From the special session of the NCRC conference, Friday March 14.
Friday, March 14, 2008Good Morning!
This is your guest blogger at the NCRC conference reporting on March 14th at the Special Session titled “Foreclosing on the American Dream: Recreating Affordable Homeownership.”
It has been a dynamic two morning sessions:
First, Sheila Bair, Chairman of FDIC spoke about the foreclosure crisis, current programs to stem the crisis, and what more needs to be done.
She reiterated a fundamental point that consumer protection and sound banking are two sides of the same coin. We cannot have a successful economic system or financial system without one of these components.
In my opinion, the most important thing Sheila Bair said this morning was: “If people are still losing their homes because their rates have been reset higher, then I want to know about it.” She feels this should not be happening after the government’s guidelines to freeze mortgage rates at their starter levels for five years.
So all you people out there in the field–if you know about people still losing their homes, tell Sheila. Tell NCRC and have them tell the FDIC Chairman about it. So go ahead and report all the details you know about homes still being foreclosed and people losing their homes.
Bair confided that she herself would have preferred a conversion of adjustable mortgages to a 30-year fixed mortgage, but the best she was able to get accepted by the Adminsitration was a 5-year freeze on rates.
Sheila Bair said that more aggressive intervention from the government is going to be necessary. She described the NCRC proposal (for a government agency to buy back the mortgages at deep discounts and then issue fixed rate affordable mortgages to homeowners) as a “thoughtful proposal” and one with some creative ideas reflected in it. But she stopped short of endorsing it or any other proposal.
After these significant pronouncements from the FDIC Chairman, the conference moved on to the Plenary 1 where more signifcant comments on the NCRC proposal came from Mark Zandi, co-founder of Moody’s Economy.com.
In Plenary 1, Jim Carr, Chief Operating Officer of NCRC, described the NCRC proposal. It is called the Homeowner Emergency Loan Program or HELP Now, which will purchase the troubled home mortgages at deep discounts and then insure new fixed-rate 30-year affordable mortgages to homeowners currently facing difficulties paying their mortgages. Significantly, the NCRC plan will also cover those who have already lost their homes to foreclosures. Jim Carr said that we should not forget those who have already lost their homes, and not forget those communities which have been devastated. The plan would allow people who have lost their homes an opportunity to regain homeownership.
Mark Zandi commended this plan. He said that it met the three criteria he had set out for a good solution. These are:
1. The homeowner should be able to stay in the home.
2. The private mortgage market should be allowed to operate.
3. There should be no bailout. Homeowners should ultimately be required to pay for their homes.
Mark Zandi expects that if not the NCRC proposal, then something very similar to it, will be adopted soon.
More on Plenary 1 in the next blog. Ta-ta.
Nandinee K. Kutty is an economist and a policy consultant. Dr. Kutty has authored papers in peer-reviewed journals of economics and policy. She is an editor of and contributor to a recent book on housing policies in America published by Routledge. She has a Ph.D. in economics from the Maxwell School, Syracuse University, where she was awarded the Roscoe Martin Dissertation Award, and a University Fellowship. She was formerly an assistant professor at Cornell University. She has been awarded numerous grants for research and innovative teaching.