|
For Immediate Release
For More information contact Bruce Hahn: 703-536-7776
During National Homeownership Month,
Grassroots Group Worries about a Housing Crunch
AHGA Raises Three “Red Flags” for Policymakers
[WASHINGTON, DC] During National Homeownership Month, policymakers at
the state and federal level should beware of three “red flags” that if
ignored, might bring about a challenge to the housing market that many
fear may be approaching Bruce Hahn of the American Homeowners Grassroots
Alliance (AHGA) said today.
AGHA believes that there are several factors which have contributed to
the substantial growth in homeownership which began in the 1990’s. This
increase began with the economic boom of much of the last decade and has
continued through today due to lower interest rates, a returning sense
of workforce job security, as well as mortgage market lending
innovations. This boom has fueled a rapid appreciation in home values,
boosting the net worth of most homeowners, including many low and
moderate income families who purchased homes during that period.
“As we celebrate Homeownership Week,” said Hahn, “we applaud the
expanded participation in the American dream by Americans from every
economic and ethnic category - but we also raise three red flags of
warning. While we reject the idea that a housing ‘bubble’ is inevitable,
but we do believe there is the possibility of stagnation in the growth
in home ownership and in home appreciation. Three public policy issues
are threatening to bring about such a result: out-of-control federal
spending which boosts interest rates, ideological attacks on
federally-backed lenders, and regulatory threats to some of the
innovative lending programs that are helping to expand home ownership.”
Hahn attributed the first red flag to the continued climb in federal
spending. “The lower interest rates of the recent past aided in creating
an economy ripe for new homeowners,” stated Hahn. But as Federal Reserve
Chairman Alan Greenspan recently noted, the climbing deficit has begun
to indicate signs of a potentially “unstable” fiscal environment. The
rising government debt means less money is available for consumer
investment and less money available means higher interest rates for
borrowers.
“When combined with the large number of baby boomers leaving the
workforce and Congress’ growing fiscal obligations, the increasing
deficit could become the proverbial straw on this camel’s back unless it
is addressed,” cautioned Hahn. Rising interest rates will dampen home
appreciation and price out prospective buyers in many markets. “Raising
this first rung in the homeownership ladder would hurt the housing
market and make it even harder for those at the lower end of the
economic scale achieve home ownership. We must maintain fiscal
responsibility and reign in federal spending to avoid perpetuating
rising interest rates,” Hahn concluded.
The second red flag, said Hahn, is the potential over-regulation of
federally chartered lenders Fannie Mae and Freddie Mac. Congress is
currently considering a host of necessary reforms for these two
government sponsored enterprises (or GSEs), due to accounting
irregularities at both institutions. However, potential homeowners
could suffer severely if the government goes beyond what is necessary to
ensure safety and soundness in the industry.
“The House Financial Services Committee recently approved comprehensive
legislation that will surely strengthen the regulation of the nation’s
secondary mortgage market,” Hahn stated. “I urge Congress to proceed
cautiously as this legislation progresses, however, as any
over-regulation of the GSEs will significantly hinder prospective
homebuyers from becoming homeowners.” Associations representing both
real estate brokers and home builders have echoed the same sentiments.
The third red flag, according to Hahn, is the threat to innovative
lending programs that have contributed significantly to the expansion of
home ownership to many buyers who previously would not have been able to
own their own home. In recent years, banks, credit unions, private
lenders, and federally-backed lenders have developed so called
“sub-prime” loans for people with poor credit or little or no credit
histories. Because the credit histories of 30 to 50 percent of
Americans do not enable them to qualify for prime rates, sub-prime loans
have helped nearly 9 million homeowners achieve the American dream.
“Subprime lending works and has a place in the marketplace”, Housing and
Urban Development Secretary Alphonso Jackson told attendees at a June 2
real estate editors convention. His views were echoed by other
conference speakers representing the home builders, real estate brokers,
mortgage lenders and mortgage brokers. “Not only do all of us agree that
the continued availability of subprime loans is critical to continued
expansion of home ownership, we are all also concerned about a possible
overreaction to some companies within the industry that have sought to
exploit vulnerable consumers in the sub-prime market” said Hahn.
Some federal and state legislators and regulators are considering steps
that in some cases could make sub-prime loans less available to those
who need them and can afford them. This is the wrong approach, AHGA
believes. “What is needed is enforcement of existing laws, better
consumer education, and a surgical regulatory or legislative approach to
the exploitive practices of a few bad actors in cases where it is
necessary. Regulators should resist the temptation to implement overly
broad regulations that could ultimately eliminate an option for
consumers who would otherwise be unable to obtain a mortgage in the
prime market. We will not be helping those for whom the only choices are
a subprime mortgage or no mortgage if new regulations are so onerous
that lenders stop making subprime loans.” said Hahn.
Said Hahn, “Homeownership has long been the key to achieving the
American Dream. The opportunity to own property and to build equity that
provides long-term financial security gives Americans a unique stake in
their communities and has helped to strengthen this nation’s economy.
In recent years, great strides have been made to increase the level of
homeownership in this country to nearly 75 million Americans of every
race, color, and creed owning their own homes.”
He continued, “As we celebrate this year’s National Homeownership Month,
we are reminded that home-ownership is in our national interest, and as
such we should re-commit ourselves to preserving the factors that have
allowed homeownership to blossom in the last decade, so that every
family has an opportunity to realize the American Dream.”
Hahn concluded, “Today, homeownership in the United States is at record
levels. Still, there is more that can be done to help more Americans
realize the dream of owning their own home. We urge caution, as
eliminating options and opportunities are not the way to continue
encouraging homeownership.”
The American Homeowners Grassroots Alliance is a nonprofit organization
dedicated to assisting homeowners understands the significant issues
affecting them and empowering them to make their voices heard by state
and federal officials.
|