Mitt Romney’s ‘Plan to End the Housing Crisis’

Politics…ugh. Is there anything worse?

It’s that time again, when presidential candidates boost rhetoric into overdrive, which sadly has revolved around the nation’s housing problems for the past couple elections.

Four years ago, Republican hopeful John McCain and Obama exchanged jabs, with the former strongly opposed to a government bailout, noting at the time that, “the fundamentals of our economy are strong.”

He got a lot of flack for that statement, especially after he couldn’t remember how many houses he owned when put on the spot (it turned out to be seven).

McCain also said he was opposed to lower down payment requirements for FHA loans (which I agreed with) and the idea of Fannie and Freddie insuring underwater mortgages – the latter eventually happened.

Housing Under Obama

As we know, Obama went on to become president and introduced a variety of programs to reduce foreclosures and improve the housing situation, most notably the Making Home Affordable plan.

It includes HAMP, HARP, HARP 2.0, FHA-HAMP, HAFA, HAFA II, and many other initiatives.

Thus far, millions of Americans have taken advantage of the programs, which include loan modifications, refinancing to lower interest rates, principal reductions, forbearance, and so on.

The President has also cut costs for FHA streamline refinances, making it much cheaper and easier for those who hold such loans to snag a lower rate.

Oh, and mortgage rates on the popular 30-year fixed are nearly three percentage points below where they stood back in 2008.

Unfortunately, there has been no magic bullet to “save” or “fix” housing thus far. Indeed, it has been a long and difficult road, and many, many Americans have lost their homes.

Perhaps one of the biggest pieces missing at the moment is a wide scale program that addresses underwater loans not owned by Fannie and Freddie.

These private-label mortgages make up a large chunk of the problem loans, but haven’t been addressed by the government, only via individual lender-based programs.

Obama actually pushed a plan to tackle these types of loans back in February, but it seemed to fall on deaf ears because it required Congressional approval.

And now Oregon Senator Jeff Merkley has proposed a similar plan, though that too has been largely ignored.

Romney Says Obama Has Failed Housing

So it appears as if a variety of programs and initiatives have been introduced under the Obama administration to help housing.

And whether you’re left or right leaning, they appear to have done some good. I’m sure many Republicans and Democrats have taken advantage of the programs on offer.

But now Republican hopeful Mitt Romney has unloaded on Obama, as we all knew he (or any opponent) would in this situation.

He noted that under Obama, home prices have fallen, 8.5 million homeowners have received foreclosure notices, and 11 million Americans owe more on their mortgages than their homes are worth.

Unfortunately, what goes up astronomically must come down, and it takes time for bad things to unravel (just look at lengthy foreclosure timelines).

That’s what we have seen over the past several years. And of course the person in charge at the time of the carnage takes the blame, even if it’s the result of actions taken years before.

Ironically, it now appears as if housing is beginning to improve, if just marginally. Home prices are finally up, negative equity levels are dropping, and homes are selling faster.

So if Romney wins the election, and housing continues on its current path, he would likely receive the praise.

Mitt’s Housing Plan

That brings us to Romney’s “plan to end the housing crisis.” Sounds pretty ambitious, doesn’t it?

So what exactly does it entail?

Well, for starters, Romney wants to unload the 200,000 vacant foreclosed homes owned by the government in a “responsible” fashion.

Romney says he’ll return these homes to productive uses and increase neighborhood values, but doesn’t specify how.

Additionally, he will facilitate foreclosure alternatives for those who can’t afford to make their mortgage payments.

Again, no specifics here, but it’ll be “creative.”

Next, Romney will replace the new “complex rules” born out of the crisis with “smarter regulations” that hold banks accountable and restart lending to creditworthy borrowers.

By the way, he blames Obama’s housing programs for making it more difficult for Americans to get a mortgage.

Last I checked, it’s more difficult to get a mortgage because they were handing them out to anybody with a pulse before the wheels fell off.

Finally, Romney plans to reform Fannie Mae and Freddie Mac, but again, doesn’t identify how.

Aside from not providing any details, it appears as if many of Romney’s “ideas” have already been implemented or addressed by the current administration.

And at the end of the day, there isn’t a magical solution to solve the current mess we’re in.  It took time to get into this mess, and it will take many more years to get back on track, that is, before the next crisis hits.