Let Qualified Home Buyers Breathe Life Into Home Market

House exterior Legislative proposals that would hinder the housing market recovery have lingered for too long. Image: Karl Weatherly/Photodisc/Getty Images

President Obama’s poll numbers have recovered nicely thanks to the good news surrounding the demise of Osama bin Laden. But the bin Laden bounce will wear off quickly unless the administration takes some bold steps to restore economic confidence in this country. Creating jobs is certainly an essential part of restoring that stability. But in my view, nothing is more important than creating confidence in the long-term health of the housing market.

A recent report suggests that 28% of American home owners are currently underwater. In other words, more than one-quarter of your neighbors owe more on their mortgage than their home is worth. It’s a frightening statistic, but one that will only expand if lawmakers don’t begin turning their attention to recovery and away from narrowly focused regulations that will further devastate our crippled economy. 

Contributing to the uncertainty of the housing market recovery, Capitol Hill has allowed proposals that would repeal longtime benefits of home ownership, like property tax and mortgage interest deductions, to linger on life support. Those proposals should be dismissed. Add to that a plan to kill a cornerstone of our national housing plan, the 30-year mortgage, and it’s easy to understand why underwater owners would rather face foreclosure than hold their breath in hopes of resurfacing. 

If that’s not enough, six government regulatory agencies are now proposing plans to tighten up lending standards that would squash the home buying power of many qualified Americans. According to the Mortgage Bankers Association, under this proposal, borrowers who can’t cough up a 20% downpayment will get hit with interest rates of more than 8% by next year. That’s a ludicrous 3% higher than the “safe” loans lenders define as qualified residential mortgages (QRM) under the proposed regulation.  
 
I agree there needs to be more scrutiny of borrowers and stiffer penalties for those who don’t pay their mortgages. But, in my view, it’s political insanity to undermine the housing market recovery with counterproductive policies that would put home ownership out of reach for most Americans, causing property values to further plummet.  

Instead, let’s find a way to persuade underwater owners to fight their way to air by encouraging qualified buyers to enter the market with confidence.

Would you be able to buy a home if you were required to put down 20%?