New York Fed President William Dudley
recently called for broad-based refinancing of performing home mortgages. It wasn’t a statement that elicited a lot of
attention, but now, building on these remarks, Dudley’s senior advisor and Fed
Executive Vice President Joseph Tracy and Joshua Wright, a senior trader
analyst in the bank’s Markets Group have posted a blog post explaining how such
an action might stabilize the housing market and support economic growth.
The two point out that we need to stop
looking at whether broad-based refinancing is “fair” or who gains the most and
look instead at what might be accomplished if one segment of society, i.e.
homeowners who are paying as agreed on mortgages that are costing them more
than should be the case, are granted relief.
It need not, they maintain, unduly penalize others, in this case the
parties who have invested in the mortgages or the economy as a whole.
The two make some solid arguments and the topic could benefit from some wide-spread disucssion. We recommend you read Why Mortgage Refinancing is Not a Zero-Sum Game.