Debate Club

Should the Government Help Homeowners With Underwater Mortgages? >

Responsible Families Deserve Mortgage Relief

Those who did not walk away from obligations are worthy of government thanks, and help

February 6, 2012

About Raphael Bostic:

Raphael Bostic is assistant secretary for policy development and research at the Department of Housing and Urban Development.

As President Obama made clear in the State of the Union, the single biggest drag on our economic recovery remains our housing market. At the center of the problem are the more than 10 million families across the country who owe more on their mortgages than their homes are worth. In many ways, these borrowers hold the key to the broader housing and economic recovery.

Millions of these underwater families continue to pay their mortgages on time. They've worked hard to weather a storm not of their making. Even as they've watched their home values fall, they've kept up with their mortgage payments every month for nearly four years. Their diligence has prevented more distress from hitting housing markets across the country, and kept already strained neighborhoods and communities from being even harder hit. These families deserve our help not just because they need it—but precisely because they've been responsible and we have all benefited by them. The market shouldn't have to hit bottom for them to get relief.

That's why last week, the president called on Congress to make it easier for underwater homeowners current on their mortgages to refinance those mortgages and save an average of $3,000 each year. It is the right thing to do.

[Check out the U.S. News housing blog The Home Front.]

Some may ask why government should help. But this crisis was fed by a mortgage system that had become far too complex—and it's that very complexity that has made the economy harder to fix. Government can play an important role in resetting the system and returning the market to a more straightforward path. That's why the president's refinancing plan is so important. If Congress passes it, we'll be able to knock down a key barrier on the road to recovery.

And government won't be the only one helping. The president's plan includes support from the largest banks—in the form of a Financial Crisis Responsibility Fee—to make sure that those whose recklessness helped cause this crisis in the first place are part of the solution. As a consequence, the president's plan not only won't add a dime to the deficit or ask anything of taxpayers—it ensures that those responsible for the damage are doing their part to help us recover from it.

At the end of the day, this plan is about standing up for responsible families who've done the right thing—and whose future is central to our recovery.

They haven't walked away from their obligations. We shouldn't walk away from ours.

Other Arguments
#1

No — Obama's housing plan is a political trick that carries little economic impact

ANTHONY SANDERS, Real Estate Finance Professor at George Mason University

#2

No — Rewriting mortgages punishes lenders while doing little for the economy

MARK CALABRIA, Director of Financial Regulation Studies at the Cato Institute

#3

Yes — Government should lead the way on right-sizing underwater mortgages

ETHAN HANDELMAN, Vice President for Policy and Advocacy at the National Housing Conference

#4

Yes — Restoring the housing market is key to the economic recovery

PETER TATIAN, Senior Research Associate in the Urban Institute's Metropolitan Housing and Communities Policy Center

Reader Comments Read all comments (5)

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What about the people who have done everything right and are still struggling? We recently went to refinance our home loan. Fortunately we are not underwater or upside down because we bought a house within our means 7 years ago and we were fortunate enough to pay a normal price - However in todays economy and lower paychecks, higher health insurance costs we thought it best to lower our mortgage payment as much as possible... funny thing.....each and every loan establishment we talked to from local banks to current mortgage lender....we were told if in trouble (behind in payments of owed more than house worth) there were all kinds of programs to help us refinance at the lowest rate possible, without a lot of conventional loan requirements and costs through points and fee's, etc... Basically saying that we can do for you, what we did for all the homeowners now in trouble by giving you a loan for more than your home is worth without documentation of paychecks, without an appraisal (we need to fork over 700 bucks for this), etc... Now can someone tell me how or why this is fair? it would be in our best interest as far as the government is concerned..... to just stop paying our mortgage until we are in trouble....then they will help us. There is no help for those who are doing things right...we pay higher closing costs, etc... to make up the losses from refinancing the bad loans that government is telling banks to make once again.... its a vicious cycle and it makes a mockery of the hardworking people of this country.

Jennifer of MT 5:12PM February 12, 2012

Their is no free lunch... who will pay the increased banking fees? The customers of the banking system will pay. It will not add a dime to the deficit. The banks will just take the dime out of our pockets to cover this new Obama program. This is just another example of a hidden tax passed to us throught business regulations.

Jim McGriff of AL 1:32PM February 08, 2012

I can't imagine where Bostic gets the idea that people should be "rewarded" by the government for behaving as the government wishes regarding their personal finances. Certainly it is not in the Constitution nor would the Founding Fathers agree. Of course, Fannie, Freddie, the FHA and HUD aren't in the Constitution either - nor did the Founding Fathers envision government assistance in home purchases. Perhaps we ought to go back to the original ideas the Founding Fathers had. With very minimal government, sticking to the original ideas of the Founding Fathers, we would have far more prosperity in this country; thus government handouts would not be needed, and taxes would go lower. Of course, that would cause high unemployment of government workers and quasi officials - so there is a disincentive for the government to revert to a strictly Constitutional system...

M. F. Sanders of OH 10:53AM February 07, 2012

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