Housing Industry Reacts to State of the Union

Housing featured prominently inrnPresident Obama’s State of the Union speech on Tuesday night.  The President made two specific proposals,rnone to deal with the ghosts of housing past, the other to provide expandedrncredit to homeowners.</p

In contrast to the settlement with banks</athat Obama was widely rumored to announcernat the State of the Union, he instead directed Attorney General Eric Holder torncreate a new office on Mortgage Origination and Securitization Abuses.  The President said, “The American peoplerndeserve a robust and comprehensive investigation into the global financial meltdownrnto ensure nothing like it ever happens again.”</p

Bloomberg is reporting that the program isrnObama’s response to a call by Fed Chairman Ben Bernanke in a paper sent to Congressrnearlier this month for the administration to offer more aid for housing.   While largely dealing with the need tornconvert excess housing inventory to rental property, the paper also touched onrnthe benefits of easing refinancing beyond the HARP program. </p

Bloomberg also outlined some of therntradeoffs of a super-refinancing program saying it may damage investors inrngovernment-backed securities by more quickly paying off those with high couponsrnand limited default risk while aiding holders of other home-loan securities andrnbanks.  Word that such a proposal might bernforthcoming in the President’s speech, Bloomberg said, “Roiled the market forrnFannie Mae and Freddie Mac securities according to a note to clients by Bank ofrnAmerica Corp.”</p

The Associated Press quoted StanrnHumphries, chief economist at Zillow as saying the refinancing could allow 10rnmillion more homeowners to refinance and, by preventing foreclosures andrnfreeing up money for Americans to spend, could give the economy a $40 to $75rnbillion jolt.  The Federal Reserve, thernAP said, was more cautious, estimating that 2.5 million additional homeownersrnmight be able to refinance.</p

The refinancing initiative would requirernapproval by Congress, however the day after the speech the focus was on other issuesrnsuch as tax reform and we could not find any reaction from members of Congressrnspecific to the refinancing issue.  Even thernMortgage Bankers Association (MBA) issued a statement from its president DavidrnH. Stevens which did not mention the refinancing program, obliquely addressingrninstead the creation of the mortgage fraud office.    </p

“Like thernPresident, we believe it is time to move forward with rebuilding this nation’srnhousing market and that lenders and borrowers alike contributed to the housingrncrisis we are currently in.  Let there also be no mistake, those whorncommitted illegal acts ought to face the consequences, if they haven’t already.”</p

Stevensrnthen called for a clear national housing policy “that establishes certainty forrnlenders and borrowers alike.”  This,rnaccording to MBA, requires finalizing the Risk Retention/Qualified ResidentialrnMortgage (QRM) rule “in a way that ensures access to credit for all qualifiedrnborrowers,” establishing working national servicing standards, developing arnlegal safe-harbor for Dodd-Frank QRM/Ability to Repay requirements, and “Move(ing)rnquickly to determine the proper role of the federal government in the mortgage marketrnin order to ensure sufficient mortgage liquidity through all markets, good andrnbad.</p

Creationrnof the fraud office generated substantial comment, much of which wasrnunfavorable.  A lot of the criticismrnfocused on the lack of prosecutions that have emerged from the existing fraudrntask force and there was a strong suspicion voiced by the liberal blogospherernthat the new office was merely a cover for pushing the DOJ/50-state attorneysrngeneral settlement with major banks.  However,rnone analysis, written by Shahien Nasiripour in U.S. Politics and Policies pointed out the wider powers ofrnenforcement available to attorneys general in some states such as New York’srnMartin Act and how the states and federal government might use the new officernto pool their powers and responsibilities to the benefit of each.  </p

The newrnoffice will not lure California Attorney General Kamala Harris back into thernfold.  Harris and Schneiderman bothrnwithdrew from the national foreclosure settlement last year, feeling that itrndid not represent the interest of their respective states.  Despite the appointment of Schneiderman tornhead the new office, Harris announced on Wednesday that she would not bernrejoining her fellow AGs in their negotiations saying that the latestrnsettlement proposal was inadequate for California.  A spokesman for her office said, “Ourrnstate has been clear about what any multistate settlement must contain:rntransparency, relief going to the most distressed homeowners, and meaningfulrnenforcement that ensures accountability. At this point, this deal does notrnsuffice for California.”</p

Here’s the video of the speech beginning at the point discussing housing related issues:</p

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