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Source of Title Blog

Obama vs. Romney: Who holds the edge on housing policy?
by Robert Franco | 2012/07/17 |

We are all in the housing industry - to some extent, our future is dependent on a strong and stable housing market.  I saw an article indicating that Realtors favor Mitt Romney in the upcoming election and I began to wonder what plans each candidate had for restoring our housing market.  So, while I have done some research to see what has been reported on each candidates' position on housing, I am curious to know what you think.  Based solely on their expressed views of the housing market, and leaving general partisan sentiments aside, who do you favor and why?

Source of Title Blog ::

In searching for their positions on housing, it became evident that much of the information I was finding was not coming from the candidate, but their opponent. I guess you have to take everything you read with a grain of salt, and try to filter out the author's personal feelings and political agenda.

I did find one recent article by Patrick Duffy, a self-proclaimed "political Independent" with "no abiding loyalty to either party."  He wrote The 2012 Presidential Candidates on Housing Policy: Barack Obama versus GOP presumptive nominee Mitt Romney on housing policies.

Here is his take on Mitt Romney's housing position:

For Mitt Romney, while there is nothing on his campaign website which specifically addresses housing, he seems to rely more on the private market to sort things out.  According to Glenn Hubbard, and economic adviser to Romney, the domination of housing finance by government entities such as the FHA, Freddie Mac and Fannie Mae is simply not sustainable and must be phased out in favor of private lenders.

At a recent campaign event in Florida, Romney also reportedly mused about getting rid of agencies such as the Department of Housing and Urban Development (HUD) as part of his plans to simplify the federal government.  As for foreclosures, he prefers to let the free market let prices hit 'rock bottom' as opposed to government policies which would seek to make such declines more orderly.

And, his take on President Obama's position:

President Obama, on the other hand, seems to believe that continued intervention by the federal government - at least in the short to medium run - is essential to providing adequate mortgage capital and even to help underwater borrowers refinance, with restrictions, to today's historically low rates.  He probably doesn't have much choice: given that his previous attempts to bolster the housing market haven't worked at even close to the scale that is necessary - with less than 20 percent of homeowners eligible for loan modifications - if government intervention is to work at all, the policies must be more aggressive.

More recently, Obama seems to have absorbed this criticism, unveiling more than a half dozen plans to encourage refinancing, to reduce the overhang of debts owed by underwater homeowners, and to expand existing aid programs even to borrowers who were speculators or simply took on too much debt.  These latest moves seem as much practical as they are political, since the previous obsession with refusing to help those who made financial mistakes has really acted as a structural break on the economic rebound.

Interestingly, my first stop in my research was Mitt Romney's official Web site.  I wanted to see what his housing policy was all about to better understand why Realtors seemed to prefer him over the President.  I noticed the same thing Duffy pointed out - there was nothing there specifically addressing housing policy.  I really thought that was strange, given the prominence of the "mortgage meltdown" and the "housing crisis" over the past few years.

However, my second destination took me to President Obama's official Web site, and there was nothing there specifically devoted to housing policy issues.

It appears that neither candidate really wants to highlight their plans to improve our housing situation.  It makes you really wonder what we may be in store for... regardless of the outcome of the election.

A specific Google search for "housing" on each candidates' site confirms that it is a hot issue.  On Romney's site, "housing" comes up several times, mostly criticizing the President's handling of the housing crisis.  There is not much about his plans to fix it.  On Obama's site, there are several digs on Romney for thinking "he can fix housing by doing nothing," and several press releases about what he has done to assist struggling homeowners.  Still not much about his plans for the future with regard to housing.

CNN reported that Romney said he "would eliminate or limit for high-earners the mortgage interest deduction for second homes, and likely would do the same for the state income tax deduction and state property tax deduction."   That seems contrary the National Association of Realtors position favoring the mortgage interest deduction.

Romney, as reported by Fox News, also said "As to what to do for the housing industry specifically and are there things that you can do to encourage housing: One is, don't try to stop the foreclosure process. Let it run its course and hit the bottom." 

