The Foundry

Members of Congress, including three presidential candidates, are competing to “do something” to stabilize the housing market and show compassion after the wave of foreclosures on risky subprime mortgage loans.

The crisis talk clouds the national picture, obscuring the varied state-by-state impact of the mortgage mess. The chart above uses the latest data to map out how the foreclosure rate for subprime loans stayed below 10% in all but 13 states.

Rather than take measured steps to assist only the most vulnerable and allow the market to correct itself, though, some in Congress want to spread the cost of a fix among all taxpayers-including those who acted responsibly in buying a home and never missed a mortgage payment. Heritage budget expert J.D. Foster writes in a new op-ed:

Fortunately, the mortgage industry isn’t waiting for Congress to get its act together. Spurred on by the Treasury Department through a program called Hope Now, the industry-supported by counselors and community nonprofits-is seeking out creditworthy borrowers who are likely to get into financial trouble. Why? To find a way to rework the mortgage or payment schedule so the borrower can stay in the home.

To limit meddling in the housing market by Congress or federal agencies, and to minimize diversion of taxpayers’ money to reward bad behavior, members of Congress should follow our “Eight Common Sense Standards for Housing Legislation.” There’s no reason to offer government assistance to:

• Borrowers who lied or made a major misrepresentation on mortgage applications.
• Borrowers who didn’t spend their own money for a down payment or use the home as a principal residence.
• Members of the mortgage industry, including speculators, owners of second or vacation homes, Realtors, home builders, mortgage brokers or bankers.
• Homeowners with other assets for repaying the mortgage, equity lines of credit or refinancing that substantially reduced equity.