Published: March 2014

Wall Street is about to crash the housing market—again

Coalition: Housing and Economic Rights Advocates (HERA)

In a letter to housing regulators, Consumer Action joins advocates demand "immediate federal intervention" to rebalance the housing market in favor of qualified borrowers who currently can't get affordable mortgage loans. All-cash buyers keep the lending high, making it seemly impossible for first-time homebuyers to enter the market.

The 2008 housing crisis was largely caused by banks that were willing to give risky borrowers a mortgage, driving home prices to unsustainable levels. As a result of record foreclosures, banks are now less willing to give out mortgages to anyone with a less-than-stellar credit rating, yet home prices are on the rise across the nation. Wealthy Wall Street investors with the ability to pay cash for homes are outbidding normal homebuyers in places hard-hit by the housing crisis, like Phoenix and Atlanta. Once these wealthy investors have bought the homes, they flip them into rentals, often covering up large issues like plumbing and mold with cosmetic fixes.

Kevin Stein, Associate Director of the California Reinvestment Coalition, explains: “There are some eerie parallels between what’s happening now and the mortgage meltdown. In both cases, the overarching similarity is a drive for higher and higher profits without regard for harmful impacts on families and communities. That’s why we’re ringing the alarm bell now and asking regulators to act. Wall Street and other cash investors are making it harder for families to buy their first house, for renters to stay in their communities, and for neighborhoods to recover.”

In the letter, advocates demand "immediate federal intervention" to rebalance the housing market in favor of qualified borrowers who currently can't get affordable mortgage loans. All-cash buyers keep the lending high, making it seemly impossible for first-time homebuyers to enter the market. As a result more people are being forced into rental properties and some may pay more than half their yearly income in rent. The Federal Housing Financial Agency and the agency of Housing and Urban Development should suspend their bulk sales of homes and mortgages until they can carefully analyze potential fair housing issues created by bulk sales (and release this data publicly).

Advocates also recommend the Federal Housing Administration to consider preferences for selling distressed loans to nonprofits who will prioritize homeownership. Banks should be incentivized to sell distressed loan pools to nonprofit organizations and other organizations that will prioritize homeownership and stability in distressed communities. Regulators should act now to protect first-time homebuyers, renters, and communities.

Lead Organization

California Reinvestment Coalition (CRC)

Other Organizations

A Community of Friends | Able Works | Action for the Common Good | Advocates for Neighbors, Inc. | Affordable Housing Services, Inc. | Alliance of Californians for Community Empowerment (ACCE) | Asian Inc. | Asian Pacific Policy & Planning Council (A3PCON) | Associated Realtist Property Brokers, Inc., a NAREB local chapter in Oakland, CA | Bet Tzedek Legal Services | California Capital Financial Development Corporation | California Coalition for Rural Housing | California Reinvestment Coalition | California Resources and Training (CARAT) | Causa Justa:Just Cause | Center for Popular Democracy | CHISPA | City Heights Community Development Corporation | Civic Center Barrio Housing Corporation | Community Action Human Resources Agency (Eloy, Arizona) | Community Housing Council of Fresno | Community Housing Development Corporation | Community HousingWorks | Consumer Action | Consumer Credit Counseling Services of Orange County | Consumer Credit Counseling Services of San Francisco | Courage Campaign | East Bay Housing Organizations | East Los Angeles Community Corporation | Fair Housing Law Project, Law Foundation of Silicon Valley | Fair Housing Napa Valley | Fair Housing of Marin | Fair Housing Council of San Diego | Fair Housing Council of the San Fernando Valley | Greenlining Institute | Hacienda CDC (Portland, Oregon) | Hello Housing | Home Defenders League | HomeownershipSF | Housing California | Housing and Economic Rights Advocates | Housing Opportunities of Northern DE, Inc. | Inland Fair Housing and Mediation Board | ISAIAH | Massachusetts Communities Action Network | Multicultural Real Estate Alliance for Urban Change | National Asian American Coalition | National Community Reinvestment Coalition | National Consumer Law Center (on behalf of its low-income clients) | National Housing Law Project | National People’s Action | Neighborhood Housing Services of Greater Cleveland (Ohio) | Neighborhood Housing Services of the Inland Empire | Neighborhood Housing Services of Silicon Valley | NeighborWorks Sacramento Region | New Economy Project | NID-HCA | Northbay Family Homes | Northern Circle Indian Housing Authority | Novadebt | NPHS, Inc. | Orange County Community Housing Corporation | People’s Self Help Housing | PICO National Network | Project LIFT (Houston, Texas) | Public Counsel | Renaissance Entrepreneurship Center | Residential Resources, Inc. (Nashville, Tennessee) | Right to the City Alliance | Rural Communities Assistance Corporation | Sacramento Foreclosure Action Team | Self-Help Enterprises | Shalom Center for T.R.E.E. of Life | Suburban Alternatives Land Trust | Tenants Together | Thai CDC | Unity Council | Vermont Slauson Economic Development Corporation | Ward Economic Development Corporation | Western Center on Law and Poverty

More Information

To read the advocates' letter in full, please click here.

For more information, please visit CRC's website.

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