Millions of American families with subprime mortgages - including one out of 26 Maryland homeowners - face an increasing likelihood of losing their homes to foreclosure over the next two years because of the Bush administration's opposition to legislation that it wrongly views as a bailout of irresponsible borrowers. The bill would allow the Federal Housing Administration to guarantee up to $300 billion in affordable mortgages for troubled homeowners; it's overdue relief. Members of Congress, Republicans and Democrats, should recognize the social and economic dangers of failing to help these homeowners and pass this bill with veto-proof majorities.
It is not just the homeowners who will suffer if substantial help isn't found. An additional 40 million neighboring homeowners may see their property values and their municipalities' tax bases drop by as much as $356 billion, largely over the next two years, recent studies show. In Maryland alone, $12 billion in state and local taxes is projected to be lost.
Bush administration officials and some Republicans in Congress are opposed to the legislation because they believe it would help people who are victims of their own irresponsible decisions. A Republican alternative, including steps to protect consumers from fraudulent or unscrupulous lending practices, was rejected last week. Meanwhile, lenders are fighting a Federal Reserve plan to tighten lending rules.
It's unfair to blame only consumers for the housing crisis, which has its roots in the reckless subprime lending practices of mortgage brokers, banks and investors who made billions from the bundling and resale of sub prime mortgages. When the investment bank Bear Stearns, a particularly aggressive player in this market, found itself trapped in a credit squeeze caused by its sub holdings, the Federal Reserve guaranteed hundreds of billions in loans to keep the institution afloat. The Fed justified the rescue as necessary to protect the nation's economy. Helping subprime mortgage holders with new guarantees could do the same. Congress should act swiftly to provide that help.