The people I spoke with on Lilly Avenue, an older neighborhood on the east side of Columbus, welcomed me into their homes with pride. They were building an active neighborhood, a mix of families who had lived there for generations as well as people much newer to the community. They were keeping up, and fixing up, their homes. They were also tired of looking at the boarded up houses, cutting the overgrown lawns and picking up the trash that the distant banks, which now held title, simply ignored. They worried about the additional crime these abandoned buildings attract, and knew that the nearby empty buildings lowered the value on their own homes, potentially putting them "underwater" on their own mortgage. Everyone knew someone who had been foreclosed on.
This is just a snapshot of what you can see in virtually every quadrant of the city as wave after wave of foreclosures have hit our neighbors hard. Banks have been reluctant participants in the federal programs that were supposed to address this problem, and the programs were not really effective at addressing the huge problem of vast numbers of homeowners paying mortgages that are greater than their home is now worth. It is a vicious cycle, particularly when some make the "rational" choice to simply walk away from their home and their mortgage obligation because they have no hope of ever catching up.
We need to put a stop to this cascade of ever lower values, more families "underwater," and lower tax payments to schools and other community resources. The Federal Housing Finance Agency needs to stop being an obstacle and instead empower Fannie Mae and Freddie Mac to take reasonable measures to rewrite these underwater mortgages, including principal reductions. Edward J. De Marco, the Bush holdover serving as Acting Director of the FHFA, is holding up this remedy, and he needs to change direction or change jobs. His own agency has estimated that a principal write-down solution could save taxpayers' billions of dollars. After all, we the taxpayers are on the hook as guarantors of these obligations, and keeping people in their homes can put a floor to a problem of declining real estate values and declining communities.
Activists, neighborhood associations, realtors, concerned citizens, now is the time to band together and make our voices heard in the halls of Congress, the White House, and the Federal Housing Finance Agency so that Fannie Mae and Freddie Mac will finally take the action needed to protect our communities.
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