Keep the dream possibleAlphonso JacksonHUD, homeownership, Alphonso Jackson, sub-prime marketplace, FHA
There has been a lot of hand-wringing and revisionist history
lately about the benefits of homeownership given the sub-prime
troubles, so now is a good time to lay out a few facts and set the
The housing market is central, quite vital even, to the American
economy. In fact, I believe it is what kept our economy afloat
after the 9-11 attackers struck a physical blow at the heart of the
capitalist system in our nations financial capital. But, we are a
resilient people, as are our markets.
As problems with exotic sub-prime loans become more apparent,
some politicians and activists cry louder that the regulators were
asleep at the switch and that we need to bail out the industry.
I couldnt disagree more. American taxpayers shouldnt foot the
bill for risky ventures, investors who were fiscally irresponsible
or lenders who were predatory.
Ive also heard prognostications that the end is near, the entire
housing market is on the verge of collapse, that homeownership
shouldnt be the goal? that homeownership rates in the U.S.
have hit some type of a ceiling. Wrong again.
While the U.S. has had a steadily increasing homeownership rate
other industrialized nations, such as Ireland, Norway and Spain
have a substantially even greater rate--some eight to 10 percent
higher. Last year, our nation invested $767 billion on residential
fixed investment, or about six percent of the Gross Domestic
Product (GDP). Including housing services, the percentage invested
on housing is close to 20 percent. Again, looking at how we measure
up with other industrialized nations, we are in the middle of the
pack, with Australia, Greece, Spain, Iceland, Portugal, Norway and
Ireland all ahead of us.
Taking a broader look at the economy, we also see that the U.S.
continues to be at virtual full employment and real income is up.
Credit is tightening but not to a point where the market is
strangled. And unlike many other developed nations, our population
continues to grow. All the elements for continued growth are there,
including in the housing sector.
We must continue to responsibly enable Americans to become
homeowners. Despite the problems in the market right now,
homeownership as a national goal is admirable and good policy.
Sure, homeownership is not for everyone. But being a part of what
the President calls the ownership society is still valid: Being a
homeowner is a proven way to build and retain wealth. It has other
benefits, such as giving children a stable environment that
influences their development in measurable ways. For example,
children of homeowners score higher in math and reading and are
also more likely to graduate high school; and they are also less
likely to become teenage mothers.
But we must be realistic about the housing market. Yes, there is
a short-term correction and exotic loans are a serious challenge
for us. Yes, there are Americans who have lost their homes--and, in
my view, one lost home is one too many. We must be compassionate
and caring for those in need.
And we must also adhere to the old adage: Read the fine print.
Americans must collectively pause before entering into the largest
purchase of their lives. Lenders also have a responsibility to act
responsibly. Thats why housing counseling is so important, and why
this Administration has tripled funding for it since we took
office. Becoming educated about the process must also include
knowing when to ask for help. Studies have found that half of
homeowners who went into foreclosure didnt even pick up the phone
to contact their lender.
One way to protect and preserve homeownership is to modernize
HUDs Federal Housing Administration (FHA). The FHA was created
during the Depression to stimulate the housing market and give
homebuyers access to reasonably priced mortgages under fair terms.
Over the past 73 years, the FHA has helped more than 34 million
families become homeowners. However, while we have improved FHAs
processes, FHAs products cant be updated without legislation. As a
result, many first-time homebuyers were left with fewer safe and
affordable options, and turned to exotic subprime loans. There are
tens of thousands of homeowners whose reset rates are about to hit
like a brick who could benefit from refinancing with us. And we
could safely help hundreds of thousands more if Congress passes FHA
Let us hope consumers, investors, regulators and industry have
learned a valuable lesson from the subprime woes, but that they
dont overcorrect. These are challenges we must overcome to make the
Dream possible for all Americans. Our commitment to homeownership
and what it brings to American families and communities must remain
steadfast. We must recognize that problems in the market are not
problems with the Dream itself.
Alphonso Jackson is Alphonso Jackson Secretary of the U.S.
Department of Housing and Urban Development. For more information,