"The administration has put forward a new set of creative proposals that offer a positive program to help average working homeowners in states where housing prices have plunged more than 20 percent. Targeting aid to the hardest hit areas and offering substantial funds to address the destruction of state economies that follows continued extreme housing price drops is the right approach.
"This additional aid gives flexibility to develop and implement programs that address issues specific to hard-hit states. Local housing finance agencies could use these funds, for example, to support robust mediation programs such as those that have been successful in Philadelphia, Connecticut, and other areas. The existing HAMP program can be augmented using these funds for negotiated principal reductions with servicers, which will make the modifications more likely to succeed. In addition, HFAs may be able to use shared equity approaches to home ownership and similar efforts to create ownership opportunities while stewarding public dollars longer.
"We hope that the administration still recognizes that without a stick over the head of servicers and their mortgage investors, little will happen. We have commented many times that incentives and programs without consequences for noncompliance have not worked. We do not see in the program as proposed the hard-edged elements that will in fact move loan servicers who in most cases are not the actual lenders who have funds at risk into making changes that keep Americans in their homes.
"While CAP welcomes more resources to state housing finance agencies to do more for homeowners, we continue to believe that the administration and Congress must get tougher with the network of bankers, lenders, servicers, and investors whose actions show that they continue to find a foreclosure, or holding a property in limbo, economically more in their interests than doing something more to keep Americans in their homes."
David Abromowitz is a senior fellow at American Progress, focusing on housing policy and related federal and state programs and issues. Andrew Jakabovics is the Associate Director for Housing and Economics.