We can and should take steps to help minimize damage for lenders and borrowers. We must address the two key factors that are dragging down our economy: the trend of increasing foreclosures and unstable housing markets.
On the first point, many have suggested a rate freeze or a moratorium on foreclosures. While both of these options might help in the short term, they are only temporary patches that fail to address the underlying problems.
That's why we need to expand the capacity of programs that assist families facing foreclosure - as well as spread the word of their existence. Under Maryland's Bridge to HOPE Program, the state provides interest-free loans of up to $15,000 to help homeowners catch up on mortgage payments. This small loan can be the critical difference between foreclosure and a family's ability to keep its home. The federal government should allocate funds to individual states to implement or enhance similar programs.
Additionally, we should look at innovative ideas such as the SAFE Loan program proposed by the Center for American Progress. This program would restructure at-risk mortgages by transferring large numbers of existing loans currently in default or with negative equity to new owners. These transfers would take place at auctions organized by either the Treasury Department or the Federal Reserve, and would be based on the current value of the property. New mortgages with fixed rates would then be offered to eligible families in these homes. Eligibility would be extended to those who are at risk of default and demonstrate ability to repay the loans following refinancing.
The other critical step we must take to stabilize the market is to address the increasing number of bank-owned homes that rest vacant throughout our neighborhoods, inviting crime and lowering neighboring home values.
The federal government should consider providing block grants to purchase and rehabilitate these properties at a discount. The properties would then be sold as affordable housing, with proceeds going back into the fund for the purchase of more properties.
Over the years, my parents struggled to pay their mortgage on time while also helping their seven children succeed in life. Today, enjoying her retirement, my mother still lives in her home.
That opportunity should remain available for Marylanders - and all Americans. Let's not allow the current crisis to endanger the American dream.
Rep. Elijah E. Cummings represents Maryland's 7th Congressional District.
