When it comes to housing policy, Mitt Romney should have many supporters among Credit.com readers. Every week we receive emails and comments complaining about HAMP and HARP, President Obama’s signature programs to alleviate the mortgage crisis. They include Nima Russell, who calls the government’s rules for modifying her mortgage “very frustrating and unfair!”
After getting invited to apply for a refinanced mortgage under the revamped version of the HARP program, a reader named Sherri was denied at the last minute because, unbeknownst to her, Wells Fargo had recently sold her loan to a different company. “HARP is apparently one big joke on us,” she wrote.
All this pent-up frustration at Obama’s policies could leave him vulnerable to attacks from Romney. But in speeches, on his campaign website and in a recent white paper on housing policy, Romney never takes the swing. Besides criticizing Obama for creating “an alphabet soup” of housing programs, Romney has not said whether he would tweak these unpopular programs, or replace them with something better.
However, here are places where Obama and Romney appear to disagree on housing policy, and perhaps more surprisingly, the many places where their plans are virtually identical.
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It’s not just Mitt Romney who calls President Obama’s housing policy a failure. Independent studies from the Federal Housing Finance Agency to the TARP program’s inspector general to a bipartisan Senate panel confirm that despite lofty goals of preventing millions of American homeowners from slipping into foreclosure, Obama Administration programs including HAMP (for homeowners facing foreclosure) and HARP (for homeowners still current on their mortgage payments) have done little to rescue consumers or turn the nation’s housing market around. Much of the blame went to the structure of the programs themselves, which went too easy on major banks by making participation voluntary instead of mandatory, according to the Senate report. Given such issues, “many of the problems now plaguing HAMP are inherent in its design and cannot be resolved,” the report found.
While not moving to disband either program, Obama can argue that he tried to improve matters by proposing legislation that would refinance mortgages using $5 billion to $10 billion raised from new fees charged to large banks. “No more red tape. No more runaround from the banks,” the President said of the plan at a rally in Falls Church, VA. His proposal has been blocked by House Republicans.
Mitt Romney has not said specifically what he would do to either improve or replace the administration’s failed programs, but he has given some hints that he might end both programs. “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,” according to his campaign’s white paper on housing policy. “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.”
So, which is better for homeowners: Keeping programs that failed because they gave too much power to banks, or diminishing those programs to give more power to the banks? On the outside, a Romney administration may look quite different from the Obama administration when it comes to housing policy. But some experts wonder whether either candidate has a plan to turn the housing market around.
“I haven’t heard a Republican proposal that would stabilize the American housing market,” says Gerri Detweiler, Credit.com’s consumer credit expert.
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Who will protect homeowners from scams?
President Obama supported the controversial Dodd-Frank Wall Street reform act, which created the Consumer Financial Protection Bureau. In its first year of existence, the bureau has proposed new rules to help homebuyers compare mortgages, force lenders to create simplified forms summarizing mortgage terms, and protect homeowners from mistakes by mortgage servicers that often make it harder for consumers to qualify for loan modifications.
“We have a responsibility to make sure that the economy we are rebuilding is one in which middle-class families can feel like they’re getting ahead again,” the President said when he visited the bureau’s new offices in January.
If Romney wins, it appears that he would move to close the bureau. Romney has said he opposes the bureau, calling it the “most powerful and unaccountable bureaucracy in the history of our nation.” And he has vowed to repeal the Dodd-Frank Wall Street reform act, which created the agency. His specific plan remains somewhat unclear, however, because in recent weeks Romney has sounded more open to compromise on the matter, as when he said during the first Presidential debate that “there are some parts of Dodd-Frank that make all the sense in the world,” and “You need transparency….”
Who will reform the mortgage market?
Conservatives blame Fannie Mae and Freddie Mac, the taxpayer-owned mortgage giants, for causing the mortgage crash partly by forcing banks to write mortgages for people who couldn’t afford them. Liberals blame the two companies for helping to cause the crash by buying millions of mortgages that the banks knew were defective, primarily to keep the banks’ pipeline of mortgage fee profits flowing.
Either way, most people agree that Fannie and Freddie played a big role in the mortgage boom, and now they are major impediments to a housing recovery. Perhaps this explains the remarkable similarity between Obama and Romney’s plans for what to do with the companies. The Obama administration proposed to let the companies offer debt forgiveness to borrowers, and in August announced plans to accelerate the process of selling off Fannie and Freddie’s giant portfolios of homes.
Romney has announced similar plans to “Protect taxpayers from additional risk in the future by reforming Fannie Mae and Freddie Mac” and “Responsibly sell the 200,000 vacant foreclosed homes owned by the government,” according to his white paper on housing policy.
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