NAACP says US Senate bill to reform home financing system does not provide enough support for families and would make it hard for those in the middle class to buy homes, urges support for finance system that would ensure broad access to credit
August 22, 2013
– STATEMENT BY HILARY O. SHELTON
SENIOR VICE PRESIDENT FOR ADVOCACY FOR THE NAACP
The NAACP strongly believes that homeownership is a catalyst for safer and more secure communities, and is an important vehicle for creating and sustaining wealth in communities of color. For decades, the equity in our homes has provided the capital for start-up businesses and college educations for our children.
In the aftermath of the housing collapse in 2007, government policies have focused on helping Wall Street and the Big Banks, not the middle-class or families of color. Minorities lost millions of dollars of wealth from the sharp decline in housing values, yet we are faced with a series of public policies that offer little assistance to troubled homeowners and are now poised to construct new roadblocks on the path to homeownership.
We want to applaud President Obama for not endorsing the Corker-Warner legislation; the Corker-Warner bill is a threat to the middle-class, and to communities of color. It will take us backwards and not forwards.
Before the 1930s, home mortgages were largely short-term loans that only the upper class could afford - only the privileged could purchase a home in America. After the Great Depression, the nation enacted polices and incentives that made the 30-year mortgage, with no pre-payment penalties, the foundation of housing finance. This new standard loan made homeownership affordable to more people, an expansion that would not have been sustained without federal support through Fannie Mae, the Federal Housing Administration, the Federal Home Loan Bank (FHLBank) System, the mortgage interest deduction and other incentives.
With these agencies and policies in place, America's housing market grew substantially, lifting the economy as well as increasing the wealth of many urban and rural families. From the 1940s until the recent mortgage crisis, homeownership rates rose from 40 percent to more than 66 percent. It changed America, helping build middle-class communities. These policies helped build wealth in working-class families—whites and people of color. Families built solid financial security.
Any restructuring of the housing finance industry must sustain home ownership opportunities so the next generation can have opportunities to prosper.
But what we are seeing are proposals that will make it virtually impossible for many in the middle - class, and particularly people of color, to purchase homes in the future.
In fact, none of the legislation under consideration will assure that there will be low-cost, mortgage financing available for families and individuals that have good credit histories, stable income and want to buy homes. America needs a fair housing finance system that can spur a robust recovery for housing, as well as the overall economy.
Going forward, our nation's housing financing system must balance the needs of families with the needs of Big Banks and Wall Street. To be blunt, the pending legislation fails to prioritize the needs of working families. Since the housing market crash in 2007, measures have focused on restoring Wall Street and the Big Banks, with not enough attention on Main Street and the homeowners facing foreclosures. By raising interest rates, insurance premiums and down payments, the pending legislation will construct more roadblocks for working families. These measures will represent more failed public policy.
Specifically, here are some of our concerns about the Corker-Warner legislation:
Our communities need a finance system that provides credit to a broad and diverse population, rather than one in which credit and housing choices are more costly, more limited, and less sustainable, especially for low- and moderate-income households, households of color, and rural households. Without this broad access to credit, neither buyers nor sellers can transact business as they would like, which could once again destabilize home values.
It is critical that the government not withdraw from supporting homeownership. There needs to be sustained public-private partnerships that can provide liquidity for lenders and support the 30-year-fixed rate mortgage, a product that has played a major role in supporting homeownership for America's families.
(Hilary O. Shelton is the Senior Vice President for Advocacy for the NAACP where he directs the NAACP Washington Bureau. Mr. Shelton has more than 20 years of experience in government relations and federal advocacy.)
Founded in 1909, the NAACP is the nation's oldest and largest nonpartisan civil rights organization. Its members throughout the United States and the world are the premier advocates for civil rights in their communities. You can read more about the NAACP's work and our five "Game Changer" issue areas here.