it’s time to talk about housing

7/31/2019 Its Time to Talk About Housing

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1 Center or American Progress | Its Time to Talk About Housing

Its Time to Talk About Housing

7 Questions the 2012 Presidential Candidates Needto Answer on the Ongoing Housing Crisis

John Griffith, Julia Gordon, and David Sanchez August 15, 2012

Te ongoing housing crisis remains one o he bigges drags on our economic recovery.

Bu less han hree monhs beore a presidenial elecion viewed by many as a reerendum

on he economy, housing is litle more han a side conversaion on he campaign rail.1

Presiden Barack Obama has barely menioned housing in recen monhs, aside romoccasional piches or reorms o help more homeowners renance.2 Presumpive

Republican nominee Mit Romneys 59-poin economic plan unveiled las year makes

only a couple o passing reerences o housing, and Gov. Romney is ye o release any

subsanive housing proposals since.3

As our presidenial hopeuls say silen, he sluggish housing marke coninues o plague

our economy. Te hisoric decline in home prices since 2006 has cos Americans more

han $7 rillion in household wealh,4 orced millions o amilies ou o heir homes,5 and

le nearly one in our homeowners owing more on heir morgages han heir homes

are worh.6

Privae invesmen in housing is a racion o is hisoric norm, ranslaing obillions in los economic oupu and millions o missing jobs.7 And more han ve years

ino he crisis, he U.S. morgage marke remains on lie suppor as he ederal govern-

men guaraneed more han 95 percen o home loans made las year. 8

Te U.S. housing marke is where he Grea Recession began9 and were unlikely o see

a ull recovery unil he marke heals. Te housing secor hisorically accouns or abou

one-h o our economy10 and housing booms paved he pah o our las hree eco-

nomic recoveries.11 Bu ew analyss expec such a boom anyime soon.

We can no longer aord o ignore hese problems. As he presidenial campaign shis

ino high gear in he coming weeks, Presiden Obama and Gov. Romney mus lay ou

heir respecive visions or housing in he Unied Saes. Tis brie lays ou seven essen-

ial quesions he presidenial candidaes need o answer on housing, including:


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1. Wha will you do o preven more unnecessary oreclosures and keep more amilies

rom losing heir homes?

2. How will you address he problem o underwaer morgages?

3. How will you revialize communiies already hi hard by he oreclosure crisis?

4. How will you mee he pressing need or aordable renal housing?

5. Wha will you do o assure ha working and middle-class amilies can achieve

homeownership in he uure?6. Wha do you plan o do wih he governmen-backed morgage gians Fannie Mae

and Freddie Mac, and wha will ake heir place in he morgage marke o he uure?

7. How do you plan o proec households rom predaory lending and discriminaion

in he U.S. morgage marke?

Each quesion includes key acs or voers, reporers, and oher key sakeholders,

as well as a brie discussion o why he issue maters and CAPs recommendaion or

xing he problem.

1. Five years after the housing bubble burst, experts suggest we may be only halfway through

the resulting foreclosures, with millions still to come. Do you think the federal government

should do more to help prevent unnecessary foreclosures? If so, how?

Foreclosure is oen he wors-case scenario or every

pary involved, since i resuls in exraordinarily high

coss o borrowers, lenders, and invesorsno o

menion he spillover eecs on he surrounding

communiy and he broader economy. And since

millions o a-risk morgages are owned or guaran-eed by he ederal governmen, axpayers are on he

hook or billions in oreclosure-relaed losses.

Tere are several ways o lower an a-risk bor-

rowers monhly paymens and increase he chance

o repaymen. I he borrower is curren on heir

paymens, hey oen have he choice o renance o

odays hisorically low ineres raes, saving an aver-

age o $2,600 a year in ineres paymens.18 I he

borrower has allen behind, he invesor can oen

save money by working ou a new deal, usually by

exending he loans erms, modiying he ineres

rae, deerring paymens, or lowering he amoun

he borrower acually owes on he loanso-called

principal reducion. Or, i he borrower eiher can

no longer aord he house or does no wish o say,

FIGURE 1

We may only be halfway through the foreclosure crisis

Total number of foreclosures vs. loans at serious risk (in millions),

as of March 2011

Sources: CoreLogic and Amherst Securities

0

1

2

3

4

5

6

7

8

Millions of mortgages

Mortgages in

foreclosure process

1.4 million

Completed foreclosures

since Sept. 2008

3.5 million

60+ days delinquent

3.5 million

Current but compromised

payment history

1.5 million

Steadily current

but underwater

2.4 million

Foreclosures completed

or in process

Mortgages at risk of

foreclosure/liquidation


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hey can sill leave graceully wihou going hrough a oreclosure, eiher by handing he

home back o he lender (known as a deed-in-lieu-o-oreclosure) or negoiaing a shor

sale wih he morgage invesor.

In a well-uncioning marke, he lender or morgage invesor responsible or he loan

considers a range o opions when deciding which inervenion is bes or he specic

borrower, and negoiaes a deal ha minimizes losses and keeps amilies in heir homeswhen possible. Bu were no in a well-uncioning marke. Recen experience has shown

ha morgage servicershe companies in charge o collecing imely morgage pay-

mens on behal o he invesorare oen unwilling or unable o work wih sruggling

homeowners, even when hose homeowners wan o work wih hem. Te resul is

unnecessary oreclosures which harm he borrower, he invesor, surrounding home-

owners, and he larger economy.

