Helping the Housing Market One Step at a Time

If you are a typical homeowner and feel left behind by federal mortgage reforms, you are not alone. Newly proposed bills in Congress can help you and correct the housing market at the same time.

U.S. homeowners are in desperate need of relief.  More than two million homes are in some stage of foreclosure and millions more homeowners are in homes for which they owe more in mortgage payments than the property is worth. 

The effect on the nation’s well-being is dire.  Housing wealth dropped by 57 percent or $8.2 trillion from 2006 to 2011, resulting in net household wealth plummeting $14.3 trillion, according to a recent Harvard University housing report. 

Communities of color have been hit hardest with Latinos and African-Americans facing foreclosure rates of 11.9 percent and 9.8 percent respectively compared to 5 percent for white homeowners. 

On June 11th, the White House invited me and twenty other Illinois housing leaders to a forum in Washington on the mortgage crisis.  High-level Treasury, HUD, and USDA officials briefed us on new initiatives in addition to finding out what works and what doesn’t from those of us “on the ground” as foreclosure prevention housing counselors. 

We learned that Congress can do many things to right the housing market.  It can start with the package of three refinancing bills in the Senate that would help more than 12 million homeowners take advantage of historically low interest rates.  The Center for Responsible Lending in a report released June 21st estimates that homeowners would save $39.5 billion annually.

The bills are aimed at helping homeowners who are current on their mortgage payments.  In Illinois, the legislation would help more than 532,000 homeowners save an average of about $3,300 annually or $1.77 billion statewide. 

Right now nearly half of home loans in our nation have interest rates above 5 percent and could benefit from refinancing to the record low rates now available – the average interest rate on a 30-year fixed rate loan is now less than 4 percent.

One of the bills would amend the Home Affordable Refinance Program to make it more affordable to homeowners to refinance their loans owned by Fannie Mae and Freddie Mac.  A second bill extends access to streamlined, low-cost refinancing for borrowers without Fannie or Freddie loans.  A third bill provides lower cost refinancing to help underwater homeowners pay down their loan principal faster.

The refinancing bills currently awaiting a vote in the U.S. Senate can put more money in the pockets of homeowners.  That’s a significant boost for local economics in areas hit hardest by the housing bust and would keep more people in their homes.  We urge Senators Richard Durbin and Mark Kirk to support the legislative package, which may face debate in the Senate in July.  Helping thousands of Illinoisans refinance is a bipartisan win-win for our state.

Passage of these bills would be a right step in addressing the housing crisis, but much more needs to be done. There are millions of homeowners facing foreclosure who would benefit from a large scale principal mortgage reduction program to correct the housing bubble of 2007.  The program would re-set underwater home loans to their fair market values and surely stem the tide of foreclosures.  Also, expanded financial support for fair housing organizations and HUD-certified housing counseling agencies would help many families facing foreclosure find affordable solutions to keep them in their homes.

Our housing market is very sick, but our Congressional leaders can provide the medicine that’s needed.  While interest rates are at a historic low it’s time to help homeowners by allowing millions of families to refinance.

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ebuddha September 06, 2012 at 06:36 PM
what a stupid idea: "Our housing market is very sick, but our Congressional leaders can provide the medicine that’s needed" That's the equivalent of radiation therapy killing the cancer cells and doing a lot of other damage to other organs and tissue. How about everyone that is under-water and no longer wants to keep making payments just hand the deed over to the bank, the bank becomes the landlord and the former homeowner stays on as a tenant. The banks would probably have to write-down their porfolios and raise more capital (thus hurting shareholders via dillution), but that would quickly clear out the problems and we could all move forward. When you suggest Congress could 'provide medicine' - why don't you just say what that really is: giving people who made bad choices free money and funding that stupdity either by taking money from people who have been prudent or going further into debt.
Guido McGinty September 06, 2012 at 07:09 PM
The best thing for delinquent homeowners might be more of other people's money. It is certainly not the best thing for the housing market or the rest of us. The optimal action for the housing market would be foreclosures, elimination of Fannie and Freddie and the reform towards free exchange.


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