On Obama’s Mortgage-Relief Plan
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No Region Left Behind!
As we wrote last week, President Obama’s housing-relief plan will be a good – if imperfect – step toward reducing the country’s crippling spiral of foreclosures. One of the reasons why it was imperfect was that the qualifying mortgage limit to get loan modification assistance was opaque at best – leaving distressed homeowners in high-cost areas like the Bay Area wondering whether or not they’d be able to qualify. About 60 percent of homes purchased in the Bay Area in 2005 and 2006 were bought with “jumbo” loans of more than $417,000.
Rep. Jackie Speier, D-Hillsborough, has come to the rescue. Speier’s new amendment would set parameters around loan modification limits, so that people who live in what the Federal Housing Administration deems as a “high-cost area” and have a loan of up to $729,750 will still be eligible.
“The purpose of this amendment is to let it be known that whatever guidelines (the administration) draws up, we want to make sure that people in the Bay Area qualify for this mortgage modification program,” said Mike Larsen, Speier’s communications director.
It’s an important point, since Congress doesn’t have the power to shape most of Obama’s plan through legislation. Most of the plan goes through the Treasury Department, which already has the bank-bailout funds it will use to execute the housing plan. Given the way that Congress has failed to move on the one portion of the housing plan that it does control – a return to earlier bankruptcy laws, wherein bankruptcy judges are able to modify mortgage terms on a debtor’s first home – that may be for the best.
But that doesn’t mean Speier won’t face some criticism, particularly from those who believe that everyone who was once able to purchase a home in a “high-cost” area is rich.
“There’s always a bit of an uphill battle because people, especially people who live in places where you can buy a home for $100,000, believe that if you live in California or New York and you have a jumbo loan that you must be rich, and that’s just not true,” Larsen said. “Homes (with jumbo loans) are the only ones that are out here.” And in the current downturn, there are going to be more and more people who find themselves suddenly unable to pay for loans they could barely afford in the first place.
Finally, the housing plan has to be about equity – national equity. Working families in high-cost areas such as the San Francisco Bay Area are not immune from the plunging home values and economic stresses that are combining to threaten the American Dream.
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