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 less endorsed.

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 without equity;
• Future of the homeowner mortgage interest deduction.
• 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 information.

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:  

• Gradually 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 years.
• Reduce conforming loan limits to reduce the presence the GSEs in the non-entry level portion of the market.
• Wind down the investment portfolios of the GSEs at an annual rate of no less than 10 percent per year.
• As 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.

The 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.

The Administration 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 institutions."

"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.

Obama 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 property."

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 program further." 

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 we can.

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 Act.
• 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 creditworthy borrowers. 

"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

The 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 a change.

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.

Romney on Refinancing

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 communities. 

• We need to reform and strengthen FHA by considering options such as lowering the maximum loan-to-value ratios and adjusting pricing.
• Rebalancing housing 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 demographic characteristics;
• Developing a 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 years.

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 income borrowers.

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.