Streamline renancing or all borrowers current on their monthly payments and

meet minimum underwriting standards (See: John Grith, Tossing a Lieline to

Underwater Homeowners (Washington: Center or American Progress, 2012)) and

establish clear and air standards or mortgage servicers dealing with struggling bor-

rowers. (See: Peter Swire and Jordan Eizenga, The Importance o a Homeowner Bill

o Rights (Washington: Center or American Progress, 2012)

CAP Policy Recommendation

As o March 2012, bank

other nancial institutio

had completed approxi

mately 3.5 million orecsures since the nancia

crisis began in Septemb

2008, with another 1.4

million loans still in the

oreclosure process.12 T

month Wall Street analy

predicted as many as 7.

million to 9.3 million at

borrowers were yet to

oreclosure or liquidatio

Roughly 25 percent o

Arican American and L

tino borrowers have eit

lost their homes or are

serious risk o oreclosu

today, compared to jus

12 percent o their whi

counterparts. 14

The typical oreclosure

costs lenders and inves

up to $50,000,15 borrow

up to $7,000 in admini

tive costs alone,16 and

governments up to $34

in lost property taxes a

associated expenses,17

beore accounting or t

indirect costs to the su

rounding community.

Fast Facts


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2. From the peak of the market in 2006, the total amount of home equity in the United States

declined by more than $7 trillion, leaving all homeowners with less wealth and more than

11 million families owing more than their homes are worth. How do you plan to address this

pressi ng problem of underwater mortgages?

I he housing marke is weighing down our economic recovery, negaive equiy is he

anchor a he end o he chain. Underwaer borrowers are a signicanly higher risk ooreclosure han borrowers wih equiy in heir homes, in par because i somehing unex-

peced happenssuch as a deah in he amily, divorce, disabiliy, or emporary bou o

unemploymenhe borrower has no cushion o all back on.24 Tese borrowers ypically

have rouble renancing o odays hisorically low raes simply because hey don have

equiy and hey oen have rouble selling heir homessay, o move or a new job oppor-

uniybecause he bank has o agree o ake a loss hrough a shor sale.

Ten here are he broader economic impacs o negaive equiy. Underwaer morgages

consrain lending beyond he housing marke, as home equiy is a criical source o capial

or collaeral or small businesses,25

college sudens,26

and elderly aduls.27

Homeownerswih litle or no equiy are oen relucan o inves in renovaions and home improve-

mens, siing demand or home-relaed producs rom window curains o washing

machines.28 Borrowers digging heir way ou o morgage deb spend less in sores, making

businesses leery o invesmen. For hese and oher reasons, analyss have observed ha

he recovery is weakes in places where morgage deb is he highes.29

Depending on the sour

between 24 percent19 a

31 percent20 o homeow

with mortgages are undwater, totaling between

$700 billion and $1.2 tr

in negative equity, the

amount above the valu

a home an underwater

rower owes.

Between 2005 and 2009

typical Hispanic homeo

saw their home equity d

cline by 51 percent, rou

two-and-a-hal times th

decline or black and w

borrowers.21

O the roughly 8 million

derwater homeowners t

are current on their mon

mortgage payments, mo

than 40 percent are likel

unable to renance to to

historically low interest

rates simply because the

have private loans that a

ineligible or certain ede

programs.22

Analysis by the Federal

Housing Finance Agenc

ound that targeted pri

cipal reductions o loan

backed by Fannie Mae a

Freddie Mac could save

the companies $3.6 billmostly rom ewer ore-

closures. Those savings

not count the boost to t

economy rom increase

consumer spending.23

Fast Facts

FIGURE 2

Nearly one in four homeowners in the United States

owes more on their mortgage than their home is worth

Total number of mortgages by equity level (in millions), Q1 2012

Severely underwater

(by 25 percent or more)

5.1 million

Moderately underwate

(by 0 percent

to 25 percent)

6.3 million

Nearly underwater

(less than 5 percen

equity)

2.3 million

More than

5 percent equity

34.4 million

Source: CoreLogic


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3. For the communities already hit hard by the foreclosure crisis, how do you plan to

revitalize neighborhoods and stabilize local housing markets?

While oreclosures have skyrockeed naionwide, some areas are paricularly hard hi, rom

impoverished urban neighborhoods o ghostown exurbs. Each oreclosure drives he sur-

rounding propery values down urher, leading o a downward spiral o more oreclosures

and addiional value decline. Muliple oreclosures cos saes and localiies enormous

sums o money in los ax revenue, promping deep cus o criical public services.

