Monday, November 12, 2012

Pete the Banker: Housing--Obama Headache; National Nighmare

Now the NY Times decides to lament about housing--safely after the election, of course.
“But as President Obama’s first administration comes to an end, the government is still deeply embedded in the mortgage market. In the third quarter, various government entities backstopped 92 percent of all new residential mortgages, according to Inside Mortgage Finance, a publication that focuses on the home loan industry.

Mr. Obama’s economic team has consistently said it wants the housing market to work without significant government support. But it has taken few actual steps to advance that idea.”
And, “Housing policy is hard to tackle because so many people have benefited from the status quo.” 
 
The first red bolded statement is true.  Even HuffPo sounded the alarm--after the election of course saying Obama spent his first term and the election,

“managing to talk around one area of economic policy in which experts frequently charge him with failure: managing the national housing crisis.
In a campaign dominated by talk of joblessness and what to do about it, the president hardly mentioned the epidemic of foreclosures, the fact that roughly one-fifth of all homeowners with mortgages owe the bank more than their properties are worth, or the uncomfortable reality that the American housing market is now largely propped up by taxpayers via public control of the mortgage finance giants Fannie Mae and Freddie Mac.”  While Obama threw money at the housing problem, he did little else in this first term.  He and the Harry Reid’s Senate did block several Congressional passed measures meant to carry out ideas in one of the few Obama Administration housing initiatives, a Treasury White Paper issued in early 2011 meant as a model for industry which suggested three alternative government approaches to housing finance reform as the NY Times article put it to make the “housing market to work without significant government support”.
The latter bolded statement that so many people “benefited” is almost laughable!  It is only cover for an inept or unfocused Administration!  Those perhaps who are foreclosure or modification consultants have benefited, but many of them were likely real estate or mortgage brokers prior to the housing crash and would be doing better in a stronger housing market in which sales of homes, not modifications and refinances, dominated.  Those receiving modifications, etc. are thought to benefit, yet the reality is that half re-default.  In re-default, they lose far more money and incur more pain than they would had they just walked away the first place.
The major banks benefitted, if only for no other reason than they were flooded with liquidity from the Federal Reserve absolving them of the necessity to unload unwanted foreclosure properties at distressed prices.  This lack of financial prudence of course spawned the burgeoning shadow inventory that so captured the media’s imagination before the election began in earnest. Of course, Fannie, Freddie, and FHA employees have retained their jobs and benefited at taxpayer cost.  And one suspects a cadre of politicians have benefited since they have thrown money at the problem and can point to their Herculean yet intangible “humanitarian” effort.  The reality is that those politicians who have continued to encourage massive government involvement in the housing and housing finance sectors have simply prolonged the housing downturn in return for election donations and votes.
One almost feels sorry for the Administration and their impending headache.  But then Americans are suffering from far more than a headache, a seeming unending nightmare!

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