Letter to the Washington Post, #11

Sebastian Mallaby’s April 21st column, “Housing Sense in Congress?” seems to be implying that it is homeowners who are to blame for the subprime meltdown. “Homeowners,” he writes, “have no moral claim to government assistance.”

Instead, Mallaby says that Congress ought to find ways to provide partial protection to the lenders who issued millions of sub-prime mortgages, then bundled and sold them to investors. In order to stabilize housing prices, the Federal Housing Administration ought to protect lenders from further losses, “if they agree to forgive part of a loan rather than kicking a family onto the street,” he writes.

In such a case, Mallaby notes, “homeowners would get a break, which is unfortunate.”

Such a break. The homeowners in question, who may have applied for and received one loan in their lives, will lose all their equity anyway. In most cases, these homeowners had little insight into what might go wrong and no idea that they were the recipients of unusual “subprime” loans.

But the lenders knew. And the lenders knew that such profitable loans were also risky. Now, Mallaby apparently believes that the lenders who profited greatly during the rise in housing prices are the ones with a “moral claim” on government action.

If Congress wishes to slow the freefall in market prices, a better option would be Own-to-Rent (OTR), a proposal first advanced by Dean Baker of the Center for Economic and Policy Research (CEPR).

OTR would require lenders to offer homeowners the opportunity to rent their home at fair market prices before beginning foreclosure proceedings. This would allow people to stay in their homes, stabilizing neighborhoods and forcing lenders and investors, who profited from the increase in housing prices, to bear the market consequences of the collapse in prices.

Jeff Epton
807 Taylor St., NE
Washington, DC 20017

202 506-7470

Letter to the Washington Post, #8

I can guarantee with near-absolute certainty that the Post will not publish this letter. So, at the same time I send it in to the paper, I'm going to put it up here.


The Post’s carefully worded editorial, “Home Truths (March 28),” managed to balance every nuanced point with its opposite. The result is fairly routine for the Post—an editorial worth less than the paper it’s printed on.

Here’s the question for the editorial board: Do you support targeted assistance for homeowners with mortgage problems, or not? If not, please say so more clearly.

If you do, consider supporting a strategy that includes the ingenious, and ingeniously named, “Own-to-Rent” proposal advanced by the Center for Economic and Policy Research (CEPR).

Own-to-Rent would require mortgage-holders to offer to rent a property to its occupants at fair market rates before foreclosing. What would this accomplish?

First, it would force banks and other mortgage-holders who don’t want to become landlords to consider renegotiating loans to monthly payment levels that would be closer to market rents and more affordable to homeowners facing foreclosure.

Second, legislation could be written that would force mortgage-holders to absorb most or all of the loss connected to the deflated value of the home. Banks would not be forced by law to renegotiate, but they would be permitted to do so under the terms outlined in the law.

In successful renegotiations between mortgagees and lenders, occupants would have a chance to remain in their homes, lenders that profited greatly during bubble times would take the lead in stabilizing market values, and there would be no government-sponsored bailout.

Check out Own-to-Rent at the website for CEPR: www.cepr.net.

Jeff Epton
807 Taylor St., NE
Washington, DC 20017

202 506-7470