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Wednesday, October 3, 2012

An Economic Analysis of Large-Scale Mortgage Refinancing Proposals: A Brief Overview of S. 3522 and S. 3085

Sean M. Hoskins
Analyst in Financial Economics

The bursting of the housing bubble in 2006 precipitated the December 2007-June 2009 recession and a financial panic in September 2008. With the housing market seen as a locus for many of the economic problems that emerged, some Members of Congress propose intervening in the housing market as a means of improving not only the housing market itself but also the financial sector and the broader economy. Critics are concerned that further intervention could prolong the housing slump, delay recovery, and affect outcomes based on the government’s preferences rather than market forces.

This report provides a brief overview of policy proposals for the large-scale refinancing of mortgages for borrowers shut out of traditional financing methods. An expansion of this report appears in CRS Report R42480, Reduce, Refinance, and Rent? The Economic Incentives, Risks, and Ramifications of Housing Market Policy Options, by Sean M. Hoskins. Contained in that report is longer, in-depth analysis of large-scale refinance and two other frequently discussed policy options, reducing mortgage principal for borrowers who owe more than their homes are worth and renting out foreclosed homes.

Date of Report: September 11, 2012
Number of Pages: 9
Order Number: R42577
Price: $19.95

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