President Obama, on the other hand, has continued to expand foreclosure prevention programs, according to CNNObama has stated that "It is wrong for anyone to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit rock bottom. I refuse to accept that and so do the American people." He also outlined what he called a "Homeowners Bill of Rights," or, "one straightforward set of commonsense rules of the road that every family knows they can count on when they're shopping for a mortgage."

So, there you have it.  In a nutshell, Romney advocates for letting the private market take its course and get government out of the way.  But, can we afford to see what "rock bottom" looks like?

Obama advocates for an expansion of government involvement  to help people stay in their homes.  But, can we afford to continue to spend money on programs that have not produced the improvement we expected?

Let me know what you think - what kind of housing policy do we need and who is the best candidate to deliver it?  Please try to keep liberal vs. conservative rhetoric to a minimum.  Just give you your view on housing policy, and which candidate so far has best convinced you that they have an understanding of our current situation. 




Rating: 

Categories: Foreclosures, General Interest, Mortgage Industry, Opportunities

1512 words | 3082 views | 6 comments | log in or register to post a comment


Looking for Wizardry!

Slade,

I think one needs to define what success would be at this stage.

The housing market is in an absolutely terrible predicament. You have to call a spade a spade and stop the cheer-leading hoping the tide will magically turn.

From the CFPB proposed rule issued July 9th, 2012, this metric was revealed:

Approximately 5.8 million homeowners were somewhere between 30 days late on their mortgage and in the foreclosure process as of April 2012.

Today's (06-01-12) new housing numbers are running at a seasonally adjusted annual rate of 760,000 according to the Commerce Department.

Here's a table in Excel format which has the monthly numbers from January 1st, 1959 to June 1st, 2012. (Source St. Louis FED in thousands)  Housing - 1959 through 06-2012

If you scroll down through the data you'll notice that numbers below 1 million units are fairly rare until you hit July, 2008. And it has been below the 1 million mark since which indicates how severe this problem is!

The average housing numbers are 1,470,890 units per annum for all data including the most recent recession years. Excluding the 2008-2012 data the annual average is 1,544,314 units. Therefore, the recession has trimmed the averages down by almost 5%!

The numbers for the decades of 1980 and 1990 average 1,441,151 for those twenty years.

So with June's numbers we're at approximately 50% of the pre-recession levels averaging 1,544,314 units.

The efficacy of using the annual new start average rates into the 5.8 million homeowners in or near default as a dampener on new starts certainly has merit. But I don't think anyone knows the extent to which this is throttling back new construction.

Simply taking 5.8 million homes that may be on the market by the average historical rate you get 3.8 years of possible inventory. If you look at today's number of 760k then you get 7.6 years of possible inventory.

I realize this is not factoring in standard inventories, existing home sales and other market conditions and I'm using these numbers for more outside reference in giving some consideration to housing policy.

I believe the problem is prolonged and aggravated in continuing to prop values with the Fed purchasing  underwater mortgage instruments and holding them in the belief that value will reemerge. This goes for our continued subsidies to Fannie and Freddie.

Housing values and equities have been eviscerated! In our area condominiums which were selling at almost $300,000.00 are now selling for less than $70,000.00. What formulas or methods can be conceived which would reinflate the $70,000.00 back to $300,000.00? I don't believe there are any! Except time, but one only has to look at the Japanese data and wonder "how much time"?

Banks are holding off on foreclosures for fear of further depressing the market and creating an even greater collapse. This is well understood but in doing this the market can't clear.

I don't believe any of the candidates have any solution to this problem because, if they did, they would already be putting such in place and we would be enjoying the results. If Bernanke and his crew of Fed algebraic munchkins could equate us to a better economy I think they would have already done so!

I don't think either candidate will propose a "mark-to-market" formula which would allow housing to bottom and I don't think either candidate is voicing any opposition to near 0% interest rates for the solvency of the banking class.

In other words, I think it would be refreshing to hear them proclaim they really "don't" have a plan because this is a vexing problem which eludes our greatest brainpower. It is not to stop searching for the correct policy but to admit that one has not been formulated which has any degree of certainty!