A he same ime, vacan or inadequaely mainained homes atrac crime, arson, and

squaters, which increases coss or re, police, and oher services. As people leave

he neighborhoods, local businesses are orced o shuter heir doors, leading o ye

anoher spiral o deparure, oreclosures, and business ailures. Healh and saey can beimpaced by uncolleced garbage, dilapidaed homes, and abandoned pes; or example,

in saes such as Caliornia and Florida, unended swimming pools have become a

breeding ground or disease-carrying mosquios.34

In some blighed neighborhoods he overhang o oreclosed homesmany o which are

owned by he governmen hrough Fannie Mae, Freddie Mac, and he Federal Housing

Adminisraion35glus he or-sale marke, keeping home prices low. In ohers, ore-

closed homes are largely being purchased by invesors and rened ou, which can pro-

vide a useul source o aordable housing bu may also signicanly change he naure o

he neighborhood wihou addiional invesmen and atenion.

Encourage targeted principal reductions at Fannie Mae and Freddie Mac using

shared appreciation, where the entities agree to write of some o the outstand-

ing balance in exchange or a portion o any uture price appreciation on the home.(See: John Grith and Jordan Eizenga, Sharing the Pain and Gain in the Mortgage

Market (Washington: Center or American Progress, 2012)


On average, a oreclosu

reduces the value o a

house by 27 percent an

reduces the value o al

other houses in the ne

borhood by 1 percent.3

In 2009 alone analysts

estimated that 2.4 milli

oreclosures caused pro

erty values to drop or 6

million neighboring hototaling more than hal

trillion dollars in spillov

home devaluation. That

an average devaluation

$7,200 per neighboring

home that year.31

Nearly hal o all oreclo

properties are located i

10 percent o the nation

census tracts.32 One-qu

o oreclosures or at-risk

loans are in low-income

neighborhoods, while 2

percent are in minority

neighborhoods.33

Fast Facts


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Rehabilitate certain government-owned oreclosed properties and convert them to

afordable, energy-ecient rentals through Rehab-to-Rent. (See: Alon Cohen, Jor-

dan Eizenga, John Grith, Bracken Hendricks, and Adam James, Rehab-to-Rent Can

Help Hard-Hit Communities and Our Economy (Washington: Center or American

Progress, 2012))


FIGURE 3

Foreclosures have massive spillover costs to the local community

Estimated cost of each foreclosure to key stakeholders

0 $50,000 $100,000 $150,000 $200,000 $250,000

Lower home values

for roughly 30

neighboring families

Losses and associated

expensive to the

lender or investor

Associated expenses

and revenue shortfalls

for local government

Administrative

costs to the

homeowner

$209,000

$50,000

$34,000

$7,200

Sources: Center for Responsible Lending, NeighborWorks, and The Urban Institute

4. The need for affordable rental housing continues to rise, with 5 million more low-

income renters than there are affordable rental units. At a time of fiscal austerity, how

do you plan to meet this unmet need?

Nearly 100 million Americansroughly one-hird o he U.S. populaionlive in renal

housing.44 Reners on average earn less han homeowners ye spend more on housing

each monh as a percenage o income45 and hey ace an even more expensive uure.

Renal vacancies hi a 10-year low in 201146 and rens increased las year in 24 o he 25

markes racked by realy rm rulia.47 Te oreclosure crisis is parly o blame or hese

increases: Families oen have o wai up o seven years ollowing a oreclosure o obain

nancing o purchase anoher home, during which hey have no choice bu o ren.


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The total number o severely cost-burdened households (those

ing more than hal their income on housing) nearly doubled over

past decade.36 The afordability crunch has disproportionally hit c

munities o color: Today 27 percent o black amilies and 25 perceHispanic amilies are severely burdened, compared to just 15 per

o white amilies.37

Twenty-seven percent o renters are severely cost-burdened, whi

more than twice the rate or homeowners.38 Only about a quarte

cost-burdened renters receive ederal assistance.39

Today there are 5.1 million more low-income renters than there a

afordable rental unitsmore than double the shortall observed

2001. O the afordable units that are available, more than 40 per

are occupied by higher-income renters.40

Last years budget cuts hit afordable housing programs especially ha

including a 38 percent cut to the Department o Housing and Urban

Developments HOME Investment Partnerships program and a 12 pe

cut to the Community Development Block Grant program.41 Total ed

unding or public housing decreased by more than 20 percent betw

2010 and 201242 despite approximately $26 billion in unmet repair a

renovation needs in the nations aging public housing stock.43a

Fast Facts

FIGURE 4

The affordable rental gap is getting wider

Total very low-income renters vs. total affordable

rental units (in millions), 2001 and 2010

Source: Harvard Joint Center for Housing Studies, The State of the Nation's

Housing 2012 (JCHS tabulations of US Census Bureau, American Community

Surveys)

0

2

4

6

8

10

12

Millions of households

2001 2010

Very low-income renters Affordable rental units

Gap:

2.4 million

Gap:

5.1 million

Wages have no kep up wih his increase in rens,

leaving one in our reners oday paying more han

hal o heir monhly income on ren.48 Meanwhile,

as he number o low-income reners grew by 2.2

million over he las decade, he number o adequae

and aordable renal unis acually decreased.49 As

needs skyrockeed, lawmakers acually cu ederalsuppor o key aordable housing programs such as

public housing, he HOME Invesmen Parnerships

program, and he Communiy Developmen Block

Gran program.

