January 2008

From the Desk of Tom Carmody
Chairman of AHAA

“Housing Hits Trifecta of Bad News”

USA TODAY’s Money Section headline Jan 31, 2008

I certainly am aware that we are the midst of the worst housing situation in America since the early ‘90s, and one that may be the worst since the depression era. USA Today highlighted the problems on the front page of its Money section: high foreclosure rates, falling prices and vacant homes. Miami leads the way in falling prices, Nevada in foreclosures and vacant homes for sale across the nation are 800,000 than would be the case in a normal market. Most every market has suffered, and will continue to do so it seems.

Certainly blame can be spread around. The FBI is allegedly investigating 14 companies for fraud relating to questionable loans to high-risk borrowers across the USA. Speculators who leveraged their way in to hot markets with sub-prime, no down type mortgage instruments have walked away in droves. Eager home builders rode a wave based on false promises knowingly in many instances. I could go on and on.

The ramifications have been well documented. Financial markets across the world in turmoil, mostly blaming the $600 billion in questionable financial asset-backed securities, whose values are now “unknown,” flowing from the US sub-prime crisis as the reason;

Local governments are worried about providing educational and other services that depended heavily on property taxes; an over 50% decline in construction jobs has put a dent in the economy, and just this week the International Monetary Fund lowered its global growth forecast and based “the global deceleration” on “the crisis in sub-prime US mortgages”. This all leads to financial institutions having a reluctance to lend, that deepens a sluggishness on a world wide scale.

Okay. We can spread blame. Okay. We can see the dire results. What’s not okay is the solution. Certainly the recent second recent dropping of interest rates by the FED shout spur activity and loosen purse strings. Certainly a drop in the bucket effort by some major lenders to refinance homeowners facing rising ARMs is a finger in a dike. But it is going to take a lot more. The problems we face will be with us throughout 2008. There is no single solution, no easy out that makes sense.

It is time for action, on a local, regional and national level. Municipalities have to create programs that provide relief to homeowners in trouble. States and counties have to back up the municipalities. The Federal government has to continue to explore steps such as the stimulus package and FHA modernization to create an atmosphere that is an inducement for success. And the private sector has to chip in with new programs in concert with government.

Here at the Association for Homeowners Across America (AHAA) we are striving to create programs that help protect homeowners against foreclosure, we are working with others to develop unique new mortgage components that allow homeowners to refinance at a level they can afford, and we continue to offer educational services for prospective home purchasers, homeowners, and those facing foreclosures.

It is time to stop pointing fingers and discussing bad conditions. Hopefully the entire housing industry has learned its lesson. Now it is time to act.