1. MONETARY POLICY, HOUSING,
AND THE RE-STRUNG HARP
Stuart A. Gabriel
Richard S. Ziman Center for Real Estate
Anderson School of Management
University of California, Los Angeles
Urban Land Institute
October 28, 2011

2. Federal Reserve Interventions
$3,500,000
$3,000,000
$2,500,000 Fed Agency Debt Mortgage-
Backed Securities Purch
$2,000,000 Liquidity to Key Credit
Markets
$1,500,000
Lending to Financial
Institutions
$1,000,000
Long Term Treasury
$500,000 Purchases
Traditional Security Holdings
$0
Sources: Federal Reserve.

3. Zero Rates Through 2012
Sources: Federal Reserve Board and UCLA Anderson Forecast.

4. Where Refinancing Should Be Happening
…the gap between predicted
and actual refinancing volume has grown.

5. Lenders Tightened Mortgage Lending
Standards for Last Three Years…Until Now
Net Percentage of Domestic Respondents Tightening Standards for Mortgage Loans
180 120
160
140 100
Nontraditional
120 80 Prime
100
80 60 Subprime
60
40 40
20 20
0
-20 0

6. The Bottom Line
• Credit remains cheap but tight
• Operation “Twist” and FRB GSE MBS purchases will exert
downward pressure on lending rates, but monetary policy
alone can’t do the job
• Re-strung HARP is timed well to leverage ongoing easing by
Fed—such that these new Administration and Fed programs
should together enhance re-fi activity among “current” but
underwater conforming borrowers.
• These are steps in the right direction—but it will take more
than a re-strung HARP to make a real difference to housing
or to the macroeconomy.