Unaordable rens are depressing demand or

goods and services. Lower-income amilies in una-

ordable housing unis spend 50 percen less on

clohes and healh care, 40 percen less on ood, and

30 percen less on insurance and pensions com-pared o amilies in aordable unis, according o

Harvards Join Cener on Housing Sudies.50

Capitalize the Housing Trust Fund, ramp up unding or Low Income Housing Tax Credits,

guarantee certain debt issued by Community Development Financial Institutions, and

establish a stable, liquid, and responsible market or multiamily housing nance. (See:

Mortgage Finance Working Groups Multiamily Subcommittee, A Responsible Market

or Rental Housing Finance (Sponsored by the Center or American Progress, 2010)



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The U.S. homeownershi

rate ell rom 69.2 perce

2004 to 65.4 percent in t

rst quarter o 2012thlowest level in 15 years.5

Still, nearly three-quarte

o renters and homeown

ers surveyed by Fannie M

believe that now is a go

time to buy a home.52

Today 48 percent house

holds o color are home

owners, the lowest leve

since 2000. By comparis

74 percent o white hou

holds own their home.5

Lenders originated abo

$400 billion in home

purchase loans in 2011,

compared to a peak o $

trillion in 2005.54

Credit standards have go

much tighter since the c

began. In 2007 the avera

Fannie Mae-backed loan

covered 75 percent o th

homes value (meaning

borrower o covered the

other 25 percent throug

down-payments and mo

gage insurance) and we

to a household with a cr

score o 716. Last years

average loan covered ju

percent o the homes vaand the average borrow

had a credit score o 762

Fast Facts5. The U.S. homeownership rate has dropped significantly in recent years as a result of

foreclosures and tightened credit standards. Do you think it is important for more

Ame rica ns to be able t o buy hom es? If so, what role do you think the fed eral gove rnment

should play in achieving that goal?

Homeownership remains a key par o he American Dream. Owning a home pro-

vides economic sabiliy or middle-class amilies, builds wealh ha can be rans-erred across generaions, and encourages residens o mainain heir properies and

inves in heir communiies.

Bu in recen years i has become increasingly difcul or he average American amily

o become a homeowner. In response o he oo-loose credi sandards o he housing

bubble, many morgage lenders have overcorreced by exending credi o only he saes

possible borrowers. Meanwhile, governmen regulaors are wriing rules ha will likely

deermine who ges a morgage or decades o come. Tere is also concern ha exces-

sively high down-paymen requiremens could lock many crediworhy amilies ou o

he marke compleely.

In designing he morgage marke o he uure, policymakers mus consider he

righ balance beween reining in excessive risk s and promoing reasonable access o

morgage credi, as well as he appropriae levels o homeownership versus rener-

ship in our counry.

Establish a new system o housing nance in the United States that reins in excessive

risk-taking, supplies mortgage capital in every community even in times o eco-

nomic duress, and preserves long-term, reasonably priced products like the 30-year,

xed-rate mortgage. (See: A Responsible Market or Housing Finance, 2011)



9/15


6. What do you plan to do with the government-backed mortgage giants Fannie Mae and

Freddie Mac? If you plan to eliminate them, what will you replace them with and how will

you transit ion to a new syste m without causing undue harm to the fragile housing market?

For decades, he governmen-conrolled morgage gians Fannie Mae and Freddie Mac

have played a crucial role in he U.S. morgage nance sysem as a secondary morgage

marke. o help capial ow ino he marke, Fannie and Freddie purchase home loans

made by privae rms, provided hey mee sric size, credi, and underwriing sandards.

Tey hen guaranee imely paymen o principal and ineres on hose loans, eiher as

invesmens held in a porolio or hrough morgage-backed securiies issued o ouside

invesors. Since morgage lenders no longer have o hold hese loans on heir balance

shees, hey have capial available o make more loans o crediworhy borrowers.

In Sepember 2008 Fannie and Freddie suered massive losses as he housing marke

crumbled around hem, orcing he ederal governmen o ake conrol o he companies

hrough a legal process called conservaorship. Since hen he governmen has backed

nearly all home loans made in he Unied Saes, as invesors have shown litle appeie

or purchasing morgages wihou a governmen guaranee.

FIGURE 5

As mortgage lending declined since the crisis began,

so too did homeownership

Total home purchase loan originations and U.S. homeownership rates,

by quarter since 2006

60%

64%

68%

72%

76%

80%

0

$100

$200

$300

$400

$500

2006 2007 2008 2009 2010 2011 2012

Home purchase loan originations

Homeownership rate

Home purchase loan originations ($ billions) Homeownership rate

Sources: MBA Quarterly Origination Estimates, U.S. Census Bureau


10/15


Gradually wind down Fannie Mae and Freddie Mac and replace

them with a new system capitalized by private capital, with an

explicit government backstop against catastrophic risk on cer-

tain well-regulated mortgage products. (See: John Grith, The

$5 Trillion Question: What Should We Do with Fannie Mae and

Freddie Mac? (Washington: Center or American Progress, 2012))


FIGURE 6

Fannie Mae and Freddie Mac back more

than half the mortgage market today

Total mortgage loans outstanding by source

of credit (in millions, as of May 2012)

