Can Obama take a Mulligan on housing?

During the election, both parties remained surprisingly silent on what exactly they would do to reinvigorate the housing market.  For the current Administration, that may have been a blessing as its policy efforts in housing have been lackluster at best.

Some signs of an improving housing market have been apparent, but this has less to do with effective policy than with other market-related factors and the passage of time. Attempts to assist struggling homeowners such as the Home Affordable Modification Program have been, by most accounts, of limited success and have undergone multiple reboots.  The government remains completely involved in the secondary mortgage market with Fannie Mae and Freddie Mac exactly where they were in conservatorship in 2008. Vast confusion has permeated mortgage markets waiting for firm guidance from regulators on what constitutes an acceptably underwritten mortgage. And it could be argued that greater emphasis and federal resources have been placed on fighting the last war in housing, namely egregious mortgage products, than in tackling the issues preventing private capital from returning.

Ironically, the policy having the biggest impact on the housing market is one the Administration cannot take credit for, namely the Federal Reserve’s interest rate actions.  Moreover, the only real policy efforts to emerge from the government since the crisis have been those by the Federal Housing Finance Agency.  The fact that their acting Director is not a politician speaks volumes for the results thus far in housing more broadly.

Now that the Administration has a “do-over” opportunity in housing, what steps ought it take to get housing back on track?

The focus should be a three-pronged approach to financing, servicing and underwriting process reforms, along with legacy asset management in order to address widespread uncertainty hanging over the market.

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