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SECURING THE AMERICAN DREAM AND THE FUTURE OF HOUSING POLICY
September 21, 2012
M I T T R O M N E Y.C O M
Securing The American Dream And The Future Of Housing Policy
EXECUTIVE SUMMARY The Romney-Ryan Plan To End The Housing Crisis The Romney-Ryan plan will reduce the outsized role of the government and revitalize the private sector’s role in the housing market to end the housing crisis and preserve the American Dream of homeownership. 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. Responsibly Sell The 200,000 Vacant Foreclosed Homes Owned By The Government: 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. This will eliminate over half of the foreclosed homes that are blighting neighborhoods. Make Foreclosure Alternatives Easier: 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. Sensible, Not Overly Complex, Financial Regulation That Gets Credit Flowing Again: By replacing the Dodd-Frank Act with sensible regulation, a Romney-Ryan Administration will usher in a new era of responsible lending with sensible regulation to allow banks to approve loans to families with good credit rather than rejecting their mortgage applications. Improve The Job Market: 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 create 12 million jobs in the next four years.
The Current State of the Housing Market
The financial crisis has taken an immense toll on the economy, and the impact has been devastating for millions of American families. Since 2009, 8.5 million foreclosure notices have been sent to American homeowners, the average home has lost $13,000 in value, and eleven million borrowers are “underwater,” owing more on their mortgages than their homes are now worth. Although there have been some recent signs of life in the housing market, our economy remains stuck in neutral with 23 million Americans struggling to find work, persistently high unemployment that has stayed above 8% for a record 43 consecutive months, and real household incomes falling more than $4,000 over the past four years. The weakness of the recovery has left many in America struggling to make ends meet, pay their bills, or stay current on their mortgage payments. Over 3 million households are currently in the foreclosure process or seriously delinquent on their mortgage.1 While the national figures tell a story of a housing market that is starting to improve, it masks the hardship that continues to be experienced locally. The impact of the housing crisis has been severe in some particularly hard-hit areas. In Florida, for example, 14% of all mortgages are in foreclosure, representing 1 out of 4 foreclosures in the US.2 In Nevada, the situation is similarly dire, with 6% of mortgages in foreclosure and another 6% seriously delinquent (90+ days late). Not only are 60% of Nevada’s homes underwater but Nevada, as a state, is underwater, as the amount owed on Nevadan mortgages is greater than the value of all Nevadan homes with a mortgage.3 Despite an alphabet soup of federal housing assistance programs and an unprecedented period of record low mortgage rates, the current “recovery” means that housing’s contribution to GDP is only half of what it has been historically.4
Mortgage Bankers Association, “National Delinquency Survey 2Q 2012,” 8/9/12 Ibid. 3 CoreLogic, “Corelogic Reports Negative Equity Decreases in First Quarter of 2012,” Press Release, 7/12/12 4 National Association of Homebuilders website, www.nahb.org, Accessed 9/20/12
Unfortunately, the failed policies of the Obama Administration have put the dream of homeownership needlessly out of reach. In many cases, the President’s policies have made things worse.
“The politicians should have realized that when you interfere with the market — as they did with Fannie Mae, Freddie Mac, and with their homeownership initiatives — bad things can happen.” - Mitt Romney
President Obama’s Failure: Uncertain Responses And A Bigger Government Role
Over the past four years, the Obama Administration has never offered a clear vision for the future of housing finance policy. At best, the President’s policy response to the housing crisis can be described as confused and reactive. Early in his term, the President stated, according to Washington Post reporter Bob Woodward that “[w]e will not roll out an aggressive housing plan,” and it was not included in his 2009 stimulus. After the President reversed course and did roll out a housing plan, what followed was a series of confusing new government programs with names like 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 — nearly three years after the program was first launched — the President proposed expanding the program further. While Wall Street needs effective regulation, the President’s solution was the DoddFrank Act. The 2,319 page law has produced more than 9,000 pages of new regulations to date, and regulators are only one-third of the way done.5 These regulations are not without costs and the burden falls disproportionately on smaller 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. In one new mortgage rule, 1,100 pages of guidelines were issued by regulators for the purpose of
American Bankers Association, “Dodd-Frank Tracker,” www.aba.com, 9/20/12
developing a simplified three-page mortgage form. This regulatory burden is significant enough that there are even some cases where small banks have more compliance officers than loan officers. As an example of the type of burden Dodd-Frank has imposed, regulators are required to write new rules for mortgage originations to ensure borrowers have a reasonable chance of repaying their mortgages. If banks fail to meet these standards when approving a mortgage, they would be subjected to fines and other legal liabilities. 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. Perhaps the greatest failure in housing policy is the failure of this Administration to reform two of the greatest contributors to the financial crisis. The President has boasted that Dodd-Frank ended “too-big-to-fail” institutions, yet the legislation did nothing to reform Fannie Mae and Freddie Mac, whose bailouts currently represent the biggest taxpayer losses of the financial crisis at more than $140 billion.6 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 consequence of the Obama Administration’s policy response has been an unprecedented intervention in the housing market by the federal government. GovernmentSponsored Enterprises (GSEs) like Fannie Mae and Freddie Mac, and government agencies like the Federal Housing Administration (FHA) now guarantee 90 percent of all new home loans.7 The failed economic policies of the Obama Administration recently led the Federal Reserve to announce a new program where they will purchase more than half of all mortgage-backed security products issued each month by the GSEs. The end result of the last four years is that the federal government now has a dominant role in our nation’s $16 trillion8 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 finance.
