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Housing crisis threatens the American dream

My parents, former sharecroppers from South Carolina, moved to Maryland to achieve their dreams of a prosperous future for their family. Although they had no more than a grade school education, they worked hard and were able to sacrifice and save enough to buy a home.

I will never forget the day we moved into that house 46 years ago. Although I was only 10, I can still clearly remember Mr. Bracken, the seller, and Mr. Brevard, the man who handed my family a set of keys - keys that unlocked many doors of opportunities for my family.

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Moving into our house changed our lives, giving my family a stable foundation. Buying that home allowed my parents to build a little wealth. As a result, my six siblings and I were all able to attend college.

As Americans, we are raised to believe that any family willing to work hard deserves this same transforming opportunity. That's why any threat to the dream of homeownership is so disturbing.

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Our nation is in the midst of a serious national crisis in the housing market, the effects of which are spilling over into other sectors of our struggling economy and hurting families everywhere.

The problem is particularly acute with subprime mortgages. Over the past five years, the number of these loans has jumped from 8 percent to about 20 percent of the mortgage market.

More than 1.4 million families lost their homes to foreclosure last year, an increase of 75 percent from 2006. Moreover, one in five of the subprime loans issued in the past two years is expected to go into default, costing an additional 2.2 million families their homes.

Maryland is not immune to this crisis, and the 7th Congressional District, which I represent, has been hit particularly hard. Foreclosures in the 7th have increased by nearly 600 percent in the past two years. Our state now ranks 15th in the country for foreclosures, up from 40th last year.

Those who are not at risk of foreclosure can still be hurt by the fallout. Foreclosures are linked to increases in vandalism and crime in neighborhoods. Additionally, for every home that undergoes foreclosure, the surrounding homes decrease in value.

Nearly 8.8 million homeowners owe more on their homes than they are worth - levels we have not seen since the Depression - and another 41 million homes not facing foreclosure are estimated to decline in value by $202 billion as additional subprime foreclosures lower the prices of surrounding homes.

We can and should take steps to help minimize damage for lenders and borrowers. We must address the two key factors that are dragging down our economy: the trend of increasing foreclosures and unstable housing markets.

On the first point, many have suggested a rate freeze or a moratorium on foreclosures. While both of these options might help in the short term, they are only temporary patches that fail to address the underlying problems.

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That's why we need to expand the capacity of programs that assist families facing foreclosure - as well as spread the word of their existence. Under Maryland's Bridge to HOPE Program, the state provides interest-free loans of up to $15,000 to help homeowners catch up on mortgage payments. This small loan can be the critical difference between foreclosure and a family's ability to keep its home. The federal government should allocate funds to individual states to implement or enhance similar programs.

Additionally, we should look at innovative ideas such as the SAFE Loan program proposed by the Center for American Progress. This program would restructure at-risk mortgages by transferring large numbers of existing loans currently in default or with negative equity to new owners. These transfers would take place at auctions organized by either the Treasury Department or the Federal Reserve, and would be based on the current value of the property. New mortgages with fixed rates would then be offered to eligible families in these homes. Eligibility would be extended to those who are at risk of default and demonstrate ability to repay the loans following refinancing.

The other critical step we must take to stabilize the market is to address the increasing number of bank-owned homes that rest vacant throughout our neighborhoods, inviting crime and lowering neighboring home values.

The federal government should consider providing block grants to purchase and rehabilitate these properties at a discount. The properties would then be sold as affordable housing, with proceeds going back into the fund for the purchase of more properties.

Over the years, my parents struggled to pay their mortgage on time while also helping their seven children succeed in life. Today, enjoying her retirement, my mother still lives in her home.

That opportunity should remain available for Marylanders - and all Americans. Let's not allow the current crisis to endanger the American dream.

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Rep. Elijah E. Cummings represents Maryland's 7th Congressional District.


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