The Missing Piece of the GOP’s American Dream

This week, Republican presidential nominee Mitt Romney and members of his party hammered home the point that this country needs leaders who will do what is essential to preserve the “American Dream” not only for ourselves, but for future generations.  Last night, Governor Romney said that he was running for president “to help create a better future, a future where everyone who wants a job can find a job, where no senior fears for the security of their retirement.”  We at NCLR have no argument there.  The problem, however, seems to be that this candidate either doesn’t remember all that encompasses the “American Dream” or, more troubling, doesn’t have a plan to fix one of its basic elements—homeownership.

In the run-up to the election, the economy has, rightfully, taken center stage.  There’s no doubt that this will be the key issue for both parties, as both Governor Romney and President Obama spar over how to get Americans, including many Latinos, back to work.  A job is only one part of the “American Dream,” though. Indeed, everybody should have the opportunity to earn a better living for themselves through hard work.  However, as old as apple pie is the promise for those workers to have a chance at affordable homeownership. A home is key to building a better life and finding a safe place to settle down and raise a family.

Americans have been inundated with the candidates’ overtures about how to solve the economic crisis, yet nobody appears to be willing to tackle the housing crisis that is simultaneously consuming our nation.  Of course, both problems are deeply connected.  In a time when we needed recovery, the collapse of the housing market severely crippled the economy, depleting the value of millions of Americans homes.  And without jobs, how are homeowners supposed to pay off their mortgages and avoid foreclosure?

Still, the proposed solutions from the campaign trail have conspicuously excluded the housing market from economic recovery.  Housing is an entirely different beast that requires its own fixes.  It is worrisome that throughout the three days of the Republican National Convention, there was nearly no mention of one of the biggest problems that this country is suffering through.  And from the Republican presidential contender, the silence is deafening.  Where in Mitt Romney’s platform is housing reform?

Millions of people have lost their homes or are at risk of losing their homes to foreclosure.  The Latino community for one has seen its wealth completely decimated by the housing crisis.  We do not need a silver bullet but we do need to hear from the potential leader of this country how he is going to repair our mortgage market and preserve what’s left of our neighborhoods.  Americans cannot afford to ignore the troubled housing system.

Heading into next week, the Democrats will have their opportunity to address this issue at the DNC.  Unfortunately, housing is conspicuously absent from President Obama’s platform as well.  It is clear we need solutions to end this crisis.  NCLR and its Home for Good partners have proposed detailed solutions and successful models that can be taken to scale.  And there are many.  All we need now is a leader to take up the cause.

Gabby, Ryan, and Home Opportunity for All

Not even Olympians are immune from America’s homeownership crisis. The Associated Press reported that the parents of U.S. Olympic swimmer Ryan Lochte are facing foreclosure in Florida, while the mother of gold medal gymnast Gabby Douglas filed for bankruptcy in Virginia last year, she said, “to protect my home.”

I don’t know the circumstances behind these families’ financial challenges.  But the fact that families who had the discipline, commitment, and drive to raise Olympic gold medalists did not have the systems or information needed to remain successful homeowners reaffirms that the promise of American opportunity is at grave risk.

Roughly four million American families lost their homes to foreclosure between the beginning of 2007 and early 2012.  Some 11 million are struggling with “underwater” mortgages, meaning that they owe more than their home is worth.  That’s just under a quarter of all U.S. homes with a mortgage.  For most, a perfect storm of financial industry misconduct, inadequate consumer protections, falling home prices, and record unemployment are at the core of the problem.

The Lochte and Douglas families are fortunate.  Their kids are now stars who will soon be paid millions in endorsement proceeds—Gabby’s already on the cover of a Corn Flakes box.

But for most Americans, the solutions require broader action. An alliance of consumer protection, fair lending, and housing experts have developed a Compact for Home Opportunity, with over two dozen practical, tested solutions for preventing needless foreclosures, restoring neighborhoods, and rebuilding the American dream.  The Compact is powered by Home for Good, a national campaign driven by people concerned about the enduring foreclosure and housing crisis.

The Compact’s solutions range from increased access to housing counseling, to reducing loan principal to fair market value, to increased fair housing and lending protections.  Some states, notably California, have adopted important elements of the Compact.  But a more robust, national approach is needed.

Home for Good is pushing housing issues back into the presidential contest, and onto the national agenda, demanding that candidates and policymakers take a stand on the causes and solutions to the crisis.  With foreclosures and bankruptcy intruding even into the Olympic games, their call is increasingly hard to ignore.

Previously posted on Rooflines by Alan Jenkins on August 9, 2012.

Geithner Steps Up in Defense of Principal Reduction

Yesterday, Treasury Secretary Timothy Geithner took a bold step toward guarding families’ homes from unnecessary foreclosure. He wrote an open letter in defense of principal reductions—a vital option that reduces the original amount of a home loan for struggling homeowners. Last summer, partners of the Home for Good campaign called on Secretary Geithner to make lasting improvements to the mortgage market.  More than 10,000 concerned individuals sent postcards, and during a four-day call-to-action, nearly 400 people called the Treasury to urge a simple message:  stop needless foreclosures; support affordable rental housing; and revive a sustainable path to homeownership.  With his open letter, Secretary Geithner made a strong move in the right direction.

In an environment where the blame game is often the operative strategy for elected officials and housing stakeholders, there appears to be little that economists, advocates, big banks, and investors agree on.  However, principal reduction is a solution that has cut across ideology and is considered by many to be a win-win solution. At minimum, it is anevidence-based tool for reducing foreclosures that continues to be underused, even while so many other approaches come up short. Smart servicers and lenders are on board.  They use a calculation known as Net Present Value (NPV) to compare the costs associated with foreclosure to the costs of reducing principal.  As analysis released by the Treasury Department shows, there is a targeted group of loans on which investors can save money in the long run by cutting a troubled homeowner’s mortgage balance to a manageable level.

Unfortunately, Federal Housing Finance Agency (FHFA) Acting Director Ed DeMarco has time and again stood in the way of implementing principal reductions as a solution.  DeMarco is in charge of regulating Fannie Mae and Freddie Mac, where most of the nation’s home loans are held—and until he concedes, many families will continue to fall into needless foreclosure.  In his open letter, Geithner points out that a recent study by DeMarco’s own agency shows that principal reduction decreases the chances of redefault and actually saves money, rather than increasing risk and cost, as DeMarco claims.  Making the situation all the more frustrating, we—the taxpayers—are the investors in the case of loans serviced by Fannie Mae and Freddie Mac.  DeMarco does us all a disservice by rejecting a key tool that could reduce foreclosures while also saving money for taxpayers.

Geithner’s public statement in support of principal reduction is cause for celebration, but DeMarco has further entrenched himself as the major obstacle to taking principal reduction to scale.  The enduring housing crisis requires bold steps and true solutions.  We cannot afford to be impeded by purely ideological differences—five years of that experiment have cost millions of families their homes and neighborhoods.  Principal reduction is a proven and refreshing strategy for repairing the system, and DeMarco must no longer stand in the way.

Ready to see real solutions to our nation’s housing woes? Join the Home for Good campaign and tell the presidential candidates that you want their commitment to housing opportunities!

Originally posted on Rooflines.

Photo by Medill DC, CC BY