ProPublica, Bailout Tracker website, www.propublica.org, Accessed 9/20/12 Stephanie Dhue, “Will Stable Home Prices Make Investors Buy Mortgage Securities,” CNBC, 7/12/12 8 Housing Finance Information Network website, www.hofinet.org, Accessed 9/20/12
The Romney-Ryan Plan: Clear Rules And Revitalizing The Role Of The Private Sector
The Romney-Ryan Plan To End The Housing Crisis Housing is a vital part of the American economy and it has played an instrumental role in leading the country out of past recessions. The Romney-Ryan plan will reduce the outsized role of the government and revitalize the private sector’s role in the housing market to end the housing crisis and preserve the American Dream of homeownership. Reducing The Role Of Government End “Too-Big-To-Fail” And Reform Fannie Mae And Freddie Mac: The Romney-Ryan plan will completely end “too-big-to-fail” by reforming the GSEs. The four years since taxpayers took over Fannie Mae and Freddie Mac, spending $140 billion in the process, is too long to wait for reform. Rather than just talk about reform, 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.
“Nearly three and a half years after the GSEs entered conservatorship, policymakers have reached no consensus about the future structure of the GSEs and the role the government should play in the mortgage market. Private capital might be reluctant to enter the market until the future parameters of government support are resolved. Collectively, these uncertainties about the future are likely contributing significantly to the tight lending standards in the mortgage market today.” -- Federal Reserve Governor Elizabeth Duke
Responsibly Sell The 200,000 Vacant Foreclosed Homes Owned By The Government: 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 over 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 these vacant foreclosed homes, and doing it in a way that will enhance communities rather than contribute to neighborhood blight. The nonpartisan Government Accountability Office has stated that vacant properties may reduce prices of nearby homes by $8,600 to $17,000 per property, money that will return to area homeowners under the Romney-Ryan plan.9 The benefits extend beyond raising property values, as vacant homes often attract vagrants and criminal activity. 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. Revitalize The Role Of The Private Sector In The Housing Market Make Foreclosure Alternatives Easier: Foot-dragging by the Obama Administration has made it harder for homeowners to get alternatives to foreclosure, such as short sales, deed-in-lieu-offoreclosure and shared appreciation. A Romney-Ryan Administration will bring clarity in this area, reduce the inventory of foreclosed homes that is clogging the market, and more importantly, spare thousands of families from going through the foreclosure process. Sensible, Not Overly Complex, Financial Regulation That Gets Credit Flowing Again: By replacing the Dodd-Frank Act with sensible regulation (instead of the 9,000+ pages, and counting, of new rules for financial institutions), a Romney-Ryan Administration will usher in a new era of responsible lending. Sensible regulation will allow banks to approve loans to families with good credit rather than rejecting their mortgage applications. A return to more normal lending standards would produce an estimated 640,000 more home sales and 320,000 jobs next year.10 A Romney-Ryan Administration will ensure that clear rules of the road exist for lenders to follow and eliminate the regulatory uncertainty that is paralyzing lenders. Improve The Job Market: 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 create 12 million jobs in the next four years. Families will benefit from fairer, flatter taxes, sensible regulation, the opening of new markets for American goods and investment in our vast energy resources.
Paid for by Romney for President, Inc. www.MittRomney.com
“Vacant Properties,” GAO, 11/201 National Association Of Realtors website, www.realtor.org, Accessed 8/9/12