Priorities for 2013: GSE Reform, Financing Options for Distressed Homeowners

What statement(s) related to housing—policy, or otherwise—would you want to hear in the presidential debates?

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Each of the candidates this election season would do well to keep in mind and publicly acknowledge how heavy the cost of housing weighs on the minds of so many Americans. It is important to remember that for most families the cost of housing is the largest part of their monthly budget. After four years, as many as 30 percent of all residential mortgage holders remain in the following distressed categories:

1. financially stressed due to unemployment or persistent underemployment;
2. underwater and tied down because their home values are significantly less than what they owe on their mortgages; and
3. suffering the devastating financial loss of a home to foreclosure.

One of the first responsibilities of a leader is to define reality. This is the shocking reality we still face today.

A recent Wall Street Journal article entitled “Why the Candidates Aren’t Talking about Housing” argues that neither candidate has had much to say about the housing crisis because housing is seen as a political loser. Presenting clear solutions to a problem that is keeping tens of millions of Americans up at night is never a mistake. The public wants to know more about how each candidate will govern the next four years and what will be done to breathe life back into the housing market and the economy. The upcoming presidential debates present an important opportunity for the candidates to present bold ideas and to differentiate themselves. The public has been asking for such clarity.

During the upcoming presidential debates, the candidates should make it clear that in 2013, the White House will ask Congress to make housing – one of the pillars of the American Dream – a top priority and to work together to finally complete next year the actions necessary to drive a much more robust recovery of the nation’s housing market and help propel the broader economic recovery. The most important actions include the following:

• Complete the reform of Fannie Mae and Freddie Mac. The federal government must no longer assume the primary role of mortgage guarantor. The roles of the GSEs in the housing market must wind down. Private lenders need to be the primary providers of mortgage credit and do so responsibly with reasonable government oversight but without the federal safety net of a taxpayer bailout if they take risks or incur losses.
• Expand access to credit. Businesses and investors do not like uncertainty and the uncertainty surrounding the implementation of Dodd-Frank has only served to restrict access to credit. New rules, such as down payment and risk standards, are already proving complex and costly to implement. Congress and the White House should be willing to continually reassess policies and make amendments or repeal provisions that have unintended negative consequences, such as reducing rather than expanding financing options available to homeowners.
• Provide workable financing options for distressed homeowners. The data illustrates the devastation rampant in today’s housing sector. Homeowners need options such as short sales, shared appreciation, and deed-in-lieu-of- foreclosure or other options that allow them to avoid foreclosure and its long-term financial setbacks. This is of the highest priority and while no plan may be entirely perfect or fair, action must be taken as soon as possible.

While there is much work to be done in other areas of housing policy and finance, such as rental housing affordability, low-income housing, homelessness, senior housing, preserving tax incentives, and the like, successfully addressing these fundamental problems in the foundation of the housing market will allow other pressing housing challenges to be addressed in the future.

Most importantly, these housing initiatives should be considered an important component of a President’s plan for economic growth. Our nation’s housing market has represented as much as 20 percent of the nation’s economic base. Without addressing these key fundamental weaknesses in the housing sector, the level and pace of economic growth will not achieve its fullest potential.

Angela Antonelli is a former Chief Financial Officer (CFO) for the U. S. Department of Housing and Urban Development (HUD)

Welcome to the BPC Housing Commission expert forum! This forum is intended to foster interactive and substantive discussion about pressing housing issues. Each month contributors from different parts of the housing sector will be invited to respond to a discussion topic. Guest posts will feature prominently on BPC’s website, as well as be shared regularly with Housing Commissioners to help inform their work.

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We encourage you and our expert bloggers to add comments, contributing to the national dialogue on solutions for the future of the housing sector. Expert bloggers are not members of the BPC Housing Commission. Any views expressed on this forum do not necessarily represent the views of the Housing Commission, its Co-Chairs, or the Bipartisan Policy Center.