Romney vs. Obama: An Overview of the Candidates Housing Views
Even while housing is repeatedly cited as a leading cause of the Great
Recession and as a significant key to a full recovery the candidates for
President of the United States have had little to say on the subject. While President
Barack Obama has been heavily involved in housing issues for almost four years
and it is fairly easy to derive and document what we can assume will be his
policy over the next four years the same is obviously not true for the
challenger. Mitt Romney finally released a "White Paper" on his housing policy
last Friday but it merely paralleled and slightly expanded some information
that has been on his website for months.
We have attempted to summarize both candidates approach to housing from a
variety of sources. For the President we
have relied largely on an administration report to Congress on housing reform
with a little additional information from pending legislation and the
Democratic Party Platform. For Governor
Romney we have cobbled together information from his White Paper and housing
policy statement on the website, augmented by snippets from speeches, and the
housing plank of the Republican Party Platform which he appears to have more or
We looked for the positions of each man on seven policy points:
Reform of the housing finance market and the
ultimate resolution of the Fannie Mae and Freddie Mac conservatorships;
Ending the foreclosure crisis with the
associated problems of disposition of bank-owned properties (REO) and dealing
with the remaining toxic mortgages.
The future of Dodd-Frank
Efforts to insure there is no repeat of the
recent housing crisis;
Refinancing for borrowers; both those with and
Future of the homeowner mortgage interest
Affordable housing and encouraging homeownership
There is significant overlap in some of these policy points. We have tried to put policy positions where
they were most relevant and to indicate the source from which we obtained the
Obama on Reform of the Mortgage Markets and the GSEs
On February 11, 2011 the Obama
Administration presented a report to Congress on its plan to wind down the GSEs
and encourage the return of private capital to the mortgage markets. In summary, the plan is to:
introduce increased pricing at the GSEs to make room for private capital and
put the GSEs on a level equal to the private market over the next several
conforming loan limits to reduce the presence the GSEs in the non-entry level
portion of the market.
down the investment portfolios of the GSEs at an annual rate of no less than 10
percent per year.
the GSEs' presence in the market shrinks there will be program changes at FHA
to ensure that the private sector rather than FHA picks up their market share.
These changes will include an increase in FHA conforming loan limits.
Administration is currently working on rules to require originators and
securitizers to keep greater "skin in the game" and to align incentives across
the securitization chain. Dodd-Frank charged the SEC with setting
stricter disclosure requirements so that investors can more easily understand
the underlying risks of securities, and establishing an Office of Credit
Ratings to more effectively regulate the credit rating agencies.
supports stronger capital standards to help ensure that banks can better
withstand future downturns, declines in home prices and other sudden shocks,
without jeopardizing the health of the economy. Additionally, the
comprehensive reforms undertaken pursuant to the Dodd-Frank Act to constrain
excessive risk in the financial system, including strengthened and coordinated
oversight through the Financial Stability Oversight Council (FSOC), will help
build a healthier and more stable mortgage market for the long term.
Romney on Reform
of the Mortgage Markets and the GSEs
Website: Any serious plan for ending the housing crisis must
address its root cause. Two government-sponsored companies known as
Fannie Mae and Freddie Mac were at the center of the housing crisis. Mitt
Romney will reform these government-sponsored companies to protect taxpayers
from additional risk in the future by ensuring taxpayer dollars in the housing
market are replaced with private dollars.
White Paper from September 21: "End "Too-Big-To-Fail" and Reform Fannie Mae and
Freddie Mac: A Romney-Ryan
Administration will protect taxpayers from additional risk in the future by
reforming Fannie Mae and Freddie Mac and provide a long-term, sustainable
solution for the future of housing finance reform in our country.
"We have now passed the four-year anniversary of the
government takeover of Fannie Mae and Freddie Mac, and the Obama Administration
has failed to come up with anything more than noncommittal options to reform these
"The end result of the last four years is that the
federal government now has a dominant role in our nation's $16 trillion housing
market, the private sector has been forced to the sidelines, taxpayers are on
the hook for even more than when the financial crisis ended, and there is no
clear plan for the future of housing."
Republican Party Platform: Fannie Mae and Freddie
Mac were a primary cause of the housing crisis because their implicit
government guarantee allowed them to avoid market discipline and make risky
investments. Their favored political status enriched their politically
connected executives and their shareholders at the expense of the nation. Both
Fannie Mae and Freddie Mac should be wound down in size and scope, and their
officials should be held to account.
on Ending the Current Housing Crisis
The Obama Administration initiated two
major programs in response to the crisis (Home Affordable Modification Program
(HAMP), Home Affordable Refinancing Program (HARP) and several smaller bore
programs such as the UP program for unemployed, the Hardest Hit program for
communities with high levels of foreclosures.
