Afro Newspaper: Keeping Americans in Their Homes

Keeping Americans in their homes

For several years now, I have been assuring everyone I know that Americans will dig our way out of the Bush Recession.  The question remains, however, whether we all will be living in our own homes.
 
The answer for many, I fear, lies as much in ideology as it does in economics.

We have seen political differences play out in the struggles over the minimum wage, labor organizing, access to health care and disparities in educational opportunity.  It would be naïve, indeed, to expect our national housing policies to be exempt from these fundamentally different ideological viewpoints about our national future.

However, this much should be clear to everyone. We will not fully renew our nation’s economic growth until all American families see their home values stabilize. 

This is why I have made addressing the foreclosure crisis and stabilizing the national housing market one of my top priorities as the Ranking Democrat on the House Oversight Committee,

Democrats on the Committee understood that action was needed to stop the mortgage servicing industry from abusing homeowners.  When I became Ranking Member, I launched an investigation into the abuses by the mortgage servicing industry (as well as by their law firms).

Together with the state Attorneys General settlement and Obama Administration efforts, we are pushing the mortgage servicing industry toward accountability and compliance with the law.

I also concluded that we must provide meaningful aid to the 11 million American homeowners whose home mortgages are “under water.” Many were (and remain) current on their mortgages but were also unable to refinance to today’s low interest rates.

That is why, last fall, I spearheaded meetings between federal regulators and Members of Congress to discuss how to implement President Obama’s proposal to expand refinancing opportunities for borrowers. 

Changes were made to the Home Affordable Refinance Program that have enabled more borrowers to obtain lower interest rates – but more needs to be done.
 
For some time now, I have been working with my Democratic colleagues to allow the expanded use of “principal reduction” to help many “under water” borrowers reclaim equity in their homes - and also to limit taxpayer losses.

Consider this:  The Chairman of the Federal Reserve, the President of the New York Fed, and even the former Special Inspector General for TARP all have called for principal reduction as the best way to end the housing crisis, help homeowners, and save taxpayers money.
Mark Zandi, Chief Economist of Moody’s Analytics has stated that “the housing crisis is ground zero for the economy’s problems, lost jobs and high unemployment.” 

He has concluded that targeted principal reduction of underwater mortgages provides the “best odds for ending the housing crash quickly and definitely.”

These experts understand that the major banks already do some form of principal reduction for the mortgages they own – and under the $25 billion settlement with the 49 states, they have agreed to do more. 

Unfortunately, a significant number of homeowners do not have access to this form of aid because their mortgages are owned by Fannie Mae and Freddie Mac.  Their regulator, Mr. Edward DeMarco, acting director of the Federal Housing Finance Agency, has refused to allow Fannie and Freddie to offer principal reduction - even when it would save money compared to foreclosure or other types of loan modification. 

I have joined with my colleagues in Congress in asking Mr. DeMarco to explain and justify his blanket opposition to principal reduction.  In response, he has asserted that principal reduction is “not going to be the least-cost approach for the taxpayer.”

I question that conclusion – and Mr. DeMarco’s own data (finally provided to the Oversight Committee in January) appears to make my case.

I believe that principal reduction will save more money than any other type of modification, including principal forbearance – especially for Fannie Mae.  That is why Congressman John Tierney and I sent a letter to Mr. DeMarco last week that described a host of internal Fannie Mae documents that confirm our position.

Fannie Mae officials concluded years ago that principal reduction has enormous potential to save the U.S. taxpayers significant amounts of money by avoiding losses that result from default and foreclosure.

Protecting the taxpayers is Mr. DeMarco’s mandate (and mine as well).  It is what Congress directed Mr. DeMarco to do - and what he should be doing now.

Our housing crisis is not going to solve itself automatically – at least not without an unacceptable level of social and economic pain.  What we can and should do now is adopt an “all-of-the-above” strategy, doing everything within our power to get the job done.

Neither the American people – nor our economy – can afford to wait.