Findings Announced at D.C. National Press Club Event, Teleconference
"The damage has been as bad as anyone imagined so far," writes Demos senior fellow James Lardner. "Foreclosures, after roughly doubling in the past year, are running at a rate of close to 25,000 a week. That's an alarming figure in itself, and it points toward the loss of more than 2 million homes in 2008 and 2009 — a number very close to estimates made by consumer groups (and widely dismissed by lenders) in early 2007."
The study shows that, beyond the terrible consequences families face in this crisis, the housing market is in short- and long-term economic peril. The market, Lardner finds, could continue further on a downward spiral and pull much more of the economy down with it.
The Demos report praises the thrust of legislation approved by the House and moving toward passage in the Senate, which this Tuesday held a key procedural vote to limit debate on the bill. But it faults lawmakers for their failure, up to now, to support state and local efforts to "contain the damage of a terrible human and economic tragedy."
In addition to analyzing the current rescue legislation, which is co-sponsored by Senators Dodd and Shelby, and Representative Barney Frank, "Beyond the Mortgage Meltdown" outlines the history of this crisis, and a path forward to fix it. The study:
"Demos's report is timely, cogent, readable and persuasive," said Ellen Seidman, a Clinton administration alum who currently directs the Financial Services and Education Project at the New America Foundation. "The nation needs to face up to both the immediate and the structural changes that are needed to cushion the impact of the current crisis for homeowners, communities and the nation; to learn from the lessons of this crisis to improve our housing policy, especially by enhancing the supply of quality, well-located affordable rental housing; and to take the regulatory steps to prevent a similar wealth-stripping crisis from happening again," she said. "As the report states, the legislation pending in Congress is a needed first step, but it is only the beginning."
Moodys.com chief economist Mark Zandi, Demos president Miles Rapoport, and Federal Home Loan Bank of New York President Alfred DelliBovi, who was Deputy Secretary of Housing and Urban Development under George H.W. Bush, also provided comments on the report as panelists at the National Press Club event.
Under pressure from the White House, House and Senate leaders have reportedly backed off from a $4 billion plan to help states buy and rehabilitate foreclosed properties.
While there are some who claim that this would be an unfair bailout of irresponsible lenders and borrowers, the Demos report outlines how key federal officials and agencies took steps that actually helped unscrupulous lenders at the expense of responsible lenders and borrowers. The report suggests that this perceived "intervention" might be more accurately understood as an effort to "undo a small portion of the damage that government helped cause."
"Assisting homeowners and the mortgage market in the short run is only the first thing that needs to be done," said Miles Rapoport, President of Demos. "For the long term, we need a set of rules for the mortgage and financial industry that give people confidence that this will never happen again."
The report is available for download at www.demos.org