That was the message delivered this week by Allan Dechert, 2011 president of the New Jersey Association of Realtors, who testified on NAR's behalf before the Senate Banking, Housing and Urban Affairs Subcommittee on Housing, Transportation, and Community Development regarding new ideas to address foreclosures.
"As the leading advocate for homeownership, NAR knows that foreclosures don't just affect the families that lose their homes," said Dechert, broker-owner of Ferguson Dechert Real Estate in Avalon, N.J. "Communities, the housing market and the economy all suffer."
"Ensuring credit availability to qualified buyers and helping more distressed homeowners with loan modifications and short sales will help reduce the growing inventory of foreclosed homes and ensure that housing leads the way out of today's economic struggles," he added.
Dechert said that creditworthy consumers continue to have difficulties securing fair and affordable loans despite their proven ability to afford the monthly payment. He said that NAR supports responsible lending standards; however, unnecessarily tight credit restrictions are putting downward pressure on home values, increasing the number of homeowners whose mortgage exceeds the value of their home, and adding to the number of foreclosures.
"Increased fees, higher down payments and reduced loan limits are making it harder for borrowers to obtain safe and sound mortgage financing products. Greater access to financing for qualified borrowers and investors could help absorb the excess inventory of foreclosed properties," said Dechert.
In testimony, NAR also urged the lending industry to take greater action to keep struggling families in their homes through loan modifications that reduce the probability of default and prevent further increases to the large inventory of foreclosed properties. Helping more families remain current on their mortgage by significantly reducing their monthly mortgage payment will allow them remain in the home that they worked so hard to obtain and reduce the impact of foreclosures on local home prices.
Dechert said that continued short sale delays are also contributing to foreclosures and urged lenders and servicers to quickly approve reasonable short sale offers that would allow home owners to avoid foreclosure. The current short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a home owner from foreclosure.
"Loan modifications – and short sales for those unable to meet their mortgage obligations – help stabilize home values and neighborhoods, and limit the losses incurred by lenders, the federal government and taxpayers," said Dechert. "More must be done to streamline short sale transactions, since many potential home buyers are simply choosing to walk away from transactions due to the length of time it takes for lenders to approve and complete these sales."
Dechert also testified about the pooling and disposition of foreclosure inventories held by the Federal Housing Administration and Fannie Mae and Freddie Mac. NAR is concerned that, although bulk sales may quickly alleviate the large inventory of homes held by the agencies, those sales would likely result in larger losses than necessary.
Realtors strongly believe that every effort should be made to incentivize individual versus bulk sales because individual sales maximize asset recovery and minimize the impact on housing values.
Regarding another proposed option to combine foreclosure disposition with affordable rentals through lease-to-own programs, Dechert testified that the focus should be on keeping families in their homes whenever possible. He recommended that any lease-to-own programs be privately administered by local entities that understand the needs and challenges of their local communities.