June 4th, 2008

Sen. Kerry: Stem the tide of foreclosures
By Rebecca Hyman
Quincy Patriot Ledger

TAUNTON —

U.S. Sen. John Kerry said his Mortgage Revenue Bond Program will provide the state with more than $200 million to help struggling homeowners stave off foreclosure, among other things.

Kerry, the featured speaker at Pro-Home Inc.’s annual meeting at the Holiday Inn on Friday, said he has never seen as big a “disconnect” between what is happening in neighborhoods as a result of the mortgage crisis and what is “not happening” in Washington, D.C., to address it.

He described a meeting in the White House with President George Bush, Vice President Dick Cheney and others in January about the economic downturn.

“I sat at the table and listened … I said, ‘You know Mr. President, what we really need to do is create jobs. ... and most importantly, we need to recognize that the crisis came about because of the sub-prime crisis,” Kerry said.

So, improving the economy means “stemming the tide of foreclosures” and helping ordinary people hold onto their homes, Kerry said.

“It shouldn’t just be when the pain reaches Bear Stearns and Wall Street that we get a response,” Kerry said.

Kerry said the bond program, sponsored by himself and U.S. Sen. Gordon Smith of Oregon and recently passed by the Senate, will provide $10 billion nationwide, including $211 million in Massachusetts, to help refinance sub-prime loans and help first-time homebuyers obtain mortgages.

Kerry said he has attended foreclosure crisis hearings around the state.

In Massachusetts, there has been a 37 percent increase in foreclosures over last year, he said.

Meanwhile, home values have fallen 11 percent, the steepest decline since 1990, and sales are down 32 percent since March of last year in the commonwealth, he said.

Kerry said the foreclosure crisis is having far-reaching effects.

Homeownership helps build strong communities and families, he said.

“It’s people sharing in the excitement and personal rewards of drawing those lines on the bathroom wall when kids grow older. It’s a place to have a barbecue and going home and knowing it’s your castle,” he said.

Pro-Home is a non-profit corporation that helps people “attain and retain” affordable housing, Pro-Home President Dave Tipping said. It was founded in 1990 in Taunton but has expanded to serve 12 additional communities, including Lakeville, Raynham, Easton, Mansfield and Norton.

Tipping said that of the 156 clients who’ve sought foreclosure counseling, Pro-Home was able to help 88, more than half, stay in their homes.

In the last couple of years, Pro-Home has become proactive, building and rehabbing properties to sell to first-time homebuyers at affordable prices, Tipping said.

“Eighteen years is quite a record for a non-profit to be making this kind of contribution to the community,” Kerry said.

Economist John W. Bitner, the keynote speaker at the lunch, said he believes the economy is in a mild recession. The term’s technical definition is two quarters of negative growth, and that hasn’t happened.

But an alternate definition is a “significant decrease in economic activity,” and that is occurring, said Bitner, the senior vice president and chief economist at Eastern Investment Advisors and guest commentator on NBC Nightly News, CNBC, WCBH, WBZ, Bloomberg radio and the “Wall Street Journal’s” nationally syndicated radio program.

Bitner said Massachusetts has actually had it easier than some parts of the country economically and in terms of real estate values in particular.

In some places, home prices have plummeted 25 or 30 percent, Bitner said.

Bitner said part of the problem is that banks gave mortgages to some people who can’t afford home ownership.

“It’s like giving an alcoholic a drink. It might make them happy, but you’re not doing them a favor,” Bitner said.

It’s a vicious cycle, he said. With home prices falling, people aren’t buying because they want to wait until the market bottoms out.

“No one wants to catch a falling knife,” Bitner said.

He expects prices to stabilize next year and even begin to rise again by the end of 2009.

Kerry and Bitner both said government intervention is necessary to address the housing crisis.

“The free market forces will resolve the issue, but they’re vicious and will resolve it in an ugly way,” Bitner said.

Kerry said affordable housing is one area where the marketplace is not self-regulating.

The reason is that developers can make more profit building luxury housing, so government has to step in to create incentives for them to build moderately priced homes.

“We always have to try to attract that investment,” Kerry said. “The result is our communities are stronger and our country is stronger.”

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