Mortgage Proposals Set Back Homeownership

By Lois A. Vitt, Ph.D.

New mortgage finance rules in the planning stages by the federal government will set homeownership back nearly forty years, and down a track that many Americans won’t understand. The efforts are intended to set-up a framework for permanent down payment minimums of 20%, higher interest rates and mandatory income ratios that will deny mortgages to a large number of applicants to buy a home.

finance rules

The proposals would also make it difficult for homeowners to obtain refinancing for a lower interest rate without at least 25% in equity. Housing construction and a recovering housing market has always led the U.S. out of serious economic downturns. But without a full housing recovery plan, including mortgage financing an economic recovery is in jeopardy.

If the proposals are approved, President Barack Obama will become the first anti-homeownership president in U.S. history. Formerly robust housing markets will continue to stagnate for years to come, and homeowners will find themselves trapped in houses they cannot afford to leave for new jobs, a better lifestyle, to resolve family issues, trade up, or downsize households.

As it stands now, millions of individuals and families are unable to qualify for a mortgage to purchase a home under current lending requirements set by banks and mortgage companies

Social Benefits of Homeownership

For years, research has shown that homeowners are happier, more content with their lives, more secure especially in later life and more likely to participate in neighborhood and community affairs than renters.

In 2010, the National Association of Realtors® completed a systematic review of the academic research and found, not surprisingly, there is a strong case to be made for public policies that promote homeownership. Owning a home is more likely to provide community stability, other benefits for individuals and families and broad societal benefits for communities and the nation.

Cited in the NAR study, Social Benefits of Homeownership and Stable Housing are these benefits of homeownership

• Higher educational performance and better behavior of children

• Lower community crime rates

• Lessened welfare dependency among households

• More household participation in civic affairs

• Better household health

Financial Benefits of Homeownership

Research also shows that the financial benefits of homeownership are no less important for the well being of the nation’s families and the nation itself. Among the financial effects of homeownership are job creation; federal, state and local revenues; household saving through equity buildup, and consumer spending on home-related expenditures and improvements.

For many homeowners, “paying down the mortgage” constitutes a continuing commitment to homeownership as a key investment in individual and family well being and financial security in retirement. For renters, aspiring to and saving for homeownership is a cultural tradition. In 2010, two out of three home buyers used savings to buy a home. The next most cited source of cash investment in a home purchase was equity buildup (savings) from a previously owned primary residence.

Homeownership activities generate:

Jobs — In 2008, National Association of Home Builders (NAHB) researchers estimated that 3.05 jobs are created from building one average new single-family home, and 1.11 jobs are created from $100,000 spent on residential remodeling. By the time the closing documents are signed, home buying activities have put real estate agents, lawyers, appraisers, inspectors, and mortgage lenders to work.

Revenues support federal, state and Social Security taxes from job creation, business profits, sales taxes on materials, and fees for building permits and utilities (NAHB 2008).

Business and consumer spending on home-related expenditures and improvements support manufacturers of carpets, home appliances, furniture, and other goods and services.

The advantages of homeownership have been shown to be greatest for households who currently have the least access. Research shows that homeownership makes an important difference in the physical condition of low-to-moderate income neighborhoods and in the lives of children from low-to-moderate income families.

By improving saving opportunities and access to homeownership for those previously underserved, a renewed National Homeownership Strategy can make a real difference in the lives of millions of American families, and communities for years to come.

Lois A. Vitt, PhD
About the Author

Lois A. Vitt is a housing expert and financial sociologist, and is the author of “10 Secrets to Successful Home Buying and Selling”, the first book to demystify the psychological forces behind our housing decisions. To learn more about Lois and this book, visit

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