Dear President-elect Obama,
Strong housing markets and financially stable homeowners are crucial to the well-being of the U.S. economy. With that in mind, I hope you’ll support policies that will strengthen the nation’s housing markets and polish off the tarnish that clings to homeownership today.
Here are nine suggestions:
1. Create jobs. There is a plain and direct connection between employment and healthy housing markets. People who feel secure about their financial situation can form new households, get married, have children, buy homes and rent apartments. People who are out of work lose their homes and are forced to bunk in with their families and friends. The creation of more good high-paying jobs is the best way to strength the housing markets and national economy.
2. Appoint housing experts to high-level positions. While politicians naturally want to reward their supporters with plum government jobs, housing is a vast, complicated economic sector that’s not easily understood. The industry needs leaders, who are experienced and knowledgeable about housing but who don’t have conflict-of-interest ties to the industry, in positions of power at the U.S. Department of Housing and Urban Development, the Federal Housing Administration, the new Federal Housing Finance Agency and all other federal agencies that are involved in housing activities.
3. Say "no" to misguided foreclosure prevention programs. Neither HOPE NOW nor Hope for Homeowners is perfect, but now that those programs are in place they should be allowed to help those who qualify — however few they may be — and perhaps with a few tweaks. More federal programs that either duplicate these efforts or encourage homeowners to default on their mortgages won’t fix the problems. A better approach would be to support and learn from existing state-level foreclosure-rescue loan programs and encourage more states, especially Florida and California, to put such programs in place. Consumer education about foreclosure rescue scams is urgently needed as well.
4. Allow bankruptcy-court judges to rework principal-residence mortgages. There’s no logical reason why homeowner mortgages should be treated as a special class of debt and given special protection in bankruptcy cases. Bankruptcy court is the appropriate venue for people who have exhausted their financial means to get a fresh start, and bankruptcy judges are in a good position to modify these mortgages as they do other debts. This change, which you’ve said you support, would be an effective and fair way to resolve the foreclosure crisis since it wouldn’t encourage defaults among homeowners who could afford to make their payments or force taxpayers to foot the bill for lenders’ losses on bad mortgage debt.
5. Say no to bailouts, rescues and tax perks that help people buy or keep homes they can’t afford to own. While these approaches may indeed help homeowners out of bad situations and goose home sales to the delight of real estate brokers and home builders, they’re only short-term fixes and are not a good path to sustained homeownership. Your universal mortgage tax credit for homeowners who don’t itemize their tax deductions is a nice idea, but the benefit of $500 per homeowner-taxpayer probably doesn’t justify the huge cost to the U.S. Treasury at this time.
6. Expand federal affordable housing programs. While government policies shouldn’t reward or cushion the consequences of irresponsible financial behavior, government does have an important function in helping people who are downtrodden and in need of aid. Housing programs should be beefed up so that local housing agencies will be able to help displaced workers and former homeowners find clean, safe and affordable rental housing. Rather than prevent necessary foreclosures, government can best aid its citizens by helping those who can’t afford to keep their home to put their sad losses behind them and get back on their feet as swiftly as possible.
7. Nationalize or privatize Fannie Mae and Freddie Mac. The bizarre quasi-governmental nature of these two mortgage corporations has been a systemic problem that likely contributed to their downfall. Please set up a commission to study the pros and cons of either turning these corporations into government agencies or, once they’re stabilized, cutting their special ties to the U.S. government. And when the commission returns its recommendations, make sure the recommendations are acted on.
8. Overhaul federal mortgage disclosure requirements. Home buyers today are confronted by an astonishing amount of paperwork they can’t possibly comprehend. While paperwork serves an important purpose, the paperwork to obtain a mortgage has grown so voluminous that it seems to extend an open invitation to fraud rather than reduce the incidence of such activity. Simplification, though not to the point of stupidity, would help people understand the costs and risks of mortgage products. Your proposal to create a Homeowner Obligation Made Explicit (HOME) score sounds like a good idea — if you can figure out how to implement it. The new Good Faith Estimate that the U.S. Department of Housing and Urban Development has proposed also could be a good start. Let’s get cracking on the new national registry of mortgage brokers, too.
9. Get rid of RESPA. While it may be politically impossible to force real estate brokers to divest their profitable affiliated businesses, the federal Real Estate Settlement Procedures Act (RESPA) is a dysfunctional mess that’s in need of a do-over. Kickbacks among affiliated businesses raise transaction costs for home buyers and should be prohibited. Better disclosures and beefed-up enforcement would be helpful, but are probably inadequate to fix this really bad law without a broader overhaul.
Marcie Geffner is a freelance real estate reporter and former managing editor of Inman News.
Copyright 2008 Marcie Geffner. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without written permission of the author. Unauthorized use of this article is a violation of federal law.
What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.