Homeowner's Blog

The Country Needs the Consumer Financial Protection Agency

House Financial Services Committee Chairman Barney Frank, (D-MA), has introduced a bill to create an independent agency to regulate financial services. The legislation, HR 3126, would consolidate many regulatory functions spread among other agencies and would give it the authority to make and enforce rules that would hopefully prevent another meltdown in the mortgage finance sector as well as address many other financial services practices that may be injuring consumers.

Consolidation of the oversight of financial products that is now split between the Fed, the Securities and Exchange Commission, the Federal Trade Commission, and others can potentially improve regulatory efficiency substantially. It can also reverse the process of "regulatory capture" by the regulated industries that appears to have undermined the independence some of these agencies did have. However assuring that the oversight organization is free from political influence and staffed with competent professionals dedicated to protecting consumers is more important than where the authority resides. In designing the new institution we need to study the reason for regulatory failures at the Fed, SEC, OFHEO, and other agencies, and build protections against politicization into the new organization.

The American Homeowners Grassroots Alliance believes that the legislation is badly needed and also creates an opportunity to create more rigorous examination of other financial services areas that are badly in need of more oversight. For example the anticompetitive practices of many real estate services organizations are forcing real estate consumers to pay much higher real estate commissions than they pay in other developed countries. The new Consumer Financial Protection Agency should be given additional oversight of real estate services and the power to roll back industry and state regulations and laws that are stifling competition in real estate services and costing home buyers and sellers vast amounts of money.

New Tax Credit Rule Will Help Home Buyers

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD), today announced that the Federal Housing Administration will permit its lenders to allow home buyers to use the new $8,000 federal first time buyers tax credit for their down payment. The credit would otherwise not be available to the home buyer until they filed their next annual federal tax form. In some cases the home buyer would not otherwise have a large enough down payment to purchase the home. To get around that dilemma, HUD will allow FHA's  approved lenders to provide buyers short-term bridge loans for up to the amount of the credit. This will enable home buyers to use the funds immediately if they are needed to complete the purchase. This is a wise decision that will help both home buyers and the recovery of the housing market, and is consistent with the intent of Congress in passing the home buyers tax credit.

Home Buyer's Tax Credit

We must find a way to reduce the inventory of unsold new and foreclosed homes before the housing market will stabilize. A 10% home buyers tax credit to offset home buyers very real fear of further price declines is the most logical way to approach the challenge. The economic stimulus bill included such a provision, limiting the credit to a maximum of $8,000 for first time buyers only.

Unfortunately, limiting the credit to first time buyers and to $8,000 is too restrictive to accomplish the task. It's modification could be done at a relatively modest cost, and should be considered as part of President Obama's budget plan. 

Continue reading Home Buyer's Tax Credit.