When I was in my early 30s, I bought the home I live in now – in Wilmington right near Warner Elementary. My brother and dad went in on it with me. The only way my brother and I could qualify was with my dad’s credit, and the only way we could afford the monthly payments was to take out a 30-year mortgage.
If homeownership is part of the American dream, so is the 30-year fixed-rate mortgage. Most of you reading this, if you own a home, probably purchased it using this type of mortgage. For those of us first-time home buyers with car payments or student loans or credit-card debt, spreading your mortgage out over 30 years is the only way to make it work. For many, the 30-year mortgage is a gateway to the middle class.
The trouble is, as we saw in the 2008 housing crisis, our current housing finance system puts taxpayer dollars in jeopardy. We need to find a way to change that, while making sure the 30-year fixed-rate mortgage continues to be an option for home-buyers across the country.
Leading up to the 2008 housing downturn, Fannie Mae and Freddie Mac – private companies chartered by the government – bought and sold mortgages, with the purpose of injecting more cash into the housing market and allowing more Americans to own homes. The debt that Fannie and Freddie took on was not guaranteed by the full faith and credit of the U.S. government, but it was commonly believed that the federal government would, in fact, back these entities in the event of a downturn.
As a result of this understood government guarantee, Fannie and Freddie were able to borrow money at very low rates in order to purchase mortgages, package them together, and sell them to investors. In the lead-up to the mortgage crisis in September of 2008, Fannie Mae and Freddie Mac adopted too many of the risky practices of the subprime mortgage industry. As a result, they got themselves into extreme financial difficulty. In order to prevent an even worse financial meltdown, the government took control of Fannie and Freddie – and bailed them out. And that means that today, the taxpayers effectively own these entities. The problem is that in the event of another housing crisis, taxpayers would once again be on the hook for bailing out Fannie and Freddie.
Some have called for eliminating the government’s role in housing all together. In fact, there’s a proposal right now in the U.S. House of Representatives that would eliminate the government guarantee and severely limit access to affordable housing options. Experts agree that doing so would cut off access to the 30-year fixed-rate mortgage and foreclose the dream of homeownership for countless Delawareans. It would be extremely disruptive to the housing market for the foreseeable future.
I’ve teamed up with two of my colleagues – Rep. John Delaney of Maryland and Rep. Jim Himes of Connecticut – to protect taxpayer dollars, ensure that banks keep offering the 30-year fixed-rate mortgage, and maintain access to affordable housing options.
The Partnership to Strengthen Home Ownership Act, makes it so that if another housing crisis happened, private money – not taxpayer dollars – would take the biggest hit. It also allocates resources to the long neglected Housing Trust Fund to provide more housing options for low and middle income families. Unfortunately, as is the case with most things in Washington, reforming our housing finance system has become a partisan issue.
The good news, though, is that our proposal structures the new system in such a way that people on both sides of the aisle can support it. To learn more about the details of my bill, visit my website at www.johncarney.house.gov.
Close to 65 percent of Americans own their own home. For generations, owning a home has been tied to American prosperity, the American dream, and the strength of the middle class. After World War II, we saw a rise in homeownership as couples who made it through the war gave birth to the baby boom generation and bought houses – much like my own parents, Ann and Jack, did in Claymont.
Whether you’re a senior citizen who looks back with pride at the home you raised your children in, or a young couple just starting out, excited to move in to your first home together – the ability to buy a home is a hallmark of the American middle class.
We owe it to our nation’s history and our children’s future to ensure that our system for buying and selling homes is built upon stable financial ground. I’m hopeful that even if my colleagues in Congress can’t agree on everything, they can agree on this.
