Michigan industry appointments update - 7/10/2007

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 record straight. 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 reform. 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, visit www.hud.gov.