Robert Shiller: Housing finance reform falling short on innovation

Innovation is lacking in current government-led efforts to fix the ailing housing market, Yale economist and home price index guru Robert Shiller argued in a recent interview with Smart Money. Comparing today’s housing market to that of the end of the Great Depression, Shiller said that while the Roosevelt administration created a number of new institutions that have since stuck (a national convention of long-term mortgages, for one), the Obama administration is “not really developing new things for the longer-run.” He noted that this is especially problematic, given that the ideas that came into being after World War II — like the 30-year mortgage and Fannie Mae — are no longer working in the contemporary economic environment. “One of my proposals is that we go to a mortgage that is more flexible. I call it a continuous workout mortgage that would protect people against unemployment or declines in home prices,” Shiller said. [Smart Money]