Talk That Makes a Difference on Capitol Hill

Human cost of protracted housing crisis adds sense of urgency to conference on identifying solutions to negative equity and slow home sales

By Robert Freedman, Senior Editor, REALTOR® Magazine

On the day the Wall Street Journal ran an op-ed online calling for federal action to get the housing market moving again, a group of lawmakers, industry leaders, and policy strategists were devising ways to do just that.

Sen. Johnny Isakson (R-Ga.) called for allowing underwater home owners to use money from their retirement accounts to help them stay in their home rather than lose it to foreclosure. Rep. Dennis Cardoza (D-Calif.) called for lenders to refinance mortgages of troubled home owners without requiring an appraisal. Richard Smith, president and CEO of national real estate brokerage giant Realogy Corp. called for a share equity program and also to make federally backed mortgages assumable.

David Stevens, Mortgage Bankers Association

These were just a few of the ideas to come out of a day-long meeting, hosted by two policy think tanks, the Progressive Policy Institute and Economic Policies for the 21st Century, that these and other housing leaders participated in to find solutions to the housing crisis.

“This meeting called by the private sector is the kind of meeting that ought to be taking place on Pennsylvania Avenue and in the Capitol of the United States of America,” said Sen. Isakson.

NAR President Ron Phipps set the tone of the conference when he said the market is capable of self-correcting but it needs two things. First, it needs the federal government to stop intervening (or threatening to intervene) in the market in the wrong way such as by imposing a 20 percent down requirement in the qualified residential mortgage (QRM) rule or by talking about curbs to the mortgage interest deduction. Piecemeal federal intervention in foreclosure processing isn’t helping, either. Second, it needs the government to intervene in smart ways. Hence, the search for solutions like those offered up by Sen. Isakson, Rep. Cardoza, and others.

Had the conference, called “New Solutions for America’s Housing Crisis,” been merely a talkfest among policy strategists, many of the ideas for getting housing moving again might not get to the ear of Congress as quickly as many would like. But with several lawmakers there, including Sen. Isakson, Rep. Cardoza, and Sen. Jeff Merkley (D-Ore.), half the battle of getting the ear of Congress has already been won. Sen. Isakson is a widely respected leader in the Senate on real estate issues and Rep. Cardoza has been on the forefront in seeking solutions to the housing crisis, as you would expect he would be: his district is in California’s central valley, one of the hardest-hit areas in the country. In some parts of his district, underwater home owners outnumber those with positive equity by a factor of three-to-one.

Richard Smith, Realogy

In his Wall Street Journal piece, Neal Lipschutz made an important observation. “There are reasonable proposals offered from many corners that don’t spell stimulus in capital letters but would do some good,” he said. The housing conference, which got underway just about the time his piece came out, makes it clear that it’s not because of a shortage of ideas that the housing market is stuck in neutral. What’s needed, rather, is leadership, said President Phipps. “We’ve had plenty of talking about blame,” he said. “We need to get to solutions.”

The 4-minute video above summarizes the solutions to come out of the meeting.

Read more on the conference.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at

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  1. Donna

    I think that Senator Isakson’s suggestion of allowing underwater home owners to use money from their retirement accounts to help them stay in their home rather than lose it to foreclosure is wrong because if people do this, they may not have the money necessary to retire, especially if Social Security and Medicare benefits are cut, as some in Congress suggest.

  2. Scot

    The main hindrance to refinancing is the appraisal as many homeowners are underwater. If the government wants to help get the economy going, how about creating a guarantee program that allows any qualified homeowner (income-wise) to refinance the principal balance only (no cash outs) of any mortgages (including HELOC’s) regardless of the appraised value. Any one still working and paying their debts would see a huge boost to their monthly cash flow if they could just take advantage of these historically low interest rates which then translates into more money being injected into the economy. Making permanent the prior year’s jumbo conforming loan limits would be helpful, too as many consumers in the high cost states such as California are impacted by the huge reduction in the loan limits.

