With the release of high unemployment numbers nationwide it is no surprise Treasury Secretary Timothy Geithner is trying to address the confidence crisis. But instead of injecting liquidity to help banks clean up their balance sheets and restore stability to the financial sector, he is trying to lower the anger and frustration of struggling American homeowners.
After the Obama administration announced its Financial Stability Plan in February to help the 7 to 9 million Americans who are facing foreclosure stay in their homes, the housing market became a breeding ground for scams. The plan's goal was "to address the key problems at the heart of the current crisis" and help homeowners refinance their homes with more affordable payments. But it allowed many companies to use false advertising to take advantage of the vulnerable. Federal Trade Commission (FTC) chairman Jon Leibowitz said these companies are "kicking people when they're down" through upfront fees.
American homeowners must make good decisions during the current housing crisis, but they can't do that with bad information. Those facing foreclosure must have the opportunity to make the best decision for themselves and their families, and the government needs to continue providing them the chance to obtain that information.
In 1802, Thomas Jefferson said, "We might hope to see the finances of the Union as clear and intelligent as a merchant's books … so every man of any mind in the Union should be able to comprehend them."
The same standard of transparency in which Jefferson hoped the government would have in its financial statements needs to be applied to the housing market. Americans need to educate themselves on their rights, the costs and benefits of foreclosing and the exposure of fraudulent companies.
The Obama administration is taking "aggressive" action to make sure homeowners don't fall prey to predatory schemes acting as government programs. The Justice Department said it is filing civil lawsuits, educating homeowners about mortgage-relief scams and directing borrowers to "legitimate" services. These steps are the beginning of what can potentially become comprehensive understanding of the housing and mortgage markets.
In addition to sending warning letters to companies the FTC believes has engaged in suspicious advertising and having the FBI investigate more than 2,100 mortgage fraud cases, the government needs to continue providing alternative outlets for struggling Americans to gain information on the various ways to handle the threat of foreclosure.
Americans also have a responsibility to take the time to gain all the information available before making a decision. The government has made free counseling available and created Web sites to help inform homeowners. It is now their role to stop believing there is a quick fix to this problem. Vulnerable homeowners need to be skeptical of false advertising. When a company says they can save your home by having you sign the deed over to them, it sounds too good to be true, and when something seems too good to be true, it is usually because it is. Americans should take advantage of the $75 billion government plan to help keep them in their homes.
Once the market stabilizes and people begin to buy houses, these standards should also apply. New buyers must ask the right questions about interest rates and have an intelligible understanding of the mortgages they take out. Banks should provide new buyers with the resources to educate themselves, but this crisis has taught us the severe consequences of an uninformed consumer, and that is something America can't let happen again.
