There’s a crisis in our communities and our options are quickly disappearing.
There are neighbors who can’t accept a job in a new city because they can’t sell their home for a price high enough to pay off the mortgage.
Seniors can’t retire as they planned by selling their homes and living off the equity of their one investment.
Parents can’t borrow against their home equity to send their children to good colleges.
Their home values have collapsed and they are “underwater,” with mortgage debt higher than the house is worth. Almost 40 percent of homeowners in Cuyahoga County are underwater, according to Zillow.com’s real estate database. In neighboring Summit County, close to 30 percent of homeowners are underwater — a good indicator of who will default next. Ohio is already 11th in the country in foreclosures.
This is just the latest incarnation of the housing crisis, which hit Northeast Ohio first with predatory subprime lending, then foreclosures en masse, abandoned properties, blight and crime. Now, underwater homes further limit our chances of stabilizing our lives and neighborhoods.
Across the nation, nearly one in four homeowners struggle to keep their heads above water. Estimates of the national “debt overhang” afflicting our housing markets range from $700 billion to more than $1 trillion.
However, none of the thousands of campaign ads this election season focuses on how to fix our housing crisis or bring principal correction to Ohio’s underwater families. The housing “crisis” is in fact a catastrophe — one our politicians need to start talking about immediately.
Today, in Akron, homeowners from across the state will take their issues directly to policymakers and government officials when they gather at a town hall meeting to discuss how to create effective solutions to rebuild and stabilize our communities.
It’s time to pay attention to Ohio homeowners’ voices and needs. What our elected officials and presidential candidates fail to recognize is that we cannot talk about jobs and the economy without discussing how the foreclosure crisis and underwater mortgages are preventing people from having the quality of life and economic opportunity every American deserves.
Experts have told us for years that to ease hardship, facilitate employment, hasten the economic recovery and end the housing crisis, mortgage loan balances must be corrected on a massive scale.
Shaun Donovan, secretary of the U.S. Department for Housing and Urban Development, told Congress in February that “to rebuild the equity these families have lost, lowering payments isn’t enough.” The most cost-effective loan modifications, Donovan said, “include a write-down of the borrower’s principal balance.”
He’s not alone. U.S. Treasury Secretary Timothy Geithner, Federal Reserve Bank Chairman Ben Bernanke and Moody’s Analytics’ Chief Economist Mark Zandi also agree.
But the two government-backed entities Fannie Mae and Freddie Mac, which together own about half of all U.S. mortgages, stand in the way. Their conservator at the Federal Housing Finance Agency, Ed DeMarco, refuses to allow principal correction. His rationale: As long as homeowners have affordable monthly payments, being underwater is no big deal.
What is DeMarco missing? Too many people are trapped in underwater homes that will never catch up in value to their mortgages. That is a drag on the entire economy and everyone’s housing values and future prospects. We need federal solutions for homeowners and communities, not more money for bankers. Meaningful policies to fix our housing crisis, including principal correction, are required if Ohio is to see a rebound in the housing market and economy.
The devastation in our communities has lasted too long to ignore during this election year’s talk about economy and jobs. Homeowners everywhere want an honest discussion about reducing their mortgage balances and other solutions to the housing crisis that will give them a fair chance to pursue new opportunities and build back equity in their homes.
Today’s town hall meeting is the first step in taking back the debate and refocusing our politicians and presidential candidates on what’s really going on in our lives, and in Ohio.
Mark Seifert is executive director of Empowering and Strengthening Ohio’s People (ESOP).