Get Cash to More Families that Need It Now: Give Banks More Discretion to Make Home Equity Loans and Refinance Mortgages

4 Pages Posted: 31 Mar 2020

See all articles by Kevin Erdmann

Kevin Erdmann

The Mercatus Center at George Mason University

Date Written: March 19, 2020

Abstract

The economic dislocations caused by the coronavirus pandemic will almost certainly result in economic contraction. There have been calls for bold actions to attenuate the effects of this contraction and also to provide cash for struggling Americans whose incomes may be temporarily disrupted. But these actions, including direct cash payments to American households, will add to the federal deficit, and recent large fiscal deficits have tempered enthusiasm for immediate large federal outlays.

The pandemic will lead to a deep contraction that hopefully will be short. The more that national consumption can be smoothed during this time, especially for households that experience the largest temporary hits to their incomes, the quicker the recovery will be. There may be a way to allow American households to help themselves through this period and to lessen the need for more federal spending—by easing some of the restrictions on mortgage lending, to allow Americans to access their single largest asset: their homes. The nation is in the midst of an emergency, desperate for liquidity and for current sources of secured spending. It is worth considering the value of tapping this source of liquidity.

Keywords: mortgages; housing finance; home loans; lending; loans; recession; coronavirus; coronavirus pandemic; COVID-19; public health; economics

JEL Classification: R31, G21

Suggested Citation

Erdmann, Kevin, Get Cash to More Families that Need It Now: Give Banks More Discretion to Make Home Equity Loans and Refinance Mortgages (March 19, 2020). Special Edition Policy Brief, Available at SSRN: https://ssrn.com/abstract=3564490 or http://dx.doi.org/10.2139/ssrn.3564490

Kevin Erdmann (Contact Author)

The Mercatus Center at George Mason University ( email )

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Arlington, VA 22201
United States

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