  3. Lei

    To prevent mortgage bankers/banks to return to same oh same of the period of 2001-2009, probably sooner, there should be a class action yes a class action against mortgage bankers/banks, mortgage companys who mainly were a part of the tarp/hamp bailouts. In addition all of the buyers who did not originally qualify for their mortgage loans, should be compensated by the lenders for only what they actually qualified, ex. taking their monthly gross income (ex.$5000/mo)only times it by 28% (ex.$1400/mo payment) @ 4%interest rate = $255,542.71(loan amount)to equal out to what their monthly mortgage payments should be. So if ex. loan was more than $255,542.71, lender would bite the bullet for the difference ex. original loan $300,000. = $44,457.29. Fair and long process, but equitable for the country as a whole. At the rate we are going we are going backwards.

  4. James Lewis

    It would be tremendously beneficial if the powers in Washington, including the NAR, address the subject of allowing people who are underwater buy more than 125%, are current with their mortgage payments, never been late with a payment and their loan is owned by Fannie or Freddie, be allowed to refinance their current loan with the remaing years left at 3.5% at the most 4%. It would be even better if there could be a principal reduction included as well. Also, why wasn’t there a representative from Congress or the Senate from the State of Nevada involved with the discussion?

  5. carlos

    There needs to be a real program for investors to purchase properties with financing. Even if the rates were 2-5% higher than owner occupied rates, loans need to be made available to proven, experienced investors that are better than hard money loans with less than 20%+ down payments.

    For owner/occupants wanting to refinance, who have strong on-time payment history, but are underwater, there should be less weight on the appraisal and more consideration given to the borrower’s history. Lowering the rate on the loan in those cases can help the owner stay in the home.

  6. Francine McGinnis

    If the NAR would police its own ranks and weed out the 30% of bad agents, the problem would cure itself quickly. The bank and government are 2/3 of the problem. Admit it and deal with it honestly.

  7. Patricia K. Scarcella

    Creating the Market/Shoring it up/ What ever you want to call it!

    Yes this is exactly what Home Path Financing(Federally backed program) is trying to do and that is they are offering to Loan on a home that probably would not appraise because it is Listed at an inflated price and offering it with NO APPRAISAL required. They are also offering it at a higher % rate. The Lending industry should be also allowed to do the same.
    This could help stabilize the market and I agree could help put more money back into the Economy.

    Investors are trying to figure out how to keep their investments from loosing more principle. Investors are buying up properties when they can and they can certainly make more income off of their investment in Real Estate it just requires a little work as most things that yield high income do.

    If that isn’t trying to create the Market I don’t know what is.

    That would be really OK, if that were the industry NORM and all Lenders were doing the same. Lets make it a fair playing field.

    Lets put our Heads together and get this done!

  8. Sandra Coon

    The banks started the real estate fiasco yet they are the ones wanting their money no matter what. Regardless of the fact they are losing money with each foreclosure and short sale, they keep driving people out of their homes and leaving valuable properties to vandals resulting in deteriorating neighborhood property values. Simple solution: leave owners in properties to preserve them without cost! A grateful owner, unmolested and loving his/her home will protect the bank’s investment if it is a condition of their continuing ownership of the property. All other “solutions” assume banks deserve their money: they do not! They owe it to the owners which they greedily put into these properties to support them during financially disrupted times.

  9. Tom

    It is sad to see the homeowners having to go through another refinance ( which is a win-win for the lenders that caused the mess in the first place) process AGAIN ! We Realtors have to see them fase-to-face and give them the bad news and in most cases are working for free after all our work because they have no equity and they can’t sell. I suggest the lenders do a stream line and give the sellers a new 15yr. at the 3.5% interest so they can see some light at the end of the tunnell and realize some equity growth.