 

 
by Wyatt Bell | 2012/07/18 | log in or register to post a reply

Well, I hope you are wrong...

You make some good observations, but I hope that you are wrong about their not being a solution to our crisis.  I don't think the broader economy is going to fair very well, as long as housing prices continue to drop and we see more and more foreclosures.  That is a bad combination that will cause losses for many of us.

By the way, Slade didn't write this one.  I did.  Slade's blog can be found here, but he is on vacation for a while longer so he won't be posting anything new.

Best,
Robert A. Franco
SOURCE OF TITLE

 
by Robert Franco | 2012/07/18 | log in or register to post a reply

My Sloppiness!

 Robert,

I apologize - I didn't catch Slade at the top which should have been "Robert".

I'm on my toes from now on!

 

 
by Wyatt Bell | 2012/07/18 | log in or register to post a reply

No problem....

Slade has written more of Source of Title than I have lately, so it is understandable.  I just thought I should make the correction so Slade didn't get blamed for something I wrote.  He may not agree with me and while he's out on vacation he's not available to jump in. 

 

 
by Robert Franco | 2012/07/18 | log in or register to post a reply

Like Asking Me To Answer A Math Problem Without Using Arithmetic

 

I think everyone here knows where I stand on this one.  We’ve tried it the government’s way.  Think I’d rather take my chances with the market.  Yes, people are going to get hurt, (been there myself, and it’s not the end of the world), but sometimes nothing is the best thing TO do.  It just seems like the more the feds get involved in the process, the worse things get.  I think it’s time to try something different.

Just my 2¢...

Regards,
Scott Perry

 
by Scott Perry | 2012/07/19 | log in or register to post a reply

New Home Sales Drop

Today's (07/25/12) New Home Sales number was down to its lowest level in 5 months. With the fireworks of the past couple of days regarding home price increases according to Zillow we're still  sputtering and misfiring as we've been doing in housing over the past 4 years.


One argument which I think would add to the general down-slope had we not experienced the colossal housing bubble and bust is that demographics are changing as we tilt towards an aging population.

I think it's probably true that you need young forming families to provide an uptick to housing. Older Americans are mostly downsizing or settling into the homes to which they have previously moved-up or they are downsizing into already existing housing.

But today's numbers will certainly keep pressure on new housing starts and thus we won't see housing lead us out of this very, very sluggish economy as housing has done in past recessions.

I think we need to reexamine this policy that keeping big banks afloat, including Freddie and Fannie, somehow keeps us all afloat. It's just plain bad logic and it's the stuff of past empirical failures. Jared Diamond in his book "Collapse, How Societies Choose to Fail or Succeed" points to this clinging and preservation of the past which begins by a short term focus on the established elites as being necessary to the society as a whole but which turns out to be a terrible pathway for the society  - even to the extent that some societies collapse!

I certainly don't think the US is headed for its demise but one has to ponder how a firm such as J.P Morgan can play the casino and parley a loss last reported at 7 billion while the true value of housing and its financial instruments remain undetermined and on taxpayer support. These guys pushed their failing housing loan instruments off on the Fed and Freddie and Fannie to which we all bear the cost while these big financial institutions continue to enjoy 0% interest rates and the casino royale!

It would seem to me that any housing policy has to be based on real value and price discovery. As long as there are government props and supports, which can fail, no one can reasonably conclude that housing values will not further deteriorate. This, in turn, feeds into the negative feed-back loop as people are cautious to the extent of shunning housing investments. If you pull out these supports and let housing fall where it may then decisions and evaluations can be made absent this government underpinning which will probably fail in the long term!

I think we need to break up these gargantuan banks and clear the rubble as we did with the Resolution Trust Corporation. We may have a few tough years but it's better than decades of deteriorating conditions as we've seen in Japan.
 
by Wyatt Bell | 2012/07/25 | log in or register to post a reply
Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco
SOURCE OF TITLE

 

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