(Source: San Jose Mercury News, Calif.) – President Barack Obama has an opportunity this week to help millions of Americans struggling with high housing costs that burden them and cripple the U.S. economy. He should answer calls to appoint a new a federal housing regulator, replacing the acting director who has been inexplicably reluctant to aid homeowners in mortgage trouble.
A group of 28 U.S. House Democrats and California Gov. Jerry Brown have called on the president to make a recess appointment to replace Edward DeMarco, the acting director of the Federal Housing Finance Agency. Senate Republicans have blocked Obama’s nomination for this office for more than two years, so using the recess power is appropriate. And because Congress’ recess ends at midnight Sunday, time is short.
This is urgent for the nation, and particularly for California. Last year, home values dropped a whopping 33 percent in the five core Bay Area counties. That means a lot more homeowners fell underwater in 2011, paying off loan amounts that are higher than the value of their houses. Low interest rates today allow many homeowners to reduce their mortgage payments, but being underwater can prevent borrowers from refinancing. Higher payments leave them more vulnerable to defaulting if they lose jobs or suffer pay cuts.
Foreclosures have taken a huge toll on our economy and our neighborhoods, where long-vacant houses drive down neighbors’ property values. And there is evidence it could get worse
in the next few months, according to the letter sent by members of Congress including Zoe Lofgren of San Jose, Anna Eshoo of Palo Alto and Jackie Speier of Hillsborough. Foreclosure filings increased in California for November 2011, suggesting that a new wave of home short sales could hit early this year.
The FHFA can help prevent foreclosures because it makes the rules for about 70 percent of U.S. home mortgages, which are underwritten by Fannie Mae and Freddie Mac. One key step would be to grant reductions in principal loan amounts to homeowners who will otherwise default. DeMarco testified in Congress that he wouldn’t allow this because it would cause financial losses to the federal programs. Yet some banks have chosen this very option because they find they lose less money by reducing loan principals than by going to foreclosure.
Preventing foreclosures to stabilize struggling families and neighborhoods should be a top priority for the federal agency, and it need not be inconsistent with keeping Fannie and Freddie solvent. It may rankle to help homeowners who should have known they were signing mortgage agreements they couldn’t afford, but that’s not the case with all underwater borrowers. And regardless, the numbers in danger of foreclosure are so great that the trend hurts everyone. Besides leading to blighted neighborhoods and falling home values, it reduces consumer spending, which drives our economy.
The nation needs an FHFA director who sees the big picture. Having been prevented by Republicans in Congress from naming one, the president must use a recess appointment to get it done.
©2012 the San Jose Mercury News (San Jose, Calif.)
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Source: San Jose Mercury News, Calif.