U.S. foreclosure-rescue plan not selling well

PHILADELPHIA — The federal government's latest efforts to prevent foreclosures are getting a lukewarm response from economists, officials and advocacy groups.

Many doubt that lenders, already facing huge losses, will agree to take on more red ink to refinance troubled loans at lower interest rates.

None of the actions the federal government has taken will solve what Columbia School of Business economists R. Glenn Hubbard and Chris Mayer say they believe is the fundamental problem: fixed rates higher than they should be, to attract investors.

"The cost of buying a house is now 10 percent to 15 percent below the cost of renting across most of the country," Mayer said, yet "rising mortgage spreads and down-payment requirements are driving down housing prices."

Their solution:

Refinance all mortgages on primary residences as 30-year fixed at 5.25 percent, "matching the lowest mortgage rate in the past 30 years," and place them with Fannie Mae and Freddie Mac.

Investors would not qualify.