17.7 million

Fannie Mae

11.6 million

Freddie Mac

9.1 million

FHA, VA,

and other

government

agencies

16.9 million

Private banks

Source: Fannie Mae

Since being placed under government control in September 20

Fannie Mae and Freddie Mac have required roughly $150 billion

taxpayer support.56 Analysts estimate it could take as long as 15

years or the companies to pay that money back.57

More than 95 percent o new home loans made last year were ba

by the ederal government through Fannie Mae, Freddie Mac, an

the Federal Housing Administration.58 At the height o the bubbl

2006, these entities backed less than 35 percent o loan originatio

Fannie and Freddie own or guarantee a combined $5 trillion in

mortgage assets, more than hal o all outstanding home loans in

United States.59

The nancial situations at both Fannie Mae and Freddie Mac have

improved in recent months. Fannie has reported prots in its pas

quarters, while Freddie in August reported its best quarterly earn

in 10 years.60

Fast FactsJus abou everyone agrees ha he curren level o

governmen suppor is unsusainable in he long run

and privae invesors will evenually have o assume

more risk in he morgage marke. Bu policymakers

have ye o grapple wih oher imporan quesions:

Wha sor o presence should he ederal governmen

have in he housing marke o he uure? And whenis he righ ime o sar moving oward his new

sysem o U.S. housing nance?

Te answers o boh quesions will have major

implicaions or he availabiliy and aordabiliy

o morgage nanceand hus access o home-

ownershipor millions o American amilies.

For example, many expers believe ha he 30-year

xed-rae morgage, now a pillar o he U.S. housing

marke, would largely disappear wihou a govern-men guaranee.61


11/15


Vigorously implement key mortgage-market reorms laid out in the Dodd-Frank Act,

including a requirement that lenders must ensure a borrowers ability to pay back a

home loan at the time o origination. Also, make air and equitable access to aford-

able mortgage credit a key pillar o any uture system o housing nance. (See: A

Responsible Market or Housing Finance, 2011)


Subprime loans jumped

9 percent o total mortg

originations in 1996 to 2

percent in 2006.62

That yan astonishing 61 perce

o subprime loans went

borrowers with credit sc

high enough to qualiy

conventional loans with

better terms.63

During the housing bubb

Arican American or Lati

borrowers with good cre

were three times more li

than their white counter

to receive a risky subprim

loan, and more than thre

times more likely to rece

high-interest loan.64

Thirty-eight percent o

Arican American applic

or conventional home

purchase loans were tu

down in 2010, compare

to 23 percent in 2004. T

denial rate or white ap

plicants climbed rom 1

percent to 15 percent o

that period.65

The Federal Housing Ad

istration, a government

mortgage insurer, prov

access to credit or 60 p

cent o all Arican Amer

and Hispanic homebuy2010, compared to less

10 percent in 2006.66

Fast Facts7. At the peak of the housing bubble, more than half of subprime loans went to borrowers

who could have qualified for conventional, safe mortgages, many of whom were borrowers

of color. How do you plan to prevent racial and ethnic discrimination in the U.S. housing

market and promote access to affordable, sustainable mortgages to all capable borrowers?

During he heigh o he housing bubble, loan originaors backed by Wall Sree capial

oen seered borrowers oward risky subprime loans, even when hey qualied or beterloans. Tese predaory producs, such as adjusable-rae morgages wih pricing gimmicks,

were designed o ail, boh encouraging borrowers o borrow ar more han hey could

manage and requiring he borrower o renance every couple years. No surprisingly, hese

loans deauled a signicanly higher raes han convenional morgages.67 Borrowers o

color were disproporionaely argeed, as black and Hispanic borrowers were hree imes

more likely o be seered o subprime loans han heir whie counerpars.68

Regulaors are nalizing new rules or he enire morgage nance sysem, including

bans on predaory lending by loan originaors. In he meanime, privae lenders have

drasically scaled back lending aciviy by ighening underwriing sandards or mor-gage loans, wih serious consequences or communiies o color. For example, home-

ownership raes have declined by abou 4.3 percenage poins or black households

since heir peak, nearly double he decline or whie households.69

Racial dispariy and discriminaion in morgage lending is nohing new, and eors

rom ederal and sae governmens during he 1990s and early 2000s made slow bu

sure headway in reducing he racial homeownership gap. Bu he recen crisis has erased

mos o ha progress.70


12/15

12 Center or American Progress | Factsheet Title

FIGURE 7

Racial and ethnic disparities persist in the mortgage market

People of color are less likely to be homeonwers, were more likely to receive risky subprime loans during the bubble,

and are less likely to receive a loan at all today, compared to their white counterparts

Percent of borrowers

in foreclosure or at

serious risk today


who received high-

interest loans despite

good credit (FICO > 660)


who received high-risk

loans despite good

credit (FICO > 660)

Percent of mortgage

applicants who

were denied

African American

Hispanic

Non-Hispanic white

Sources: The Center for Responsible Lending and The Federal Reserve

0

10%

20%

30%

40%

50%

60%

70%

80%

Homeownership

rate in 2011

A moment of urgency

In recen monhs, several analyss have prediced ha he housing marke has nally bo-

omed ou and ha were now in he beginning sages o a housing recovery.71

We hopehas rue.

