Alphonso Jackson, Secretary of Housing and Urban Development, thinks that the recent subprime foreclosure crisis is creating a greater need for government action in the marketplace. While saying he favors a free market approach, the HUD Secretary also favors new regulations to protect and regulate mortgage lenders.
“I think we should let the free market work. But at the same time, we’ve let the free market work and look what’s happened,” Housing and Urban Development (HUD) Secretary Alphonso R. Jackson said Monday in a speech at the National Press Club.
One in 92 homes was in some stage of foreclosure last year. Jackson said he is “65 percent” in favor of tighter federal regulation but would increase his support for congressional action if the problem grows.
If the Congress places more restrictions on borrowers you know that these laws will have unintended consequences for borrowers and those in the industry. Also, a bailout of subprime borrowers will turn into an avalanche. Think for a second, you are a low income person who has always fought to make ends meet. You are in a mortgage you have paid on and lived sparsely otherwise. Then the government tells you that if you don’t pay your mortgage for a couple months, we got you covered.
How many people will this lead off the cliff. That is what I mean by the law of unintended consequences.
His comments come as congressional leaders remain split on how to address the growing foreclosures and as consumer advocates warn that the worst is yet to come. House Financial Services Chairman Barney Frank, D-Mass., has said he will draft a bill to protect borrowers, particularly those with subprime loans, from deceptive practices. However, Christopher J. Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee, favors a market-based approach without congressional intervention.
Jackson said the most important step for Congress is to pass a Federal Housing Administration (FHA) modernization bill, which would allow the majority of subprime borrowers at risk of foreclosure — hundreds of thousands of families — to remain in their homes through government-backed refinancing. via CQ Today
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{ 3 comments… read them below or add one }
Keep government out!!! They will want to take all our tools away. Each loan program is just that a tool. Get the right tool for the job at hand. Don’t blame the tool, the person using it is to blame.
Hopefully the recent tightening by fannie and freddie will keep the feds at bay. Can you imagine the industry if all loans turned the direction of an fha or va loan!
I must agree that the mortgage business needs to continue to be free enterprise but guidelines should be followed by loan officers and mortgage brokers and set by the lenders. We must work with integrity for the process to work.
William Steiner
senior loan officer
1st metropolitan mortgage