We face a sobering statistic in housing today: An estimated 33 percent of homes in Georgia and 22 percent of homes nationwide are “underwater,” meaning homeowners owe more on their homes than what their homes are worth.
As someone who spent three decades in the residential real estate business, I understand the burden this places on families and, on a greater scale, our state and national economies.
Although we come from opposite sides of the country and opposite sides of the political aisle, Sen. Barbara Boxer, D-Calif., and I share the commonality that both of our states are suffering from plunging home values and rampant foreclosures. As a result, we decided to work together to find a solution to help responsible homeowners who are underwater yet make their mortgage payments on time and play by the rules.
Our efforts led us to introduce legislation in the Senate, the Helping Responsible Homeowners Act of 2011, to allow millions of homeowners with Fannie Mae or Freddie Mac-backed loans, who are current on their payments but underwater , to refinance at current low interest rates.
Last October, the Obama administration announced plans to adopt the proposals set forth in the Boxer-Isakson legislation. I commend the administration for taking action to provide relief to responsible homeowners.
During these challenging times, the administration has placed much focus on programs to assist homeowners who are having difficulty making their mortgage payments and struggling to stay in their homes. Although these programs were intended to prevent foreclosures, the result in many cases has been that they have only delayed the inevitable.
In our efforts to revive the housing market, I felt it was very important to remember those homeowners who have worked hard, played by the rules and made timely mortgage payments. They deserve help as much as anyone else.
As the administration continues to consider its housing program moving forward, I strongly urge regulations to reconsider another recent proposal that, if implemented, would seriously threaten the recovery of the American housing market.
In 2010, I worked with my colleagues in the Senate to include a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act to ensure that highly qualified home buyers have access to affordable home loans. Our provision exempted Qualified Residential Mortgages, also known as “QRMs,” from a provision that requires lenders to retain at least a 5 percent interest in loan pools, known as “risk retention,” sold to investors.
Unfortunately, the administration is circulating a proposed QRM rule that would require a minimum of 20 percent down payment to qualify for an exemption from risk retention requirements. Our original QRM proposal required a 5 percent minimum down payment and private mortgage insurance on any loan amount above 80 percent and up to 95 percent. This would provide the same security to the lender as a 20 percent down payment. If the administration does not revisit its QRM requirement, there will be greater pressure on FHA, Fannie Mae and Freddie Mac to fund all mortgage financing.
Even worse, there will be less and less capital flowing from private investors to fund residential mortgages and that will result in a greater risk forced on the American taxpayer.
Republican Johnny Isakson represents Georgia in the Senate.
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