From NPR News, it's ALL THINGS CONSIDERED. I'm Robert Siegel.


And I'm Melissa Block.

For homeowners looking to refinance, there's good news and bad news. First, the good: mortgage rates are at historic lows. The bad news is most Americans can't take advantage of them. Either their credit scores aren't perfect, they've lost income or their houses have lost value. So tens of millions of Americans have been effectively blocked from saving hundreds of dollars a month by refinancing.

Today, NPR's Chris Arnold has the second of two stories on a proposal to change that.

CHRIS ARNOLD: Terry Riccio runs a pet taxi service in Boston. For around $50 round trip, she'll take, say, an elderly person's dog to the vet. She'll even pick up turtles and snakes. But getting her hands around today's low interest rates is proving to be an even slipperier task.

Ms. TERRY RICCIO (Fetch 4-Legged Limo): Even though I make enough to pay my mortgage, the banks won't even look at me because it's a lot more strict than it was in the past.

ARNOLD: We spoke to Riccio at a homeownership event at a convention center in Boston. Riccio says if she could qualify for today's low rates, down well below 4.5 percent, that would save her $450 a month on her mortgage, which would be a big help right now.

Ms. RICCIO: Definitely would help me. And I also think it would help a number of people. Right now the market today was 4.35. Why not just give everybody 4.35 and we would avoid more foreclosures, people would be happier and I think the economy would get a lot better.

ARNOLD: And that's basically what some economists are proposing, at least for some 30 million Americans. The idea is that because of the financial crisis, the federal government has ended up guaranteeing 60 percent of all the existing home mortgages in the country. So, since the government is on the hook anyway, allowing all those people to refinance at today's low rates would make defaults less likely and save homeowners money.

Professor GLENN HUBBARD (Economist, Columbia University): You'd be giving what amounts to a tax cut for the life of the mortgage.

ARNOLD: That's Glenn Hubbard, an economist at Columbia University who helped come up with this�proposal. He says that extra spending money would help stimulate the economy.

Prof. HUBBARD: As much as a few thousand dollars per year for many, many years. That has a very big effect.

ARNOLD: Hubbard says it would add up to around $50 billion a year.

So, what are the plan's political prospects? Well, Glenn Hubbard is the former chief economic adviser to President George W. Bush. So, the plan is being pushed by a Republican.�And some 30 Democrats in Congress have already co-sponsored a bill to make this happen. So, could this be something Republicans and Democrats could actually agree on? Glenn Hubbard.

Prof. HUBBARD: I think it might. Both parties will obviously be focused on the economy and jobs and things that can be done. The real question is whether there will be any stimulus bill at all. But if there is one, I would expect this to be part of it.

ARNOLD: Also, Hubbard says the plan wouldn't cost taxpayers any money. It would just let more people qualify for interest rates that are available in the market. But the plan does have its critics.

Professor ANTHONY SANDERS (Finance, George Mason University): I think this will not end up working.

ARNOLD: Anthony Sanders is a finance professor at George Mason University. He says the plan exaggerates the savings to homeowners, underestimates the costs and the barriers to making this work. Banks might throw up roadblocks, insurance companies might not go along and the biggest problem...

Prof. SANDERS: I'm very scared about the notion that we're going to go through and just for millions of households give them a savings of $300 to $500 a month because that's not free. It comes out of somebody's pocket.

ARNOLD: That $50 billion for homeowners will come out of investors' pockets. For example, community banks have mortgage holdings that could take a hit. And some speculators around the world have made bets that so many loans wouldn't be able to refinance into better rates.

Mr. TOM DEUTSCH (Executive Director, American Securitization Forum): Those�investors are going to lose out based on that refinancing.

ARNOLD: Tom Deutsch is the executive director of the American Securitization Forum, which represents some mortgage investors. He says, though, his members are actually split. Some don't like this idea, but others think it might help the overall market enough that it's worth it.

Mr. DEUTSCH: There is some division within the investment community as to whether this would be an appropriate program and would be in their best interests.

ARNOLD: A senior official says the Treasury Department is, quote, "continuing to refine the administration's housing policies." Some economists think a likely next move for the government would be to launch a scaled-down version of the plan. Chris Mayer and Glenn Hubbard say as long it's not too scaled down, many more Americans could be saving hundreds of dollars a month on their home loans.

Chris Arnold, NPR News.

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