Obama has also submitted requests to Congress to expand the HARP program
to all borrowers not just those with Freddie and Fannie loans. The Department of Housing and Urban
Development has recently initiated a pilot program to bulk sell several
thousand foreclosed homes with the requirement that purchasing investors
maintain the homes as rentals for a period of time.
From the Obama February 2011 Report to
Congress: The Administration supports several
immediate and near-term reforms to correct problems in mortgage servicing and
foreclosure processing to better serve both homeowners and investors.
These include putting in place national standards for mortgage servicing;
reforming servicing compensation to introduce proper incentives to invest the
time and effort necessary to work with borrowers to avoid default or
foreclosure; requiring that mortgage documents disclose the presence of second
liens, define processes for modifying them when a first lien becomes
delinquent; and considering options to restrict adding debt secured by the same
Romney on Ending the Current Housing Crisis
One can infer that Romney would end some of the programs in this area that currently exist. In the White Paper he says of HAMP, HARP,
2MP, H2H and EHLP, "These programs have been poorly
administered with constantly changing terms and overstated goals that have
never been met. In the case of one
program, when the goals were not being met the Administration's solution was to
expand it, creating 'HARP 2.0'. In his
State of the Union Address this year...the President proposed expanding the
It is unclear whether Romney still supports a statement he made in Las Vegas
in October 2011:
"As to what to do for the housing industry
specifically and are their 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. Allow investors to buy homes, put renters in them, fix the homes up and
let it turn around and come back up. The Obama administration has slow walked
the foreclosure process [inaudible] that has long existed and as a result we
still have a foreclosure overhang." [Las Vegas Review-Journal]
Website: Under President Obama, home prices have fallen,
homeowners have received more than 8.5 million foreclosure notices, and 11
million Americans owe more on their mortgages than their homes are worth.
President Obama's only plan to address the housing crisis was the same plan he
used to try to fix the economy: spend more taxpayer money on big-government
programs. To address the housing crisis, President Obama rolled out an
alphabet soup of more than ten housing finance programs rather than offering a
real solution. Meanwhile, credit-worthy borrowers are struggling to get a
loan as a result of the uncertainty caused by the President's policies.
White Paper: "Vacant properties reduce the
property values of neighboring homes and contribute to neighborhood
blight. Many foreclosed homes are clustered
in low-and middle-income neighborhoods, and the more than 200,000 properties
owned by the federal government represent more than half of all vacant,
foreclosed properties in the United States. The Romney-Ryan plan will get the
federal government out of the landlord business by responsibly selling 200,000+
vacant foreclosed homes in a way that will enhance communities rather than
contribute to neighborhood blight. Returning
these homes to private hands and renting them out will benefit millions of
neighboring homes and reward the taxpayer, including via reduced police costs.
"A Romney-Ryan Administration
will make it easier for homeowners to get alternatives to foreclosure, such as
short sales, deed-in-lieu-of-foreclosure and shared appreciation."
Obama on Efforts to Insure no Repeat of the Housing Crisis
In the case of both candidates this area gets conflated with reforming
Freddie Mac and Fannie Mae and other issues but we have sorted them out as best
Report to Congress:
Requirements for larger down payments
will be phased in so that any mortgage qualifying for a GSE guarantee will have
at least a 10 percent down payment.
Fundamental flaws in the mortgage market
will be remedied starting with those in the Dodd-Frank and Consumer Protection
Continued implementation of Dodd-Frank's
consumer protection reforms including anti-predatory lending protections,
improved underwriting standards, verification of ability to pay, and increased
mortgage disclosures for consumers.
Stronger capital standards to ensure
banks can better withstand future downturns, price declines and other sudden
shocks without jeopardizing the economy.
Increased accountability and transparency
in the securitization projects including rules for skin in the game and aligned
incentives across the securitization chain.
Romney on Efforts to Insure no Repeat of the Housing Crisis
Website: "Since the housing crisis, the government has produced more than
8,000 pages of new rules and regulations. The problem is that they are
poorly designed, and have made it harder for people with good credit to get
loans. Mitt Romney will put in place smarter regulations to restore a
functioning marketplace that holds banks accountable and restart lending to
"Any serious plan for ending
the housing crisis must address its root cause. Two government-sponsored
companies known as Fannie Mae and Freddie Mac were at the center of the housing
crisis. Mitt Romney will reform these government-sponsored companies to
protect taxpayers from additional risk in the future by ensuring taxpayer
dollars in the housing market are replaced"
"We believe that when a family can no longer be
tricked into signing a mortgage they can't afford, that family is protected,
but so is the value of other people's homes, and so is the entire economy."
White Paper: (The Dodd-Frank) regulations
are not without costs and the burden falls disproportionately on smaller banks
that don't have the same level of resources as larger banks that don't have the
same level of resources as large banks.
