The local congressman reviews what's being done to combat risky loans and help imperiled homeowners.
Americans all across the county are feeling squeezed by the subprime mortgage crisis. Nowhere is that feeling more acute than here in San Joaquin County, where we suffer from one of the nation’s highest foreclosure rates.
But more than just frequent headlines, national and even international attention, the foreclosure crisis means that families are losing their homes.
 And there’s an even greater effect, as well. Foreclosures destabilize neighborhoods. For every foreclosure in a one-eighth square mile, the size of a typical city block, the value of every other home on that city block declines by 1 percent immediately, and the crime rate goes up 2 percent immediately.
It’s clear that the subprime crisis has caused hardship, not just for families that got in over their heads, but it has also caused an economic slowdown that hurts us all.
The road to recovery starts with stabilizing the housing market, and just this past week, the House of Representatives passed a foreclosure prevention package that will benefit all Americans.
The House package is a fiscally responsible, 100 percent voluntary program that assists people who are trying to act responsibly but who can’t refinance because their homes are now worth less than the value of their mortgage. This is a difficult problem that lots of families in San Joaquin County have encountered because home values have dropped.
To participate, lenders must write-down the value of a mortgage to better reflect current home prices, and the Federal Housing Administration will help the borrower refinance into a fixed-rate mortgage. Banks that gave out bad loans will have to accept responsibility for their actions by taking a loss. This is valid only for owner-occupied homes; speculators, investors and vacation/second-home owners are not eligible to participate.
Banks will have an incentive to participate, because they are better off taking a small loss now than a bigger loss later, and hundreds of thousands of homes may be saved.
In addition to helping homeowners who are under water, the House-passed package helps restore community stability by providing funds for local communities to purchase vacant, foreclosed properties, rehabilitate them, and use them for affordable housing.
I am also proud that a bill I wrote was passed as part of the package and will allow more homeowners to qualify for stable, government-insured mortgages by raising the size of mortgages that the FHA is allowed to insure.
These represent reasonable, responsible steps to stabilize the housing market, help keep people in their homes and rebuild our economy.
After all, I think Federal Reserve Chairman Ben Bernanke put it best when he recently said, “High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets and the broader economy. Therefore, doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It’s in everybody’s interest.”
We still have a lot of work ahead of us, but we are making important progress. I hope that the Senate and the president put partisanship aside, support this legislation and join with us to protect homeownership and rebuild our economy.
• Rep. Jerry McNerney, D-Pleasanton, represents the 11th congressional district, which includes Tracy.
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