Bu even i he wors days are indeed behind us, he housing crisis is ar rom over.

Millions o sruggling amilies sill risk losing heir homes. ens o millions o reners

sill ace unmanageable housing coss. Counless more crediworhy amilies sill dream

o owning a home bu can ge approved or a morgage.

Each o hese problems has ripples beyond he housing marke. Wheher is a home-

owner drowning in morgage deb, a low-income amily paying hal heir income on

ren, or a poenial homebuyer being closed ou o he marke, he crisis coninues o

sie demand or goods and services, impeding eors o grow and creae jobs.

Our presidenial hopeuls canno say silen on his criical issue. Aer monhs o argu-

ing abou ax reorm, budge cus, healh care, ousourcing, and privae equiy, is ime

or housing o ge is ime in he spoligh.


13/15


1 Bloomberg Editorial Board, Obama and Romney ShouldSay What Theyll Do About Housing, Bloomberg, July 30,2012, available at http://www.bloomberg.com/news/2012-07-30/obama-and-romney-should-say-what-they-ll-do-about-housing.html.

2 Matt Compton, President Obama Calls or a SimplerRenancing Process, The White House Blog, May 11, 2012,available at http://www.whitehouse.gov/blog/2012/05/11/president-obama-calls-simpler-renancing-process.

3 Romney or America, Believe In America: Mitt RomneysPlan For Jobs And Economic Growth (2011), available at

http://www.mittromney.com/blogs/mitts-view/2011/09/believe-america-mitt-romneys-plan-jobs-and-economic-growth.

4 Federal Reserve Board, The U.S. Housing Market: CurrentConditions and Policy Considerations (2012), available athttp://ederalreserve.gov/publications/other-reports/les/housing-white-paper-20120104.pd.

5 Debbie Gruenstein Bocian and others, Lost Ground, 2011:Disparities in Mor tgage Lending and Foreclosures (Dur-ham, North Carolina: Center or Responsible Lending, 2011),available at http://www.responsiblelending.org/mortgage-lending/research-analysis/Lost-Ground-2011.pd.

6 CoreLogic, CoreLogic Reports Negative Equity Decreases inFirst Quarter o 2012, Press Release, July 12, 2012, availableat http://www.corelogic.com/about-us/researchtrends/as-set_upload_le912_15196.pd.

7 Bipartisan Policy Center, Housings Impact on the Economy

(2012), available at http://bipartisanpolicy.org/projects/housing/inographic-economy.

8 John Carney, Too Big Not to Fail , The New York Times,August 11, 2010, available at http://ww w.nytimes.com/2010/08/12/opinion/12carney.html.

9 Adam J. Levitin and Susan M. Wachter, Explaining theHousing Bubble Georgetown Law Journal 100 (4) (2012):1177-1258.

10 National Association o Home Builders, HousingsContribution to Gross Domestic Product (GDP)(2012), available at http://w ww.nahb.org/generic.aspx?genericContentID=66226.

11 Eric S. Rosengren, Housing and Economic Recovery,Speech Delivered at the Economic Outlook Seminar, Stock-holm, Sweden, September 28, 2011, available at http://www.bos.rb.org/news/speeches/rosengren/2011/092811/

index.htm.

12 CoreLogic, CoreLogic Reports 69,000 Completed Fore-closures Nationally in March, Press Release, May 1, 2012,available at http://www.corelogic.com/about-us/news/corelogic-reports-69,000-completed-oreclosures-national-ly-in-march.aspx.

13 Laurie S. Goodman, Testimony beore the Senate Bank-ing Committee, Strengthening the Housing Marketand Minimizing Losses to Taxpayers, March 15, 2012,available at http://banking.senate.gov/public/index.cm?FuseAction=Files.View&FileStore_id=096e0-8500-41a5-a02-0139d0d2e07.

14 Center or Responsible Lending, Lost Ground: CRL ResearchShows Foreclosure Crisis Not Halway Over, Press Release,November 17 2011, available at http://www.responsi-blelending.org/media-center/press-releases/archives/Lost-Ground-CRL-Research-Shows-Foreclosure-Crisis-Not-Halway.html.

15 Desiree Hatcher, Foreclosure Alternatives: A Case orPreserving Homeownership (Chicago: The Federal ReserveBank o Chicago, 2006).

16 Family Housing Fund, Cost Eectiveness o Mortgage Fore-closure Prevention (1995), available at http://www.hund.org/_dnld/reports/MFP_1995.pd.

17 William C. Apgar, Mark Duda, and Rochelle NawrockiGorey, The Municipal Cost o Foreclosures: A ChicagoCase Study (Minneapolis: Homeownership Preserva-tion Foundation, 2005), available at http://www.nw.org/network/neighborworksProgs/oreclosuresolutionsOLD/documents/2005Apgar-DudaStudy-FullVersion.pd.

