters or producers wishing to schedule live or taped interviews can contact the Law School’s Public Affairs office at 212-854-2650.

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