Mark Winston Griffith

House Foreclosure Bills May Save Trees, but Lose the Forest

This past Thursday the House of Representatives passed two pieces of legislation targeted, at least in theory, at the nation's foreclosure crisis.

The Neighborhood Stabilization Act (HR 5818) would create a $15 billion Department of Housing and Urban Development (HUD) loan and grant program designed to enable states to purchase, sell and rehabilitate vacant foreclosed properties. Click here for a more complete analysis by DMI's Middleclass.org .

The other, the American Housing Rescue and Foreclosure Prevention Act (HR 3221) is described by the National Community Reinvestment Coalition as a "complex package that combines prior [Federal Housing Administration] Modernization and [Fannie Mae and Freddie Mac] regulatory reform bills." Its most notable feature is a "voluntary" plan that would allow homeowners facing default to refinance into more affordable 30 year fixed mortgages insured by the FHA. In order to lessen the risk to taxpayers, borrowers would pay into an insurance fund.The Congressional Budget Office estimated that it would assist about 500,000 borrowers, and cost approximately $2.7 billion over 5 years.

HR 3221 is perhaps most notable for the fact that the Bush Administration has already threaten to veto it.

HR 5818 has a brighter future because it was passed with a veto-proof 391-33 margin. As DMI's Middleclass.org analysis notes, the bill is a welcomed piece of legislative action that will help address neighborhood property devaluation and blight that occurs as a direct result of widespread foreclosure and abandonment.

However, providing this type of aid, without reforming lending practices or helping people avoid foreclosure in the first place is like the government providing assistance to the families of soldiers injured in an avoidable war. While the assistance will certainly have a profound impact and address collateral harm, taking soldiers out of the line of fire should be the government's number one priority.

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Posted at 8:00 AM, May 11, 2008 in Economic Opportunity
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