  10. Too many people hurting from multiple reasons due to the climate of this economy.
    Many can afford the the home they’re in if the interest rate on their mortgage would be modified. However, late payments, bad credit score, etc…will not allow this to happen.
    Still, these homeowners, as true Americans, fight every day to keep some sort of balance to keep their home, put gas in their car to go to work, food on their table++++++! The sad truth is, no matter how much effort, eventually they will be another statisic. Mathematically, the figures don’t work. They are not catching up, they are staying afloat. Why oh Why is the goverment not stepping in before they become just another statistic? Is 4% interest not enough profit? Modify these loans, keep people that can afford the house in their home, Get them out there spending some money (which they will be able to) & START GETTING THIS ECONOMY GOING AGAIN!!!!!

  11. The solution is simple:
    RAISE interest rates to 7.5%.
    Reduce BK seasoning on those who filed before October 2011 to 1 year.
    Require Buyers with a 550+ score to bring in 10%, and a $500 processing fee.
    Allow loans to be ASSUMABLE WITH AN ADDITIONAL 5% to buy down LTV for each subsequent Buyer.
    Have gvt back these loans…current rates are 4.5% (approximately) if the gvt keeps the spread of 7.5 – 4.5 PLUS keeps the $500 processing fee, they’ll ignite sales to otherwise ineligible Buyers. The gvt will also make a fortune to pay down the debt created by Fannie/Freddie!!
    Somebody PLEASE explain to me how this wouldn’t work???!

  12. Lenders need to start thinking about the borrowers (their clients) and not themselves and how to really help the housing market in general. Walking mortgages from homes with little or no equity to qualified homeowners to a nice place where they can refi at todays lower rates on REOs they own and leaving a lower priced home free and clear for borrowers who can qualify would greatly help the market in my opine. Also making loans assumable is another great idea that has been around for a while. Worked great in the 70s and 80s in California and kept the market alive when rates were so high. I’m sure there are a lot of more creative ideas that could help homeowners in this terrible market caused by poor lending and the stock market in the first place.

    If the government had bailed out all the homeowners and stipulated buying a new car we could have possibly solved two serious problems. Lenders always make money at the expense of others and they are certainly allowed a profit but all these huge bonuses to execs. like Jamie Dimon are way too high, which is true for a lot of top execs.

    We need to make America strong again and work together for the best interests of all us fellow Americans and that includes, among many other things, spending all this money in other countries who do NOT have our best interests at heart. With all the sacrifice on behalf of our troups the least they could do is pay us with oil, money and whatever and pay our soldiers more and all our congress people far less.

  13. Don

    What is not being addressed:
    The 200 Billion in excess salaries being taken each year by Wall Street CEO’s, CFO”s, and Prez’s, that comes directly out of the same 401K, or IRA account the homeowner would like to use. We have a minimum wage in this country, why don’t we have a maximum wage for exec’s who work at the publically funded Fortune 500 companies, if each of those; the CEO, the CFO and the Pres. had a million dollar salary CAP, we would be saving 192.5 Billion out of the PERS, STR’s IRA’s and 401K’s that each of us are now missing on an annual basis. Because of our losses, paid by us and not even reported correctly in the media we are all suffering. Wall Street is not a “Free Enterprise”, it gets it’s funding every two weeks out of 100+ million employees, from the Cop on the street to the janitor on his beat, each of us pays Wall Street. It is simply too bad, sad and a shame that the people there protesting don’t have a voice to articulate the problem as the boring facts, statistics, and data prove have badly we are being ripped off, or is it just maybe we really don’t want to admit it and pass it along to our grand children to deal with because we would rather watch the “game on ESPN tonite”…???

  14. Carol Smith

    I believe a correction is in order – Isakson is a Republican from Georgia. Let’s remember a mortgage is not mandatory nor is it an entitlement. It’s collateral for the lender in case you can’t pay back your debt. We are supposed to pay back our debts – correct?

