Op-Ed: Save Housing Market, Save Economy

Op-Ed

Orlando Sentinel

Until the housing market recovers, the state of our economic decline will remain unchanged. Our current recession began with the burst of the housing bubble, and so far, the federal government has not responded with enough vigor to help the market. There are steps and incentives that can be taken to help families and financial institutions through this crisis, but those steps must be taken soon or the economy will worsen.

In the several weeks since the Congress passed the $700 billion Troubled Asset Relief Plan, I have met with business groups throughout the state of Florida. We've talked about whether the federal rescue plan is working and what might be done to improve it. We agree the TARP assisted large banks with the capital injection they needed to weather this economic storm, but there is little evidence that the program has provided the liquidity the marketplace needs for sustained recovery. What we know for certain is that more focus and more resources need to be put toward foreclosure avoidance and housing-inventory reduction.

Foreclosures affect more than the family losing a home; in great numbers, they negatively impact neighborhoods and entire communities. To avoid foreclosures, we need a broad and systematic approach involving mortgage-loan modifications. The Federal Deposit Insurance Corp. is already engaged in this practice with the assets it received from California-based IndyMac bank.

Under the FDIC proposal spearheaded by Chairman Sheila Bair, delinquent and at-risk mortgages are evaluated to determine whether modification will improve the value of the loan versus foreclosure, and then qualifying loans are modified based on a borrower's ability to pay.

The result is the bank has an improved loan portfolio and a family avoids losing their home. Fewer foreclosures mean lower housing inventory on the market, thus stabilizing housing prices overall. Just as important, neighborhoods avoid becoming filled with foreclosed homes -- a characteristic that drives down home values communitywide.

Another way to revive the housing market is to offer tax incentives to would-be homebuyers. A $15,000 tax credit spread over three years would give buyers added financial flexibility, and it would reduce the glut of inventory that is driving down home prices. Restrictions would apply, including a requirement that the home be the buyer's primary residence. Offering incentives for home purchases will help to revive stagnant markets and move capital in this important sector of our economy.

This month, a new Congress meets, and a new administration comes to power. I look forward to working on a bipartisan basis to move proposals that will help return our country to the path of economic recovery -- an industrywide move toward foreclosure avoidance and realistic and meaningful incentives to encourage families to purchase homes. Doing so will help families, the housing market, and eventually our overall economy.

Mel Martinez is a U.S. senator for Florida, a member of the Senate Banking Committee and former secretary of the U.S. Department of Housing and Urban Development.

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