WASHINGTON -- Key Senate Democrats issued a report Wednesday detailing the housing market's decline amid calls for federal aid to homeowners at risk of foreclosure.
The report from New York Democrat Charles Schumer, chair of the Joint Economic Committee, came on the same day that the nation's trade group for Realtors offered new projections that the housing slump is worsening.
The National Association of Realtors said the national median price for existing homes would decline this year for the first time since 1968 on the same day an activist nonprofit called on Wall Street to help homeowners restructure their mortgage loans. Across town, senators called for the government to come up with hundreds of millions of dollars to help at-risk homeowners.
"We've heard one heartbreaking story after another of borrowers with limited incomes being sold mortgages they could not afford," Sen. Sherrod Brown, D-Ohio, said at a briefing on Capitol Hill.
His words were backed up by the NAR predicting the median price for existing homes nationwide will drop 0.7 percent to $220,300 this year, down from $221,900 last year. Tighter lending standards and the continued fallout from the troubled market for loans given to people with shaky credit are to blame, the NAR said.
Even though the median price of new homes is expected to rise slightly this year, the NAR estimated existing home sales will fall 2.2 percent compared with an earlier forecast of a 0.9percent decline. New home sales are expected to fall 14.2 percent compared with a previous estimate of a 10.4 percent slide, the NAR said.
Economist Edward Leamer, director of UCLA's Anderson Forecast, says that estimate is too conservative.
He predicts a decline in the price of existing homes of 2 percent to 3 percent this year and expects that trend to continue for two to three years. With high-interest rate mortgages for people with poor credit no longer available, Leamer said, "you're eliminating 20 to 30 percent of the demand for homes."
Sen. Christopher Dodd, D-Conn, chairman of the Senate Banking Committee and a candidate for president, said he would call for a summit on Capitol Hill soon "to try to work out a process for providing relief to homeowners."
As 1.8 million adjustable rate mortgages reset to higher rates this year and next, foreclosures are sure to continue rising, the 32-page report from the JEC said.
Areas hardest-hit by foreclosures include Denver, Dallas and Detroit, the report said.
In Detroit, one of every 21 mortgages foreclosed last year, according to the JEC, which used RealtyTrac's foreclosure database.
The Federal Housing Administration could be revamped to refinance mortgages in danger of default, the JEC's report said, citing a proposal by a Harvard professor under which the housing agency could oversee a "rescue fund" that would restructure failed or failing mortgages. Aid also could be provided to community organizations or banks that work with borrowers to refinance loans.
"We'd like to do something very quickly," Schumer said. "These statistics are new and they're startling."
Lawmakers also are talking up proposals to strengthen federal regulation of mortgages, impose a national ban on predatory lending practices among all lenders and require those lenders to establish a borrower's ability to pay back a mortgage loan through the life of the loan, not just for two or three years.
Rising delinquencies and defaults among borrowers have resulted in more than two dozen so-called subprime lenders going out of business, moving into bankruptcy protection or putting themselves up for sale.
Last week, civil rights groups called for a six-month morator-ium on foreclosures resulting from high-risk loans given to people with shaky credit, arguing that lenders could face lawsuits if they don't help borrowers. The mortgage industry says lenders already are working to help distressed borrowers.
The Boston-based Neighborhood Assistance Corporation of America announced plans Wednesday in Washington to work with Bank of America Corp. and Citigroup Inc. on refinancing troubled loans.
Bruce Marks, NACA's chief executive, said the group aims to convince other big lenders and Wall Street investors to help consumers avoid foreclosures and obtain loans that they can afford.
"The real question is how big is (the housing market's drop) going to be," economist Leamer said.