  15. E.W. SKALA

    Why not make it easy ? Ask the homeowner how much they can pay, one way or another they are going to make a payment or pay rent. What ever the amount is, set this up for 10 years, then reevaluate the situtation. You can make it as complicated as you wish, appraise the home now and and reappraise the home in 10 years, a higher interest rate say 5-6%, but keep them in the home. Most of the empty homes now had someone in them at one time. Investors are renting these homes out. Or if all else fails, move to Nebraska, our Real Estate economy is Great , Land prices are up, our Football team is doing very well, Agriculture markets are GREAT.. Unemployment rate are LOW …Take a LOOK…It don’t get any better.

  16. Tamra Muse-Boaz

    A large part of the problem stems from a req. in TARP which reqs. that the Freddie & Fannie loans cannot loose government funds. As TARP would facilitate the lenders keeping funds liquid. The government wanted taxpayer funds protected. Although an admirable req. it does not let the insurer consider other options. Maybe inventing a “BuyIn Plan”. Where the insurer/investor buys in to a plan where if the market goes up they can secure a percentage of the increase in value up the the amount owed on the orginal loan balance and the homeowner gets the remainder of equity appreciation.
    The large banks are unwilling to participate because they paid a full discounted premium for these loans from the originator.They want their investment repaid in full-Bankers would do well to do what they have done in the past-create a new product for our new times. We are all in this together-Banks need to share the hit in equity now carried fully by the homeowner.(A veteran title insurance agents perspective)

  17. Jim

    There are two parties involved that are to blame, the borrower and the lender…..both share the same portion of responsibility. Shame on the borrower for biting off more than they can chew.

  18. We should come up with a lending situation that allows Americans to loan money directly to solid Individual home owners who are not late, making their payments on time, have good credit, at 3.5-4%, without appraisals (simply unside down due to market conditions)? This allows Americans who have cash to make the loans with. a reasonable return on cash. I think this could appeal to wealthy and retired people across the nation who want to invest their money and make this type of return. Currently, the Safe Act of 2008 makes it almost impossible for individuals to do carry backs and any loans like this. I believe those restrictions should be removed and the idea expanded to not only allow seller carry backs but also to allow individual Americans to be the mortgage holder on any refinance that fits the above criteria. The banks and institutions have proven they do not have the ability to handle the loans they make. Perhaps on an individual basis Americans can help other Americans solve the problem without turning the entire nation into renters. If the government would allow a tax incentive to this idea, you would have the wealthy individuals in American willing to participate in even greater numbers.

  19. Terry Lucoff

    the current low interest and low down payment will not help achieve a bottom of the market

    the second interest rates begin to increase because of inflation housing will go lower.
    low down paments let unqualified buyers purchase homes without any vesting or the abilities to pay.

    its time the national association of realtors get realistic and push for minimums of 10% down and 4% loans so the housing market can achieve a bottom and we have have a new beginning. other courses of action are just smoke and mirrors and will continue a cancerous housing market
    Terry Lucoff
    Coldwell banker malibu california

  20. Allan

    As long as it is believed that the homeowner must carry the burden of this housing crisis, this crisis will continue.
    Let’s look at this long term for the homeowner who can afford the payment on the intangiable value of their home. Using the current state of affairs. It has been predicted by many in the industry that values will bounce along the current established bottom for the next 2-5 years, meaning no real gain in appreciated value.Most of these homeowners are $150K or more upside down (at least in California). and that is at the lower end of the home values. In San Diego properties that once sold upwards of $1.2 million are now selling at 50% of that value. Question, (Focusing on the homeowner who is $150K upside down.) once the market stablizes and maybe starts appreciating 5% per per year how long will it take this homeowners loan value to break even with the real value) Old loan value $450K new value $300K.
    For this market to take off like we all would like it to the following must happen for ALL upside down homeowners. The principle balance must be reduced to todays Market Value. At Current Rates. The executives and government officials who had a hand in this crisis should be held accountable for any laws and regulations they violated. GO TO JAIL DO NOT PASS GO AND PAY BABY PAY!
    This would put millions of $$ back into the economy from the bottom up and since each dollar is touched by several people recovery would be on its way. The Banks and government caused it they should carry it!