The foreclosure crisis has made one thing very clear: It is time to get back to basics by putting consumers first.
This is particularly true when it comes to strategies for repairing the housing finance system. Precipitated by loose lending practices and unregulated financial products, the foreclosure crisis has reemphasized the need for the federal government, in partnership with the private sector, to develop more practical, straightforward housing finance policies focused on better meeting the needs of consumers.
To help ensure this goal's achievement, the government must maintain its key role in the housing finance system even after the current crisis has abated. With private lenders and mortgage insurance companies continuing to tighten credit standards, Fannie Mae, Freddie Mac, the Federal Home Loan banks and Federal Housing Administration/Ginnie Mae or their successor agencies must continue to play central roles in providing funding and liquidity for new mortgages as part of the secondary mortgage market.
Absent a federal role in the housing finance system, it is unlikely that the private sector alone would be able to supply long-term, fixed-rate financing for single-family and multifamily affordable housing in all markets at all times and on reasonable terms.
The government and the private sector must also focus on supporting more balanced housing policy — that is, recognizing the importance of both homeownership and rental housing options to address the needs and interests of individuals and families nationwide. This means supporting programs that ensure access to credit for both owner-occupied and renter-occupied housing. Though homeownership is an important goal for many Americans, it is essential that the housing finance system also develop a stronger infrastructure focused on supporting rental housing finance, particularly for developers that serve low- to moderate-income families.
A fully functioning housing finance system also must provide transparent transactions for consumers, including ample educational opportunities for both homeowners and renters. For homeowners, the rules governing the primary and secondary mortgage markets should ensure adequate disclosures and protections and provide effective consumer-based prepurchase and post-purchase counseling.
Renters, too, must be made aware of their rights as tenants and have access to financial education and counseling services. These are crucial steps that would help restore confidence among consumers while also creating a better prepared generation of homeowners and renters.
The dramatic effect of the foreclosure crisis on our economy makes it hard to deny that the components of a well-functioning economy — such as educational opportunities, good jobs and civil society — are largely tied to healthy, affordable homes in safe neighborhoods.
Ultimately, housing is a basic need and an essential part of family and community life whether a family owns or rents. The federal government and the private sector must work together to create a stronger, balanced homeownership and rental housing infrastructure. This is essential not only to helping consumers and repairing the housing finance system but also to the economy as a whole.