- The Washington Times - Wednesday, August 6, 2008

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.

Essentially, “there is something for everyone” in the law from Freddie and Fannie to lenders, from local governments to an estimated 200,000 to 400,000 homeowners, Ms. Gordon said.

“It’s definitely a victory for the average voter but a great victory? No,” said Ms. Gordon, whose group - the Center for Responsible Lending - has been fighting unscrupulous lending practices aimed at the poor, minorities and women for decades.

One group unhappy with the housing act is NACA, whose leaders charge that the law is a bailout for Government Sponsored Entities (such as Freddie Mac and Fannie Mae) who continue predatory lending practices.

“The act will provide virtually no benefit to at-risk homeowners, due to the restrictive underwriting and delayed implementation; over one million homeowners will lose their homes,” NACA leader Bruce Marks said in a prepared statement.

“Congress and the administration are trying to provide themselves with political cover for the Fannie and Freddie bailout,” Mr. Marks said.

Though they didn’t leave the campaign trail to vote for the measure, the presumptive presidential nominees - Republican Sen. John McCain and Democratic Sen. Barack Obama - say they support the American dream of homeownership and the new housing law despite initial reservations.

Mr. McCain’s Web site says that any financial assistance policy must be accompanied by reforms that promote greater transparency and accountability. His “home plan” mirrors elements of the section of the housing law for homeowners, basically voluntary refinancing. His proposal also would “bolster groups like NeighborhoodWorks America, a national nonprofit group created by Congress to provide financial help and training for community revitalization projects.

Mr. Obama’s Web site says he will draft a new housing security plan, create a universal mortgage credit (which would help those who do not itemize their tax returns), ensure more accountability in the subprime mortgage industry, mandate accurate loan disclosures, start a fund that would help homeowners avoid foreclosure and close the bankruptcy loophole for mortgage companies.

Ms. Gordon said Congress and the next president need to pass legislation that defers foreclosure to allow homeowners a chance to work with their lenders, requires loan providers to pursue negotiations before foreclosure and, most important, allows bankruptcy judges to restructure loans on primary residences.

“The next president will be living with [the housing crisis] throughout his term, and voters will have to look at the candidates and determine which one of them deals best with this problem,” Ms. Gordon said.

“Beyond that, candidates and anybody else has to look beyond the mortgage crisis and deal with the larger issue which is having an economy that’s financed by consumer debt and consumer spending,” she said.

The national rate of homeownership currently stands at nearly 68 percent. It will not be a pretty sight to watch neighborhoods deteriorate due to rising foreclosures not only in the subprime market but also among homeowners who had decent credit, increasingly unable to make their mortgage payments because of other financial stresses such as rising fuel and food prices.

Although it is not clear exactly who will be helped by the new law, Ms. Gordon says the most important thing homeowners can do is call a housing counselor who is certified by the Department of Housing and Urban Development if they are in trouble or think they will be in trouble.

The housing act may not provide free money, but for some, it will help shore up their dwindling funds.

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