The over 700 percent increase in foreclosures has finally gotten a rise out of the banking industry. Five banking industry trade groups released a statement today endorsing mortgage reform and saying that they will tighten standards. Let’s just hope that they will sustain this momentum.
It’s great that the industry is starting to recognize that lax standards may put 2.2 million families out of their homes and take away $164 billion of accumulated wealth. Short term solutions to keep these families in their homes are good for the banking industry and good for the families themselves.
The banking industry’s willingness to self-regulate is no substitute for prudent federal regulation, but rather an important building block to addressing the current crisis. Lawmakers still have a responsibility to look for a sustainable approach that will provide assistance to homeowners who find themselves in trouble for the foreseeable future.
That’s why the Center for American Progress outlined a policy strategy earlier this year that would prevent some foreclosures, help communities to deal with the impact of concentrated defaults, and ensure credit continues to flow to impacted communities. The report, From Boom to Bust: Helping Families Prepare for the Rise in Subprime Mortgage Foreclosures, discusses avenues for effective action, including:
- Providing federal grants to expand and enhance current mortgage assistance and foreclosure prevention programs and low-interest mortgage assistance to eligible borrowers.
- Allotting federal funds to target key cities and states facing the highest risk of mass foreclosure.
- Enacting provisions to ensure federal agencies assess the effectiveness of each program every three years.
- Strengthening programs that aid families while their mortgage contracts are renegotiated or the property is sold on the market so that the homeowners’ credit ratings are salvaged, allowing for the possibility of future homeownership.
Ultimately, we need more than just voluntary regulation in order to make assistance for families permanent; help with credit access for those most in need, especially minorities and small business owners; and prevent similar problems in the future.
For more information on the Center for American Progress’ take on the housing market, see:
- From Boom to Bust: Helping Families Prepare for the Rise in Subprime Mortgage Foreclosures, by Almas Sayeed
- The End of the Great American Housing Boom, by Christian E. Weller
- Subprime Market—Isolated or a Tipping Point? by Gene Sperling
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