By KIT Bond
Homeownership, the linchpin of the American dream, is turning into a nightmare for many families who can no longer afford their mortgages.
According to the Mortgage Bankers Association, mortgage delinquencies are at their highest rate in 23 years. More than 57,000 homeowners in Missouri are delinquent on their mortgages, including a full 20 percent of subprime borrowers. In some other states, the problem is even worse.
When people lose their homes, it has a devastating effect on the family, the neighborhood, the community and, multiplied many times over, on the economy. We are already seeing a weaker economy led by the housing crisis, and the projections are for the situation to get worse before it gets better.
The best way to get out of the housing crisis is to avoid the foreclosures that throw families out of their homes. We already have a problem with enough affordable housing in many areas. For those already in homes, doesn't it make more sense to try to keep them where they are?
That is why I have joined with several colleagues to introduce the Security Against Foreclosure and Education Act of 2008. Our SAFE Act authorizes state housing finance agencies to issue $10 billion in tax-exempt bonds and use the proceeds to help refinance subprime mortgages.
The new loans would have a much lower interest rate than the high, adjustable subprime rate now trapping so many families. Lower payments will be affordable and struggling families will be able to keep their homes.
Our legislation also expedites delivery of $180 million already approved by Congress in December for counseling help to families in distress. Through this counseling, we hope to reach families with financial solutions before they fall too far behind in their payments.
Foreclosure not only hurts families, it hurts communities. Other homeowners in the surrounding area see the value of their homes plunge. Vacant homes invite vandalism. Nearby schools and businesses suffer from fewer students and customers. Local governments lose tax revenue.
Our bill supports these struggling neighborhoods by providing $15,000 in tax credits for purchasing a home in or approaching foreclosure. This provision would help neighbors take down foreclosure signs and stop the slide in property values.
Many troubled homeowners complain that they feel victimized by mortgage brokers who promised lower payments without describing what would happen when the interest rates adjusted. Homebuyers are hit with dozens of pages of legalese when they reach the settlement table. What they need to see on the first page in large type is information about their loan in plain English. That's why our proposal includes new loan disclosure requirements for a prominent and plain-English explanation of key loan conditions.
Congress must act now to support homeowners. This legislation is an important step in stopping the bleeding for many families and communities. But Congress must also do more to curb predatory lending practices to ensure that this does not happen again.
Kit Bond represents Missouri in the U.S. Senate.