Letter: Prudent response to rise in foreclosures

Monday, Oct. 1, 2007 | 7:01 a.m.

As the gambling capital of the world, Las Vegas clearly knows about risk. When it comes to the sagging housing market and the rise in foreclosures, the greatest risk is to do nothing ("Bailing out homeowners called a bad move, especially in Vegas," Sept. 21 story).

That is why President Bush last month announced FHASecure. The plan will allow responsible homeowners - those who went into default because their interest rates suddenly reset - to refinance with a safe, affordable Federal Housing Administration-backed loan.

Despite your reporter's use of loaded terms such as "bailout" and "propping up," this is a prudent action. It is not a taxpayer bailout; FHA is self-financing. Only families with a history of on-time mortgage payments will qualify, while multiple home-owning speculators and "flippers" will not. The family must also have a good debt-to-income ratio and a stable employment history. We're promoting responsibility, not risk.

We must also modernize the FHA. Legislation to do so just passed the U.S. House of Representatives overwhelmingly. The FHA has long been an attractive alternative to more risky and complicated subprime loans. By modernizing this 74-year-old program, we will restore sanity and stability to the marketplace.

Many homeowners feel burned by subprime and exotic mortgages, especially in booming cities like Las Vegas. Nationally, applications for FHA loans are up dramatically since 2006, while home sales have fallen significantly. We have the tools to turn this around. Doing nothing is not an option - in fact, it's what got us into trouble in the first place.

Alphonso Jackson, Washington

The writer is the secretary of the U.S. Department of Housing and Urban Development.