Our Housing Markets Must Have GARDNS and be SAFE

February 25, 2008

The U.S. Senate, which begins debate this week on legislation to stimulate our troubled housing markets, must swiftly enact two key progressive housing proposals that will go a long way toward dampening the length and effect of a deteriorating housing market on overall domestic economic growth.

The Center for American Progress has two proposals that work in tandem to achieve this goal. First is the Saving America’s Family Equity, or SAFE loan program, which is modeled after the New Deal’s successful Home Owners’ Loan Corporation but uses existing government agencies and government-sponsored housing institutions to purchase pools of loans at current value and refinance those loans that are in default or have negative equity into fully amortizing, fixed-rate loans based on the current value of the property.

Our second proposal, the Great American Dream Neighborhood Stabilization Fund, or GARDNS Fund, would provide money to local housing authorities and non-profit organizations to buy foreclosed properties from banks and return them to productive use as affordable housing. Taken together, these two proposals can stabilize neighborhoods and restart frozen housing markets by significantly reducing excess inventory and moderating downward pressure on home prices.

Both measures would help the housing market find its footing, which in turn would help struggling homeowners cope with the downward spiral in housing prices and thus help the larger economy to recover again. These are steps that Congress needs to consider now. Waiting for the next Congress and the next administration to consider these plans may well ensure the current housing downturn does indeed last another several years.

For more information about the Center for American Progress' policies on the housing crisis, see:

• Strengthening Our Economy: Foreclosure Prevention and Neighborhood Preservation
• Throwing Homeowners a Lifeline: A Proposal for Direct Lending to Qualified Troubled Borrowers