As long millions of homes are in foreclosure or near foreclosure, our housing market cannot recover. As long as our housing market cannot recover, our nation's economy cannot fully recover. Congress must take steps to address foreclosure. If we get our housing market moving, we get our economy moving again.
Mortgage Lending, a Balancing Act:
Home ownership is the foundation of the American Dream. Congress and the government should make it easier for those who work hard, play by the rules, and are responsible with their money to buy a home. Congress should be working together to find how best to maintain oversight and protect taxpayers against losses, while continuing to ensure safe, affordable access to mortgage products like the traditional 30-year fixed income loan that will help our economy recover.
Promoting recovery in the housing market presents a balancing act for Congress and regulators between clamping down on unsafe lending and actively promoting responsible lending to support recovery. The 2010 Dodd Frank Bill, while not perfect, largely maintains this balance by creating regulatory protections for homeowners and those trying to become homeowners, while ensuring lenders and those on Wall Street are fairly regulated.
Congress should focus on policies that promote:
Traditional Lending: Congress should encourage responsible lending to promote long-term market health. For generations, the 30-year fixed mortgage has provided a path for average, middle-class Americans to own a home. Even at the height of the financial crisis, comparably few 30-year fixed mortgages defaulted--proof that responsible lending can foster a stable housing market that can weather economic troubles.
Sound mortgage underwriting: Moving forward, sound underwriting that focuses on a borrower's ability to repay and fulfill all documentation requirements will continue to be key in ensuring lenders and borrowers are engaging in appropriate lending practices.
Refinancing: Congress should be more aggressive with policies encouraging and allowing refinancing of homes to lower principal payments for American homeowners.
Mortgage Principal Reduction: Whether you are in the midst of foreclosure or are a neighbor to a foreclosed-upon home and have seen your property values decline--we are all affected by the mortgage crisis. For some homeowners who took a responsible mortgage on their homes, but are still struggling to make payments--because of unemployment or certain other specific circumstances out of their control--a reduction of their monthly principal payment could be a responsible step. Even a small amount of principal Reduction for a responsible homeowner could make the difference, allowing them to stay in their home and maintain home values in areas affected by foreclosure.
Reinstating Glass-Steagall: Before it was repealed, Glass-Steagall required separation between investment banks that issue securities and commercial banks that accept deposits. Its repeal allowed Wall Street investment firms to gamble with depositors' money held in commercial banks owned or created by the investment firms. This brought about high-risk behavior that contributed to the housing bubble and the ultimate crash in the housing market. A modernized Glass-Steagall needs to be enacted in order to prevent a future financial calamity.