Don’t Quit the Dream: A Vision for Homeownership Beyond 2012Posted July 11th, 2012 by Janis Bowdler
In polls, voters often identify the troubled state of the economy as their top concern. Most economists agree that housing remains the biggest drag on our recovery. Eleven million homeowners owe more than their home is worth. That’s 11 million people who are keeping themselves out of the consumer economy. Some of this is a good thing; people are paying down their debt and padding their savings. But for most, that negative equity looms large over the family finances. Not only is household consumption down, but families are delaying purchases of major goods that drive our economy, such as cars and houses.
For as much consensus as there is around solutions, the lack of movement from Washington is shocking. Principal reduction is widely recognized as the best way to head off an unnecessary foreclosure, thereby sparing the neighborhood one more abandoned property and keeping local taxes flowing to municipalities. Analysis of the various methods servicers use to stave off foreclosure shows that homeowners are most successful when the principal balance is written down to a value closer to what the home is actually worth. Perhaps the best evidence is that the banks and servicers are putting this strategy to work on the loans they hold on their books.
The hope is that with robust implementation of the 49-state AG settlement, the evidence for principal reduction will grow. Most of us are not content to wait that long. Voters in California showed they can persevere—the bill had failed three times before—when they stand up and let their elected officials know what they want. Now it’s time to deliver that kind of success to other states. Here is what you can do: Tell the presidential candidates you want to see better solutions now. Watch the video of the Don’t Quit the Dream town hall or follow us on Twitter at @NCLR and #H4G to get your side of the story on the public record. Together we can make 2012 the year to turn around the housing market.