Could Obama's Second Term Housing Policy Mean More Or Less Government?
By Gina Ragusa Credit Unions Online
President Obama’s second term in office brings numerous challenges, including the ongoing housing crisis, which continues to plague this administration.
During his first term, President Obama backed away from any aggressive strategies surrounding the housing and mortgage market due to the housing bust and subsequent downward spiral in 2009.
Hopeful that the rash of foreclosures and underwater homes might lessen; the administration introduced programs like Home Affordable Refinance Program (HARP and HARP 2.0) and Home Affordable Modification Program (HAMP), while continuing to battle with what to do about the petulant children, Freddie and Fannie.
The President has discussed eliminating Freddie Mac and Fannie Mae’s role, which has cost the country an upwards of $188 billion since 2008; but how can these mortgage giants be eliminated while the market continues to be so shaky?
"There are very important questions left unresolved regarding the future of the housing finance system," Julia Gordon, the director of housing policy at the Center for American Progress tells The Huffington Post. "The answers matter not just for the housing market but for the future of economic growth and the future of the middle class."
The October 2012 Housing ScoreCard Points to Positive Gains
The U.S. Department of Housing and Urban Development (HUD) released its October report surrounding the health and stabilization of the housing marketing, citing numerous key indicators of recovery since February 2009.
HUD authors say that the administration’s foreclosure programs are providing relief for millions of homeowners and that, “nearly 1.3 million homeowner assistance actions have taken place through the Making Home Affordable Program, while the Federal Housing Administration (FHA) has offered more than 1.5 million loss mitigation and early delinquency interventions.”
Additionally, the report finds that homeowners who have accessed HAMP are demonstrating a high likelihood of long-term success to avoid foreclosure. More than a million homeowners have tapped into a permanent HAMP modification, saving each family an average of $541 a month on mortgage payments. Approximately 86% of those who sought permanent modification through HAMP were successful.
The ScoreCard also reviewed some of the actions President Obama has taken to prop up the failing housing market including the support of Freddie Mac and Fannie Mae and the Federal Reserve and the U.S. Treasury purchasing more than $1.4 trillion in agency mortgage backed securities through independent MBS purchase programs, which has kept mortgage rates at historic lows. The question remains, has the President’s actions been enough to begin a slow exit from the housing market?
Is Government Pull Back the Answer?
Because the government was compelled to sweep in to help struggling homeowners, how will it reduce its role in the housing market--and should it?
Some market analysts say the time has come to take the plunge. “I think the housing recovery is far enough along that they can start winding down Fannie and Freddie,” Phillip L. Swagel at the University of Maryland’s School of Public Policy told The New York Times.
Other experts want to see baby steps from the administration such as reducing the maximum amount it will guarantee from Freddie Mac and Fannie Mae.
However, President Obama has a multitude of considerations such as how will the private sector react in terms of purchasing bonds once the government exits stage left, and what happens to the number of troubled mortgages still entering and moving through the pipeline?
Whatever steps are taken, credit unions are reporting strong mortgage growth under the current policies. Tobias Nergarden, Realtor and publisher of The Real Estate Market Insider commented that credit unions are “benefiting from the healing market for mortgages; he believes that this news is great for home buyers, as it increases their options for home financing and will lead to more competitive lending among banks.”
He says that he sees “An increase in awareness of mortgage availability is being touted as one reason for increased membership, even though many credit unions still aren’t using mortgage loans as a major advertising point.”
Nergarden cites one Florida credit union that has made over $1 billion in mortgage loans in 2010, and appears to be on track to lend nearly the same amount by the end of this year. “The CEO of the credit union said that the surge in demand was due to low interest rates and a carefully-maintained reputation. Many of the union’s new members evidently came to the firm via word-of-mouth.”
Whether you are underwater in your home or looking to purchase; find a credit union and inquire about their mortgage loan programs today.