Via LearnVest By John Kelly for Zillow ~
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As Mitt Romney officially claimed the Republican Party nomination for president this week in Tampa, police there warned protesters against squatting in vacant houses that dot the area. Foreclosures recently spiked again in the Tampa region, where homes have shed half their value since the housing market crashed.
But hard-hit Tampa seems unlikely to be a backdrop for Romney to outline ways his administration would fix the ailing housing market. To date, he has said little to illuminate his views on the topic, except to say that when it comes to foreclosures, the government should butt out.
“Let it run its course and hit the bottom,” Romney told the Las Vegas Review-Journal last October.
Experts Chime in
Since then, the former Massachusetts governor has largely avoided references to housing policy, except when criticizing President Barack Obama’s. Romney’s 59-point economic growth plan contains no housing initiatives. Among two dozen issues addressed on his campaign website — from taxes to trade policy — foreclosures are not mentioned. His running mate, Rep. Paul Ryan of Wisconsin, was scheduled to discuss housing during a Las Vegas campaign stop in August, but he barely mentioned the word.
“Romney’s running as Mr. Fix-it on the economy, but he has nothing to say about one of the biggest pieces of the puzzle,” said Jason Gold, a senior fellow at the Progressive Policy Institute, a Washington D.C. think tank affiliated with the Democratic Party.
Gold, who specializes in housing policy, questioned whether Romney’s selection of Ryan as a running mate indicates he supports privatizing Fannie Mae and Freddie Mac, as Ryan called for in a budget blueprint last year. Romney hasn’t said.
Many conservatives argue such a move would finally untangle government — and taxpayers — from the mortgage business. Gold calls it an impractical step that would almost certainly end the days of30-year fixed mortgages. “It would take a sledgehammer to the housing market and throw us right back into recession,” he said.
Zillow Chief Economist Stan Humphries said Romney is correct in suggesting the housing market must be left to resolve its troubles.
“We have to let prices find their equilibrium, and then people will buy homes again,” he said. “That’s largely what’s happening now.”
Home Values Are Turning Around
Following years of bleak housing news, recent headlines have indeed turned hopeful. Home values have started to climb. Many underwater homeowners are slightly less underwater. With record lowinterest rates and homes at their most affordable in 40 years, sales have started to pick up.
How much to credit or blame the Obama administration, of course, depends on whom you ask.
Critics fault Obama for being too tepid in his attempts to bring the housing market under control as it plummeted early in his term. Instead of forcing banks to forgive mortgage debt or pursuing a large-scale bailout of homeowners, Obama focused on more modest programs to help struggling homeowners avoid foreclosure.
The Home Affordable Refinance Program (HARP), which Obama announced two months after taking office, was designed to help as many as 4 million underwater homeowners refinance their government-backed loans to take advantage of low interest rates. More than three years later, only around 1 million homeowners have received refis through the voluntary program, which offers incentives to mortgage service providers as enticement to participate.
Humphries views Obama’s two signature housing initiatives — HARP and the similarly named Home Affordable Modification Program, or HAMP — as sensible policies that have helped a subset of underwater homeowners refinance their mortgages and keep their homes. Administering them has been a tightrope walk for the administration: trying to target only borrowers in hardship who genuinely stand to benefit from the assistance. The resulting constraints, Humphries points out, have contributed to the programs falling short of their goals. Separately, the $25 billion mortgage relief settlement reached by the government and the country’s five largest mortgage providers was a win for the administration.
But Humphries said Romney’s criticism of Obama’s housing policies is warranted in at least one case.Providing tax credits of up to $8,000 to first-time homebuyers in 2009 and 2010 was a $30 billion “waste of taxpayer money,” Humphries said, adding, “Basically we gave the money to people who were going to buy homes anyway, or we encouraged them to buy six months earlier than they would have.”
Where to Go From Here
Despite budding signs of a housing recovery, the issue remains a pressing one for millions of homeowners who are collectively grappling with $1.1 trillion in negative equity, according to Zillow metrics. Many live in electoral swing states such as Nevada, Florida and Michigan, where foreclosure rates are the highest in the country.
Those voters likely want to know whether Romney would halt government efforts to help struggling homeowners refinance their mortgages. There are hints the answer is maybe not. After all, his chief economic adviser is Glenn Hubbard, dean of the Columbia Business School, who has advocated expanding the refinancing of government-backed loans — in ways very similar to Obama. Nor has Romney himself nixed the idea, telling the same Las Vegas newspaper last October that helping underwater homeowners refinance is “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,” he added.
Why such little discussion on what remains such a pressing challenge for the country?
Humphries suspects the answer is pure politics. Romney “doesn’t want to show that there’s no daylight between him and what Obama’s already doing,” he said.
LearnVest is the leading lifestyle and personal finance website for women.