The Brookings Institution, one of the nation’s most prestigious think tanks, has issued a new report on the mortgage crisis focusing on the role of state governments.
The report, entitled “Tackling the Mortgage Crisis: 10 Action Steps for State Government,” was written by Alan Mallach, a Senior Fellow at the National Housing Institute and a Visiting Scholar at the Federal Reserve Bank of Philadelphia, and suggests “10 Action Steps” that can be taken by state governments to “tackle both the immediate problems caused by the wave of mortgage foreclosures and prevent the same thing from happening again.”
The 10 steps are:
- Help borrowers gain greater access to counseling and short-term financial resources.
- Ensure a fair foreclosure process.
- Encourage creditors to pursue alternatives to foreclosure.
- Prevent predatory and fraudulent foreclosure “rescue” practices.
- Establish creditor responsibility to maintain vacant properties.
- Make the process as expeditious as possible.
- Ensure that the property is ultimately conveyed to a responsible owner.
- Better regulate the mortgage brokerage industry.
- Ban inappropriate and abusive lending practices.
- Establish sound long-term policies to create and preserve affordable
housing, for both owners and renters.
These seem like common sense steps to us — although the debate over what in fact are “inappropriate and abusive lending practices” and “sound long-term policies to create and preserve affordable housing” — will be where the reform process is likely to break down.
We’ve noted before that “while the federal government’s response to the mortgage and real estate crisis appears to be paralyzed by partisan politics, the States are taking the initiative in trying to protect homeowners facing foreclosure.”
The Brookings Institution agrees:
“Although most media attention has focused on the role of the federal government in stemming this crisis, states have the legal powers, financial resources, and political will to mitigate its impact. Some state governments have taken action, negotiating compacts with mortgage lenders, enacting state laws regulating mortgage lending, and creating so-called ‘rescue funds.’ Governors such as Schwarzenegger in California, Strickland in Ohio, and Patrick in Massachusetts have taken the lead on this issue. State action so far, however, has just begun to address a still unfolding, multidimensional crisis. If the issue is to be addressed successfully and at least some of its damage mitigated, better designed, comprehensive strategies are needed.”
As we’ve pointed out, “Unless a national consensus is quickly reached on dealing with the rising tide of foreclosures — and we believe this is unlikely to happen when presidential candidates are competing for votes based on whose plan is best for dealing with the mortgage and real estate crisis – we think lenders can expect to fight individual battles over foreclosure in all 50 States. Given the negative publicity that lenders have had in the media, and with a bitterly fought presidential election on the horizon, these are not battles that the lenders are likely to win.”
Since delinquent and at-risk borrowers have far more political leverage in many state capitols than they have in Washington, the Brookings Institution report not only provides a road map for individual state action, but also further increases the pressure on the mortgage industry and their supporters in the federal government to come up quickly with an effective national plan for dealing with the foreclosure crisis.