Seattle REALTORS® Protect Homeowners From Mortgage Credit Crunch
Current and prospective homeowners in the Greater Seattle area can thank the Seattle King County REALTORS® for its role in protecting mortgage credit availability in the area.
Seattle city officials had been considering a controversial new program that would have purchased underwater mortgages through the use of its eminent domain power, and then issued new mortgages at more favorable terms to homeowners. Though couched as a foreclosure relief program, the SKCR immediately recognized that the program posed a risk to the local housing market, and particularly to mortgage-credit availability. SKCR joined with a coalition of local organizations to lobby against the program.
Lobbying efforts focused on education, ensuring that the mayor and city officials understood the negative impacts that this type of eminent domain program would have on homeowners and the local housing market. Some of the primary concerns expressed were:
- The Federal Housing Financing Authority came out against this type of eminent domain program and prohibited Fannie Mae and Freddie Mac from operating in markets implementing such programs.
- The state and federal constitutionality of the program were suspect and multi-year litigation regarding use of the power would be inevitable.
- The program would deter mortgage lenders from working with borrowers on existing loans or from issuing new mortgage loans, with lending to low-income borrowers being especially impacted.
- The program would be costly and the city would be assuming substantial financial risks that could harm the local economy.
SKCR and its fellow coalition members also pointed to numerous existing foreclosure prevention programs that provide assistance to homeowners without these negative impacts. These programs have been working — the number of underwater mortgages in the area has been decreasing steadily. Expansion and increasing public awareness of these existing programs are more effective alternatives to the drastic, untested, eminent-domain approach.
The diligent efforts of SKCR and its fellow coalition members paid off last year when Seattle’s mayor firmly indicated his intent to veto any legislation permitting the use of eminent domain to obtain residential mortgages in the city.
The Seattle King County REALTORS® continues to keep abreast of local and regional issues that could impact homeowners in Seattle and the 38 other municipalities it serves.