原文：

Home truths

May 8th 2008
From The Economist print edition

Congress can't stop people losing their homes, but it can do a little to help

AMERICA'S policymakers have fought the credit crunch with gusto. The Federal Reserve has slashed interest rates, pumped liquidity into markets and spun a new safety net for investment banks. Politicians have applied a fiscal stimulus and, to keep housing finance flowing, relaxed prudential controls on government-sponsored mortgage lenders. As The Economist went to press, the House of Representatives was set to vote on the latest plan: to stem foreclosures and stabilise house prices by allowing the government to reinsure up to $300 billion of problem loans through the Federal Housing Administration (FHA).

It is not hard to see why politicians are so keen to help. For all the hope that the worst may be over in financial markets, the housing mess is getting nastier. Nationally, house prices have fallen between 3% and 13% depending on which index you look at. And they have further to sink. The stock of unsold homes is huge and the ratio of prices to rents suggests that property is still expensive (see article). Some 1.5m households went into foreclosure in 2007, up 50% from the year before. And with 9m people owing more than their house is worth, that figure is likely to soar.

In general, governments should not try to prop up prices in inflated markets. However, as Ben Bernanke, the Fed chairman, argued this week, there is a case for government intervention to avoid unnecessary foreclosures. Evicting a homeowner and selling his property takes months, during which vandalism and legal fees can destroy a large part of the home's value—and drag down the price of the neighbours' homes as well. Borrowers and lenders would often be better off renegotiating and writing down loans than going through foreclosure. Yet securitisation has made it harder to reschedule loans and nobody knows how far house prices will fall. Too few home loans have been renegotiated.

So is the FHA plan the answer? Supporters, from Wall Street financiers to all three presidential candidates, claim it will do great things: save 1.5m people from losing their homes and, as a result, help to stabilise house prices. Opponents, including the veto-wielding Bush White House, lambast it as a misguided taxpayer rescue for the imprudent. Neither is true.

Criticism notwithstanding, the plan is hardly a bail-out. Lenders would have to write down their loans to 85% of the current value of a house. Borrowers would pay a fee for the insurance and give up a share of any later price rise to the government. By reinsuring more mortgages, the government would take on more risk, but the bean-counters at the Congressional Budget Office (CBO) put the explicit subsidy at about $1.7 billion over five years—a fiscal rounding error rather than a reckless handout. Yet because the plan involves little government cash and is voluntary, its effects will be modest, helping half a million households at most avoid foreclosure, according to the CBO. For all the hoopla, the FHA plan will be a useful addition to the anti-foreclosure tool-kit. But it will do less than its supporters hope—or its detractors fear.