After years marked by stalemate and indecision, 2012 has delivered a glimmer of hope for families and the housing market. The Department of Justice kicked off the year with a historic settlement with Bank of America regarding predatory loans made by Countrywide before the Bank acquired the company in 2008. Not to be outdone, 49 state Attorneys General delivered the largest settlement made thus far on behalf of families who experienced wrongful foreclosure. And just last week, California's state legislature approved a bill to end the practice known as dual track--where a homeowner's loan modification and foreclosure are processed at the same time. Now servicers will have to suspend foreclosure while a family is being evaluated for a home-saving solution. Our community's skepticism is warranted as we've heard the promises before, only to be disappointed with one failed program after another. But there is one reason to think that these latest efforts may be the precursor to true relief: elected officials finally seem to have gotten the message that voters care about housing.
In polls, voters often identify the troubled state of the economy as their top concern. Most economists agree that housing remains the biggest drag on our recovery. 11 million homeowners owe more than their home is worth. That's 11 million people who are keeping themselves out of the consumer economy. Some of this is a good thing; people are paying down their debt and padding their savings. But for most, that negative equity looms large over the family finances. Not only is household consumption down, but families are delaying purchases of major goods that drive our economy, such as cars and houses.
Today, HUD Secretary Shaun Donovan and CFPB Director Richard Cordray will speak before hundreds of Hispanic leaders at the 2012 NCLR Annual Conference in Las Vegas at 6:00 p.m. ET/3:00 p.m. PT. If you're in town, you can join us at the Mandalay Bay (it's free and open to the public). If you can't be there in person, you can watch it live here. Our message is clear: Don't quit the dream. The settlements secured earlier this year are a critical step forward, but their ultimate impact will only be realized if implemented well. This town hall is part of the Home for Good Campaign--a venue for local voters to challenge our presidential candidates on their solutions to the persistent housing slump.
For as much consensus as there is around solutions, the lack of movement from Washington is shocking. Principal reduction is widely recognized as the best way to head off an unnecessary foreclosure, thereby sparing the neighborhood one more abandoned property and keeping local taxes flowing to municipalities. Analysis of the various methods servicers use to stave off foreclosure shows that homeowners are most successful when the principal balance is written down to a value closer to what the home is actually worth. Perhaps the best evidence is that the banks and servicers are putting this strategy to work on the loans they hold on their books.
Republican candidate Mitt Romney's solution is to let the housing market bottom out, and he and President Obama both support refinancing as way to help the market rebound. These strategies have not worked so well for Latino families in hot foreclosure states like Florida, Nevada, California, and Arizona, where home values may be as little as 50% of what they were a few years ago. During another session at the NCLR Annual Conference, we will share data that shows that Latinos accounted for only 4.2% of all refinancing loans originated in 2010 compared to 87% for White homeowners. Meanwhile Fannie Mae and Freddie Mac overseer Ed DeMarco continues to be the major obstacle preventing implementation of the best tool for restoring housing stability--principal reduction.
The hope is that with robust implementation of the 49-state AG settlement, the evidence for principal reduction will grow. Most of us are not content to wait that long. Voters in California showed they can persevere--the bill had failed three times before--when they stand up and let their elected officials know what they want. Now it's time to deliver that kind of success to other states. Here is what you can do: Tell the presidential candidates you want to see better solutions now. Join us at the Don't Quit the Dream town hall or follow us on Twitter at #NCLR12 to get your side of the story on the public record. Together we can make 2012 the year to turn around the housing market.
BALDERDASH
The only way that a homes value effects spending is if it is used as a check book. It is that mentality that led to the bubble.
The ONLY time a home value comes into play is at purchase. The payment is then set for the term of the loan. IF the payment is affordable and the property tax load does not escalate then the value of the home is meaningless until the next purchaser comes along.
The market value is determined by what a house can sell for. Propping prices artificially simply delays the inevitable and transfers the debt to the public at large.
Why do you expect someone else to shoulder the cost of someone elses lack of equity.
You want a smaller principle? Pay down 20% to 33% of the house's value at closing and buy a smaller house. You want a safer neighborhood? Get involved in the neighborhood. Pay your taxes, make sure you never miss a payment on your house. Step in if you see kids (yours or others) getting into trouble. Get to know your neighbor and their kids. Safety is brought about by vigilance and active participation in your community. If you are going to tune out, you are better off in an apartment.
Never quit a paying job until you have another one. Make sure you have an emergency fund so that if you lose your job you can keep your house. A house is not a piggy bank. Too many people forgot that leading up to the housing crisis. Your emergency fund should have 6 months to a years worth of vital current expenses (water, power, mortgage/shelter, car payments, food, insurance, taxes, etc).
Impossible? No, but if you think it is, you cannot afford a house.