The real estate market has certainly seen better days. While the vast majority of Americans have a secure mortgage, pay on time, and are above water, many others are struggling to get by in these tough times.
Those struggling to make their mortgage payments are in a bind for a number of reasons. They may have lost their job or had their time cut at work. Some may have fallen victim to unscrupulous lenders who were trying to make a quick buck. Others simply bit off more that they could chew.
No one problem describes all situations. But regardless of how we got to where we are today, and what particular actions led to a family’s tough situation, one thing remains clear: stabilizing the housing market is central to restoring the health of our national economy. We all stand to lose if we do not stop the steep decline in home prices. In fact, estimates indicate that foreclosed homes reduce nearby property values by as much as 9 percent.
Considering recent statistics, we still have a ways to go to get out of this mess. Home prices dropped nearly 14 percent in the first quarter of 2009. And nearly one in five homeowners owes more than their home is worth and many cannot refinance.
That’s why it is important to act to stem the tide of foreclosures. Doing so will provide immediate relief to those facing dire circumstances. It will also provide a long-term boost to all of those who make their payments on time and are not below water.
The Obama Administration has put in place a housing plan to help up to 9 million families restructure or refinance their mortgages to avoid foreclosure—as well as their neighbors whose own house values will drop as a result of a nearby foreclosure. Among other things, the Administration’s plan will help millions of families refinance into lower interest rate loans if they have mortgages issued or guaranteed by Fannie Mae and Freddie Mac and owe more on their houses than their current value. The plan is also intended to spur lenders into working with families stuck in unaffordable sub-prime mortgages to change the terms of those loans. Lenders representing 75 percent of the U.S. mortgage market have agreed to work with troubled homeowners under this program.
On May 19th, the House and Senate put the finishing touches on a bill called the "Helping Families Save Their Homes Act of 2009" (S. 896). The bill would provide key tools and incentives for lenders, servicers, and homeowners to modify loans and to avoid foreclosures. The bill builds on the Administration’s plans to restructure and refinance mortgages so that foreclosures can be avoided. More specifically, it will reduce the current fees for homeowners and lenders that have discouraged them from participating in the Hope for Homeowners program. The bill will also offer new incentives for lenders to negotiate loan modifications with borrowers at risk of foreclosure under the Hope for Homeowners program; and expand the President’s loan modification program to the Federal Housing Administration and mortgages in rural areas.
Families throughout our country are worried about their ability to get by during these difficult times. Hopefully the efforts to help families stay in their homes will not only provide much needed assistance, but also help lead us out of our economic downturn. Only time will tell if these efforts will pay off, but at least these are some positive steps in the right direction.
