Paul Milstein Center for Real Estate » Research & Media » Public Policy Proposals

Public Policy Proposals

Columbia Business School’s thought leadership on issues related to U.S. housing policy has gained the attention of the media and policymakers alike. This section contains a guide to related background and analyses, broken into three main policy areas.

Accelerated Amortization

Allowing refinancing with shorter amortization periods and at minimal closing costs would benefit more than a million homeowners while also helping to stabilize the housing market and boost the broader economy, all without cost to taxpayers.

Helping Underwater Borrowers Save Themselves: Accelerated Amortization

By Alan Boyce, R. Glenn Hubbard, Christopher Mayer, and James Witkin

Recently a number of policymakers have proposed that the government encourage underwater borrowers to take advantage of low interest rates to shorten the amortization periods on their mortgages (and in many cases also reducing their monthly payments).

Such a plan would enable these borrowers to pay down their debt more quickly by taking advantage of mortgage rates that are even lower for 15-year and 20-year mortgages (currently about 3 percent and 3.5 percent, respectively) than for 30-year mortgages (currently about 3.8 percent).

Many borrowers can decrease the term of their loan by five years or more, saving money on their monthly payments while simultaneously getting out from being underwater much more quickly. We analyze the costs and benefits of a government policy that would offer to pay the closing costs for underwater homeowners who choose a shorter amortization period for their refinanced mortgage.

Economic Stimulus Through Refinancing

How the federal government could stimulate the economy while helping middle-class households without a cost to taxpayers—and possibly benefiting them.

Now Is the Time to Consider Widespread Refinancing

By Alan Boyce, R. Glenn Hubbard, Christopher Mayer, and James Witkin

With the 10-year Treasury rate near its lowest point since the Great Depression, there is a new opportunity for the federal government to implement a new economic stimulus program . . . helping over 12 million borrowers with government guaranteed mortgages at today's record-low rates. Under our plan, homeowners could save more than $25 billion per year in interest payments at no cost to the US Treasury. More than one-half of the savings would go to middle-class households whose mortgages started at less than $200,000.

Mortgage Modification

Targeting privately securitized mortgages for loan modifications would stabilize the housing market and prevent foreclosures.

Loan Modification Proposal

By Christopher Mayer, Edward Morrison, and Tomasz Piskorski

This proposal aims to stem foreclosures through loan modifications by targeting privately securitized mortgages, which are at the core of the housing crisis, accounting for more than 50 percent of foreclosure starts. We estimate that the plan would prevent nearly one million foreclosures over three years, at a cost of no more than $10.7 billion.

This proposal, coupled with Prof. Mayer and Dean Glenn Hubbard's earlier proposal (link) for the federal government to reduce mortgage rates, is part of a two-pronged approach to stabilize the housing market and prevent foreclosures.

"A New Proposal for Loan Modifications," Yale Journal on Regulation, Vol. 26(2) 2009

About the Researchers

Click through for bios of the Columbia Business School faculty and administrators leading this research:

They have been working closely with Edward Morrison, Paul H. & Theo Leffmann Professor of Commercial Law, University of Chicago Law School and Alan Boyce, CEO of the Absalon Project, among others, on this research. Note: Former Research Coordinator James Witkin is now a member of the MBA class of 2015.