The consequence is that they are forced to use more of their resources
hiring lawyers rather than lending to consumers and small businesses or
approving new mortgages.
"More than two years since the
passage of Dodd-Frank, regulators still haven't been able to define what the
characteristics of these 'qualified mortgages' should be, and the lack of
certainty has paralyzed lenders. The end
result is that credit-worthy borrowers are being rejected when they apply for a
mortgage, and the housing recovery is being further delayed."
Obama and Romney on the Future of the Homeowner Mortgage Interest Deduction
President Obama stated clearly during his acceptance speech last week in
Charlotte that he would not touch the mortgage tax deduction for middle-class
families while leaving open the subject for higher wage earners who would more
readily be affected if the deduction were limited, as some have suggested, to
the first $500,000 of the outstanding mortgage balance.
It is more difficult to determine what Romney's stance is on this
deduction. Under his budget proposal he
talks about lowering tax rates across the board while at the same time
eliminating many of the deductions now available for both individuals and businesses. Many analysts who have looked at his budget
proposal have concluded that the mortgage deduction would be among those that
would have to be eliminated.
Obama Regarding Dodd-Frank
President signed Dodd-Frank into law and has strongly endorsed it and the
Consumer Financial Protection Bureau it created.
Romney Regarding Dodd-Frank
Romney has made repeal of Dodd-Frank a
keystone of his campaign but lately his message has softened. His staff has told reporters on background
that they think Dodd-Frank's implementation is too far along for repeal and
many of Romney's Wall Street donors aren't totally unhappy with the bill. In recent weeks he has said "some of the
concepts" in the legislation 'have a place.'"
He still campaigns on repealing the law but says as president, he would
work to replace it with a mostly unspecified but "streamlined regulatory
framework." Bloomberg recently said "Romney's comments (regarding Dodd-Frank)
don't rule out an option less than full appeal."
Obama on Refinancing
Obama has asked Congress to extend the
HARP 2.0 program to homeowners who do not currently have loans owned or
guaranteed by Fannie Mae or Freddie Mac.
An estimated 11 million homeowners would be able to refinance under such
Democratic Platform: Too many people still owe more on their homes than they are worth.
That is why Democrats are fighting to give every responsible homeowner the
chance to refinance their home, spurring investment in communities that have
been hit hardest by foreclosure, and taking whatever steps we can to avoid more
foreclosures. The President remains committed to creating an economy that's
built to last, where home ownership is an achievable dream for all Americans.
It is a little hard to determine Romney's stance on refinancing. As seen above, he has been critical of HARP,
but its expansion late last year was based in part on a plan by Romney's
economic advisor Glenn Hubbard. Around
that time Romney said, "I think the idea of helping
people refinance homes to stay in them is one that's worth further
consideration but I'm not signing on until I find out who's going to pay and
who's going to get bailed out and that's not something which we know all the
answers to yet." In an interview with Larry Kudlow in January,
right after Obama announced an expansion of the program Romney seemed to be in
favor of HARP as long as it was limited to GSE loans, the version of HARP put
forth by Hubbard.
Obama on Encouraging Homeownership
and Affordable Housing
Report to Congress: We should make sure opportunities are available
for all Americans who have the credit history, financial capacity and desire to
own a home have the opportunity to take that step but should also ensure that
there are a range of affordable options for the millions of Americans who rent whether
by choice or necessity. We must design
access and affordability policies that are better targeted and focused on
providing support that is financial sustainable for families and
We need to reform
and strengthen FHA by considering options such as lowering the maximum
loan-to-value ratios and adjusting pricing.
policy to provide additional support for rental housing,
Ensuring capital is
available to credit-worthy borrowers in all communities through greater
transparency in the secondary market regarding credit, geographic and
dedicated funding source for targeted access and affordability initiatives
Romney on Encouraging Homeownership and Affordable Housing
White Paper: "The best way to help the housing market is to get
the economy going and get America back to work.
The Romney-Ryan jobs plan will crease 12 million jobs in the next four
Platform: Homeownership is best fostered by a growing economy
with low interest rates, as well as prudent regulation, financial education,
and targeted assistance to responsible borrowers.
The FHA, tripled in
size to more than $1 trillion under the current Administration, has crowded out
the private sector and is at risk of requiring a taxpayer bailout. It must be
downsized and limited to helping first-time homebuyers and low- and moderate
The federal government
has a role in housing by enforcing non-discrimination laws and assisting low
income families and the elderly with safe and adequate shelter, especially
through the use of housing vouchers. Homeownership
is an important goal, but public policy must be balanced to reflect the needs
of Americans who choose to rent. A
comprehensive housing policy should address the demand for apartments and
multi-family housing. Any assistance
should be subject to stringent oversight to ensure that funds are spent wisely.