Ray of Light: Obama administration may offer mortgage refinance plan

The plan would guarantee mortgage payment for lenders that refinance mortgages for at-risk homeowners, Comptroller of the Currency John Dugan, who regulates national banks, told Bloomberg News. The plan would also pay lenders / servicers a $1,000 fee to cover closing costs.

Economist Richard Felson told BloggingStocks Tuesday he expects the Obama administration to face criticism from some economic conservatives, but the stronger argument rests with those who support a federal refinance plan, in his interpretation.

"Up to 1.5 million, perhaps as many 2 million at-risk homeowners would avoid a foreclosure," Felson said. "Having 2 million homeowners retain their homes ... that's a mini-stimulus plan in its own right. That would mean there would be 2 million more homes paying utility bills, maintaining their properties, paying property taxes, paying insurance. That's a remarkable economic boost right there."

Further, Felson estimated that 2 million fewer home foreclosures would raise U.S. GDP by 0.5-0.8 percentage points above where it would be with those foreclosures. The U.S. economy contracted by 3.8% in Q4 2008 and by 0.5% in Q3 2008.

Housing Sector / Economic Analysis: The Obama administration program appears to be a modified version of the FDIC's plan proposed last fall, and it's a plan that's long overdue. True, housing will not play as large a role in next U.S. economic expansion, but it's almost impossible for the U.S. economy to grow without a healthy housing sector