A group of lawmakers and industry experts from both sides of the aisle got together in Washington, D.C., yesterday — brought together by think tanks Progressive Policy Institute and e21 — and came up with some pretty interesting ideas for solving the housing market’s woes.
Some of the ideas floated during the New Solutions for America’s Housing Crisis conference were really novel, like reducing student loan payments so young people have more money to put toward a home purchase. Others have been floating around for a while, like finding a way to help home owners refinance when they owe more than their homes are worth.
The panelists, including Sens. Jeff Merkley (D-Ore.) and Johnny Isakson (R-Ga.), Rep. Dennis Cardoza (D-Calif.), Zillow Chief Economist Stan Humphries, NATIONAL ASSOCIATION OF REALTORS® President Ron Phipps, Mortgage Bankers Association CEO David Stevens, and the Center for Responsible Lending’s Executive Vice President Ellen Schloemer offered up even more suggestions:
1. Streamline government programs that help financially troubled home owners and expand the federal Making Home Affordable mortgage help program so that creditworthy home owners who owe their mortgage lender more than their home is worth can refinance to take advantage of today’s low interest rates.
2. Provide down payment vouchers of $2,500 for single taxpayers and $5,000 for married people to help first-time home buyers get into starter homes.
3. Offer shared appreciation mortgage modifications for home owners who owe more than their homes are worth. With a share appreciation modification, the lender agrees to forgive the difference between what the home owner owes and what the house is worth. In exchange, the lender gets a set proportion (usually 25%) of any future home price appreciation.
4. To reduce the number of foreclosed homes being held by the government’s mortgage market giants — FHA, Fannie Mae, and Freddie Mac — sell foreclosed homes to investors either in bulk deals where hundreds of homes are sold in a single deal, or one house at a time to small investors.
5. Make financing available to small investors. Right now, about 90% of mortgages come through Fannie Mae, Freddie Mac, or FHA. Opening these loan programs to small investors would help investors buy foreclosed homes and turn them into productive rental properties.
6. End the current Fannie Mae and Freddie Mac practice of charging extra fees to creditworthy home owners who want to refinance but don’t have a lot of equity and to home buyers who can only put down a small down payments.
7. Put a stop to proposed regulations that will raise the cost of mortgages when home owners have down payments of less than 20%. A proposed regulation called the “qualified residential mortgage” rule will make it more expensive to finance or refinance a home with a down payment below 20%, even if you use private mortgage insurance.
8. Create national rules about the best way to handle home owners who can’t make their monthly payments. Banks, faced with class action lawsuits and angry state attorneys general, would like the federal government to make consistent rules about the fairest way to manage loans when borrowers stop making payments. Now they’re dealing with rules from different states and even local governments, which are passing laws about servicing loans.
9. The best idea of all came from Richard Smith, president and CEO of Realogy Corp., in Parsippany, N.J., which owns such brands as Century 21, Coldwell Banker, ERA, and Sotheby’s International Realty. His suggestion: Start with a cohesive government policy that defines how and why we, as a nation, support home ownership. Once you’ve established that home ownership’s family, community, and national economic benefits make it worthy of federal support, it becomes easier to remove the current roadblocks slowing the real estate recovery.
What do you think of these ideas as ways to jump-start the housing market?