18 Mitchell Remy, Deborah Lucas, and Damien Moore, AnEvaluation o Large-Scale Mortgage Renancing ProgramsWorking Paper 2011-4 (Congressional Budget Ofce, 2011),available at http://www.cbo.gov/sites/deault/les/cboles/

attachments/09-07-2011-Large-Scale_Renancing_Pro-gram.pd

19 CoreLogic, CoreLogic Reports Negative Equity Decreases inFirst Quarter o 2012.

20 Zillow, Despite Home Value Gains, Underwater Homeown-ers Owe $1.2 Trillion More than Homes Worth, PressRelease, May 24, 2012, available at http://zillow.mediaroom.com/index.php?s=159&item=278.

21 Harvard Joint Center or Housing Studies, The State othe Nations Housing 2012: Demographic Drivers (2012),http://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_demographic_drivers.pd.

22 John Grifth, Tossing a Lieline to Underwater Homeown-ers (Washington: Center or American Progress, 2012), avail-able at http://w ww.americanprogress.org/issues/2012/05/homeowners_lieline.html.

23 Federal Housing Finance Agency, Review o Options Avail-able or Underwater Borrowers and Principal Forgiveness(2012), available at http://www.ha.gov/webles/24108/PF_FHFApaper73112.pd.

24 Laurie S. Goodman and others, Negative Equity TrumpsUnemployment in Predicting Deaults, The Journal o FixedIncome 19 (4) (2010): 67-72.

John Grifth is a Policy Analyst with the Housing team at the Center or American Progress.

Julia Gordon is the Centers Director o Housing Finance and Policy. David Sanchez is a

Special Assistant with the Centers Economic Policy team.

Endnotes


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25 Mark E. Schweitzer and Scott A. Shane, The Eect o FallingHome Prices on Small Business Borrowing, Federal ReserveBank o Cleveland Economic Commentary, December 10,2010, available at http://www.clevelanded.org/research/commentary/2010/2010-18.cm.

26 Michael F. Lovenheim, The Eect o Liquid Housing Wealthon College Enrollment, Journal o Labor Economics 29 (4)(2011): 741-771.

27 Edward Wyatt, Report Highlights a Rise in Reverse Mort-gages, The New York Times, June 28, 2012, availabl e at

http://www.nytimes.com/2012/06/28/business/economy/report-highlights-a-rise-in-reverse-mortgages.html.

28 Brian T. Melzer, Mortgage Debt Overhang: Reduced Invest-ment by Homeow ners with Negative Equity, Working paper(Kellogg School o Management, 2012), available at http://www.kellogg.northwestern.edu/aculty/melzer/Papers/CE_debt_overhang_082210.pd.

29 Mike Konczal, How Mortgage Debt is Holding Back theRecovery (Washington: The Roosevelt Institute, 2012), avail-able at http://ournancialsecurity.org/blogs/wp-content/ournancialsecurity.org/uploads/2012/06/Mike-Konczal-How-Mortgage-Debt-is-Holding-Back-the-Recovery-PAPER.pd.

30 Massachusetts Institute o Technology, How ForeclosuresHurt Everyones Home Values, Press Release, July 20, 2010,available at http://web.mit.edu/press/2010/housing-prices.html .

31 Center or Responsible Lending, Soaring Spillover: Accel-erating Foreclosures to Cost Neighbors $502 Billion in 2009Alone; 69.5 Million Homes Lose $7,200 on Average (2009),available at http://www.responsiblelending.org/mortgage-lending/research-analysis/soaring-spillover-3-09.pd.

32 Harvard Joint Center or Housing Studies, The State othe Nations Housing 2012: Key Facts (2012), available athttp://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son_2012_key_acts.pd.

33 Center or Responsible Lending, Foreclosure DamageIndex (2011), available at http://ww w.responsiblelending.org/mortgage-lending/tools-resources/oreclosure-dam-age-index.html.

34 Associated Press, Pools Become Mosquito Havens in Fore-closure, MSNBC, April 22, 2009, available at http://www.msnbc.msn.com/id/30344932/ns/technology_and_science-science/t/pools-become-mosquito-havens-oreclosure/.

35 Bill McBride, Fannie, Freddie, FHA REO declined 18%Year-over-year, Calculated Risk, August 8 2012, availableat http://www.calculatedriskblog.com/2012/08/annie-reddie-ha-reo-declined-18-year.html.

36 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Housing Challenges (2012), avail-able at http://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_housing_challenges.pd.

37 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Appendix Tables (2012), availableat http://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_appendix_tables.pd.

38 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Key Facts.

39 Barbara Sard and Will Fischer, Renters Tax Credit WouldPromote Equity and Advance Ba lanced Housing Policy,

(Washington: Center on Budget and Policy Priorities, 2012),available at http://w ww.cbpp.org/les/7-13-12hous.pd.

40 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Rental Housing (2012), available athttp://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_rental_housing.pd.

41 National Council o State Housing Agencies, FY 2012Minibus Appropriations Bill Cuts HOME and CDBG, IncreasesFHA Loan Limit, National Council o State Hou sing AgenciesBlog, November 15, 2011, available at http://www.ncsha.org/blog/y-2012-minibus-appropriations-bill-cuts-home-and-cdbg-increases-ha-loan-limit.

