Have We Closed the Book on the Foreclosure Crisis? Housing Outlook Improves, But the Senate May Have the Final Say
January 2014 will mark five years since new home starts bottomed out and foreclosures were at an all time high; over this time entire communities have been decimated and many families have fallen from the middle class. As we head toward this milestone, the Obama Administration’s latest Housing Scorecard shows improvement over a broad range of housing indicators, and state and federal homeowner protections continue to keep homeowners in their homes. These signs of progress are good for the housing market, the job market, and the overall economy. We cannot allow partisan politics to impede further progress.
A sharp 50% increase in homeowner equity during the first half of 2013 to $9.286 trillion brings homeowner equity back to fourth quarter 2007 levels, according to Federal Reserve data. Meanwhile, steady increases in home prices continue to build that equity. According to the Housing Scorecard, the Federal Housing Finance Agency purchase-only home price index has risen for the last consecutive 19 months. Another indicator, the S&P/Case-Shiller 20-City Home Price Index, indicated gains of 12.8 percent over the past 12 months, its highest level since August 2008. These numbers are very encouraging, especially given an almost 20% spike in 30-year fixed mortgage interest rates during the same time. What this means in real terms is that the economy is stabilizing and homeownership is once again becoming an investment.
Clearly these numbers have been helped by state and federal efforts to protect homeowners from foreclosure. As of August 2013 over 3.8 million loans had been modified by HOPE Now lenders, and over 1.2 million homeowners had received permanent loan modifications to keep them in their homes through participation in HAMP, the federal mortgage modification program created in 2009. That program was extended another two years in May, and is now set to expire on December 31, 2015. States like Illinois are following suit by passing legislation to ensure that homeowners are given a chance to use HAMP before they lose their homes to a judicial sale.
But to keep homeownership improvements moving forward, real leadership must be in place at the Federal Housing Finance Agency (FHFA). On October 31, Senate Republicans blocked a confirmation vote of Rep. Mel Watt to lead the agency, leaving it without a permanent director as we enter the new year. This is an important time for the agency, as it continues to reorganize and wind up Fannie Mae and Freddie Mac. Stabilization of Fannie and Freddie is key to our nation’s housing market and, ultimately, our economy, as Fannie and Freddie and Ginnie Mae have a piece of about 90% of all home mortgages. And now is the time—with the housing market turning around, Fannie and Freddie’s profits are soaring. Last Thursday the two companies announced that they will pay $39 billion to the U.S. Treasury this year; both companies are close to repaying the amounts they received in their bailouts.
FHFA should install a leader to guide these companies’ direction now and gain control over this significant sector of the American economy. Let the lessons of the foreclosure crisis be learned. The Senate should back every effort to improve the housing market, homeownership, and the economy and should install a new leader for FHFA so that we can truly close the book on the housing crisis.