In a recent column for the Financial Times, Meredith Whitney, renowned financial analyst and CEO of Meredith Whitney Advisory Group, highlighted the potential economic stimulus that could be unleashed in the U.S. housing market. Whitney pointed out that mortgage finance giant Freddie Mac has requested permission from its regulator to enter the secondary mortgage market, specifically home equity loans. This proposed reform could potentially inject $1 trillion into consumers' wallets as early as this summer, and $2 trillion by autumn, according to Whitney's estimations.

Freddie Mac, well-known for purchasing and re-selling first-time mortgages as mortgage-backed securities, aims to extend this practice to home equity loans. By taking such loans off the balance sheets of lenders, Freddie Mac's involvement could potentially free up liquidity for more loans and revitalizing the home equity loan market. If fellow mortgage giants Fannie Mae and Ginnie Mac follow suit, the overall economic stimulus could surpass $3 trillion, as calculated by Whitney.

Whitney emphasized that this proposal comes at a crucial time, as banks have significantly reduced their participation in home equity loans since the financial crisis. Currently, outstanding home equity loans stand at $350 billion, a sharp decline from over $700 billion in 2007, despite a significant increase in home prices of over 70% during the same period.

"The Freddie Mac proposal could change all that, and it could not come at a better time," Whitney stated. She highlighted the financial strain experienced by older Americans living on fixed incomes, who have been hit hard by rising costs of homeowners insurance and property taxes. These individuals have increasingly relied on debt to meet their financial obligations, leaving them vulnerable to unexpected expenses or financial shocks.

While the recent lower-than-expected April jobs report indicated a cooling of wage growth, other economic data showed that consumer demand remains resilient, further contributing to upward pressure on inflation. Given this scenario, Whitney acknowledged that now may not be the most opportune time for trillions of dollars in additional stimulus, especially considering the continued persistence of inflation above the Federal Reserve's 2% goal.

Nevertheless, Whitney argued that expanding the accessibility of home equity loans would provide a significant boost to the slowing economy and consumers without adding to government debt. She characterized it as a rare win-win scenario for the government, Wall Street, and the U.S. consumer.

If implemented, this proposed reform could not only inject trillions of dollars into the U.S. economy but also provide relief to older Americans and potentially stimulate economic growth. The fate of the reform now lies in the hands of regulators and the decisions of other mortgage giants, Fannie Mae and Ginnie Mac.