November, 2008
Washington Watch
Inspection News and Views from the American Society of Home Inspectors



ASHI Offers Proposals to Help Address Mortgage Crisis

RANDALL PENCE

(Washington, D.C.) With passage of the housing bailout bill earlier this summer and the subsequent credit rescue bill passed in early October, the U.S. government has demonstrated extraordinary speed in its efforts to moderate the effects of the severe economic downturn. Time will tell whether these remedies are the best tonics for the collective financial crises.

But one thing is for certain: The U.S. government is in the realty business.  

We would prefer that the housing markets were stable and that any discussion of bailouts/rescues was unnecessary.  But with government’s new authority, and new role, come a unique opportunity for ASHI members.

The government will become responsible for large numbers of houses that are in foreclosure, pre-foreclosure or some manner of mortgage distress. Some have been abandoned. It is well known that when houses become subject to mortgage distress, the care, maintenance and repair of the houses begin to suffer.  

The government, backed by the American taxpayers, will soon take control of the debt for many thousands of such houses. No one really knows the condition of these homes, and, of course, the condition affects the value of the properties that secure these debts in purchase-money mortgages. 

Further, the clear intent of Congress, Treasury and HUD is to sell the houses in a manner that will minimize the cost to the taxpayers. The government should have a goal to at least break even, or perhaps make a profit. This can happen only if the purchasing public can buy the houses with confidence they are in reasonably good condition. 

Thus, the government has a need to know the condition of the houses under federal management, and further, the government has some extra responsibility to ensure that houses it sells to the public are in reasonably good shape. 

ASHI has already made these arguments to personnel on the key housing subcommittees on Capitol Hill. In addition, ASHI has drafted language for consideration in follow-up legislation to address the liquidation phase of the housing bailout. Specifically, language establishing that the government agencies handling the liquidation must make efforts to ascertain the physical condition of the houses, both for its responsibilities as a housing owner and its different responsibilities as a seller of houses. 

The ASHI provision would require home inspections to be obtained at some point in the process.          
  
It is clear Treasury and HUD are moving at lightning speed to address the housing and credit crises — so fast, in fact, that the agencies have not worked out many of the problems or details involved in this gargantuan process. Further legislation will be required when the federal agencies and Congress move past the implementation phase of the new programs to the liquidation phase.  We expect the congressional housing subcommittees will convene early in the new 111th Congress next year and begin working on those aspects of the process.  It is possible they will meet sooner, in a lame-duck session to follow the elections. In any event, ASHI has asked the committees to consider the special responsibilities undertaken by the government, and the need to obtain home inspections, where possible, to make sure the taxpayers will hold, control and eventually sell houses whose condition is known to the general public.

ASHI continues to pursue another opportunity: to have HUD incorporate special training about home inspections in housing counseling programs under HUD authority and funding. 

ASHI members will recall that Congress introduced a bill, HR4776, in the 110th Congress that would achieve this goal.  Recent events would seem to indicate the country needs better education for homebuyers to know the details of their purchases.  Most of the focus has been on financial education, but ASHI makes the case that buyers should have full and fair knowledge of the physical condition of their homes as well. 

Treasury is also aware of the need for the better-educated homebuyer. The wave of support for better buyer education is growing, and ASHI is in a position to ride that wave of public policy development.
ASHI will continue to push for consideration of its proposal to require HUD to include specific messages, drafted by ASHI, in its training programs for HUD counselors. In our view, every HUD counselor should fully understand the benefits of home inspections and be able to explain them, persuasively, to every prospective homebuyer they influence. 

Thus, ASHI has two legislative proposals before Congress at this time. These proposals will carry forth the positive message about home inspections and cause them to be adopted by the government. In addition, the proposals would help the government’s liquidation phase by providing some safeguards regarding the condition of the properties the government would offer to the public for sale. 

When the time is right and the new Congress convenes to consider the next steps in crisis management, ASHI will be on the Hill to rally attention for these proposals and will seek grass-roots support to ensure that home inspections play a significant role in the process.