A WASHINGTON NOTE: ‘Dream’ program aids homeowners

ANALYSIS/OPINION:

You’d have thought they were giving away money last month at the Capital Hilton, where 20,000 at-risk homeowners lined up around the block for hours seeking rescue in the “Save the Dream” program.

And the money flowed - in a way.

Hundreds of counselors for the Neighborhood Assistance Corporation of America (NACA), a nonprofit community advocacy group, were able to help hundreds of mortgage holders restructure their loans to make payments affordable, as Congress and the Bush administration hammered out a huge, multibillion-dollar law to help the tanking mortgage industry.

“It’s a 700-page bill, which is why nobody understands it,” said Julia Gordon, a NACA policy counselor. “There are some things we are supportive of, some things we are mildly supportive of and others we are not wild about.

“No doubt this is a big bill and there is a lot in it for everybody. It’s not a panacea, but it’s a reasonable first response,” Ms. Gordon said.

While much of the economic focus in the news media and the presidential campaign centers on rising energy costs and gas prices, another issue stoking anxiety among voters is the possibility of losing the roof over their heads.

Though the Housing and Economic Recovery Act of 2008 had bipartisan support, primarily in the House, its chief opponents were Republicans, especially in the Senate, who primarily objected to what they characterized as a bailout for borrowers who got in over their heads.

This contention discounts the depreciation in home values and the unregulated, predatory lending practices that lured millions into risky loan agreements. One day, teaching financial literacy will be mandatory in this nation’s school curriculum, and we will return to a nation of savers instead of a nation of debtors.

Until then, lawmakers could help by requiring simplified and transparent credit contracts. Only when it was revealed that the giant mortgage lenders, Freddie Mac and Fannie Mae, were on shaky ground did the law’s opponents capitulate to provide the lenders with a line of credit.

“Political pressure,” however, won the day, Ms. Gordon said. “No Republican wants to face a campaign [in the fall] with this crisis that affects everybody.”

After they marched in the Independence Day parades and had to answer questions from homeowners, Ms. Gordon said, “they couldn’t go back empty-handed one more time.”

No kidding. Congress, with its low approval ratings, had to take some tangible action to show voters, like the “Hope for Homeowners” provision in the housing law, even though they didn’t pass energy legislation before their five-week summer recess.

(During Congress’ vacation, 2 million Americans will be in some phase of foreclosure, according to Ms. Gordon.)

The law’s “hope” provision asks lenders to work with homeowners to “take a haircut” on existing loans and then allows homeowners to refinance with new affordable loan insured by the Federal Housing Administration (FHA). The lenders get nonperforming loans off their books rather than bearing the costs of foreclosure.

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