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Watt: Credit markets will remain tight

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Consumer credit could remain tight for another 20 years, Congressman Mel Watt told a group of realtors Wednesday.

That means people looking to buy homes or start new businesses -- especially those with less-than-perfect credit -- would have a tougher time borrowing money.

“It will be a long time before we get back to the credit standards we had two or three years ago,” Watt told members of the Charlotte Regional Realtor Association.

Watt, a member of Congress since 1993, is part of a congressional committee working on a final bill to overhaul the nation’s financial markets. He said “mammoth issues” remain between House and Senate versions. Still, Democratic leaders say they would like to present a final bill to President Obama before Congress breaks for its July 4 recess.

At the Wednesday event, held in a conference room at Friendship Missionary Baptist Church, realtors said the local market has improved but remains spotty. With residential foreclosures still mounting, some said, banks are still reluctant to write housing loans.

Watt offered little encouragement for a quick turnaround. He told the group it could take 20 years or more before lenders feel comfortable writing loans again.

As part of the financial reform package, some lawmakers favor a provision that would require banks to retain on their books 5 percent of the loans they write. While such a provision may discourage banks from writing bad loans, Watt said, the negative effect is that banks also would have less money to lend.

Watt said that Congress, in its effort to prevent future abuses, may now be overreacting in some areas. But until lenders and consumers feel confident again, he said, “we can’t right this (economic) ship.”

Consumer Protection Needed

Among the issues most important to his constituents, Watt said, is the creation of the Consumer Financial Protection Agency, which would safeguard the rights of financial consumers.

“The industry lost sight of its responsibility to the public and was focused solely on making money,” he said, recalling some of the issues that led to the near-collapse of the banking industry in 2008.

Watt said voters are now demanding that someone in government look out for the interests of consumers, who lost about $17.5 trillion in wealth when the real estate and financial sectors crashed.

For African Americans, who tend to keep a higher percentage of their wealth locked up in their homes, the economic collapse was devastating, Watt said. By some measure, he said, black families lost an estimated 40 percent of their household wealth.

The House version of the reform package would direct federal regulatory agencies to hire more minorities. Watt said he believes the provision has a good chance of making it into the final bill.

“Let’s put someone in the room who can talk about some of our interests, because right now it’s not happening,” he told Qcitymetro.com in a later interview.

No Estate Tax Repeal

During a Q&A session, the realtors peppered Watt on a host of issues, including whether lawmakers should repeal the federal estate tax, which affects about 1 percent of the nation’s wealthiest individuals.

Watt said an estate tax repeal was improbable.

“The effect of that would be to freeze in place wealth,” he said. “The people who are wealthy would always be wealthy, and some of those people did not get to be wealthy on a level playing field with some other people.”

One realtor complained that banks are unwilling to restructure mortgage loans for homeowners struggling to make payments, choosing instead to foreclose. Watt agreed. He said he once pushed unsuccessfully to amend bankruptcy laws so that homeowners could discharge their mortgage debts, as a last resort, in court. He said the threat of a bankruptcy filing would push more lenders to work with homeowners holding delinquent mortgages.

Burley Bardney, a broker with Wilkinson & Associates, said she liked what she heard from Watt but wants the government to offer more financial incentives to spur home buying. She said she especially wants Congress to extend a recently expired tax credit.

The credit -- $8,000 for first-time buyers and $6,500 for repeat buyers-- expired April 30.

“People can’t buy houses without money,” Bardney said.

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October 7, 2015
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