42 Center on Budget and Policy Priorities, Update on 2010Funding or Housing Vouchers and Other HUD Programs(2009), available at http://www.cbpp.org/les/2010-hous-ing-unding.pd; Center on Budget and Policy Priorities,HUD Program Funding or FY 2012 (2011), available athttp://www.cbpp.org/les/11-18-11-IPmemoHUDapprops.

pd.

43 Will Fischer, House Bills Deep Cuts in Public HousingWould Raise Future Federal Costs and Harm VulnerableLow-Income Families (Washington: Center on Budget andPolicy Priorities, 2011), available at http://www.cbpp.org/cms/index.cm?a=view&id=3583.

44 National Multi Housing Council, Quick Facts: ResidentDemographics (2011), available at http://www.nmhc.org/Content.cm?ItemNumber=55508.

45 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Housing Challenges.


47 Trulia, Trulia Reveals Asking Prices Up For Sixth StraightMonth, Boosted by Fewer Vacancies and Job Growth, Press

Release, August 7, 2012, available at http:// ino.trulia.com/trulia-price-and-rent-monitor-july-2012

48 Harvard Joint Center or Housing Studies, The State o theNations Housing 2011.

49 Harvard Joint Center or Housing Studies, The State o theNations Housing 2011: Rental Housing (2011), available athttp://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/americasrentalhousing-2011.pd.

50 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Housing Challenges.

51 John Gittelsohn, Homeownership Rate in U.S. Falls toLowest Since 1997, Bloomberg, April 30, 2012, available athttp://www.bloomberg.com/news/2012-04-30/homeown-ership-rate-in-u-s-alls-to-lowest-since-1997.html.

52 Pete Bakel, Consumer Expectations on Housing RemainUpbeat Amid Cautious Economic and Financial Outlook,

Fannie Mae, Press Release, August 7, 2012, available athttp://www.anniemae.com/portal/about-us/media/corpo-rate-news/2012/5800.html.

53 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Appendix Tables (2012), availableat http://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_appendix_tables.pd.

54 Mortgage Bankers Association, Quarterly Origination Esti-mates (2012), available at http://www.mbaa.org/Research-andForecasts/ForecastsandCommentary.

55 Federal Housing Finance Agency, Conservators Report onthe Enterprises Financial Perormance: First Quarter 2012(2012), available at http://www.ha.gov/webles/24016/Conservator%27sReport1Q2012061512_FINAL.pd.

56 Ibid.

57 Jon Prior, Taxpayers may wait 15 years or GSE payback:Moodys, Housing Wire, May 30, 2012, available at http://www.housingwire.com/news/taxpayers-may-wait-15-years-gse-payback-moodys.

58 Carney, Too Big Not to Fail.

59 Ofce o Management and Budget, Fiscal Year 2013 Budgeto the U.S. Government, (Executive Ofce o the President,2012), pp.1431-1432.


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60 Dow Jones News Service, Update: Fannie Mae Swingsto 2nd-Quarter Prot on Credit-Loss Benet, TheWall Street Journal, http://online.wsj.com/article/BT-CO-20120808-711729.html.

61 Richard K. Green, Testimony beore the US Senate Bank-ing Committee, Housing Finance Reorm: Should therebe a Government Guarantee?, September 13, 2011,available at http://banking.senate.gov/public/index.cm?FuseAction=Files.View&FileStore_id=56068079-9c03-40d4-b36a-72913d3850b4.

62 Katalina M. Bianco, The Subprime Lending Crisis: Causes

and Eects o the Mortgage Meltdown (Riverwoods, IL:CCH, 2008), available at http://business.cch.com/banking-nance/ocus/news/Subprime_WP_rev.pd.

63 Rick Brooks and Ruth Simon, Subprime Debacle Traps EvenVery Credit-Worthy, The Wall Street Journal, Decem-ber 3, 2007, available at http://online.wsj.com/article/SB119662974358911035.html.

64 Bocian and others, Lost Ground, 2011: Disparities in Mort-gage Lending and Foreclosures.


66 U.S. Department o Housing and Urban Development, An-nual Report to Congress Regarding the Financial Status othe FHA Mutual Mortgage Insurance Fund Fiscal Year 2010(2010), available at http://portal.hud.gov/hudportal/docu-ments/huddoc?id=DOC_12561.pd.

67 Center or Responsible Lending, Lost Ground: CRL ResearchShows Foreclosure Crisis Not Halway Over, Press Release,November 17 2011, available at http://www.responsi-blelending.org/media-center/press-releases/archives/Lost-Ground-CRL-Research-Shows-Foreclosure-Crisis-Not-Halway.html.

68 Bocian and others, Lost Ground, 2011: Disparities in Mort-gage Lending and Foreclosures.

69 Harvard Joint Center or Housing Studies, The State o theNations Housing 2012: Homeownership (2012), availableat http://www.jchs.harvard.edu/sites/jchs.harvard.edu/les/son2012_homeownership.pd.

70 Ibid.

71 David Wessel, Housing Passes a Milestone, The Wall StreetJournal, July 11 2011, available at http://online.wsj.com/article/SB10001424052702303644004577520414196790098.html

it’s time to talk about housing

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