Obama on Housing
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It’s been a while since housing policy figured prominently in a presidential debate. This time around both candidates, Senators Barak Obama (D-Ill.) and John McCain (R-Ariz.), have stated positions on a wide range of issues that affect home builders, their buyers, and lenders. With the Democratic Convention dominating the airwaves for the next few nights, let’s take a look at what an Obama administration might try to accomplish.
Obama made it very clear that he firmly supported the new FHA program in the Housing and Economic Recovery Act of 2008 designed to help up to 400,000 families avoid foreclosure. He says on his website that he doesn’t want to aid people who speculated on the housing market, bought vacation homes, or people who falsely represented their income. That’s good, because no one else does either.
But it looks like he would build on the new FHA program by creating a $10 billion foreclosure prevention fund. He would help homeowners who are underwater on their mortgages sell their homes by offsetting the costs of the sale. He would also help “low-income borrowers get additional time and support to pay back any losses from the sale of their home.” And he would waive “certain state and local income taxes that result from an individual selling their home to avoid foreclosure."
Obama also wants to crack down on lenders who “act irresponsibly and commit fraud.” (McCain has also said he wants national standards for mortgage lending.) He proposes to create new criminal penalties for mortgage fraud; establish an official federal definition of mortgage fraud; give more money to state and local law enforcement programs; require people in the industry to report suspicious activity; and have the Government Accountability Office report on state lending practices.
Home buyers, on the other hand, would receive greater assistance in weighing mortgage options. Lenders would have to provide a new score for mortgage products that would allow borrowers to easily compare options and understand full loan costs. He calls it the HOME score (homeowner obligations made explicit). It’s going to take quite a computer program, and not a few value judgments, to execute that one.
In keeping with his mission to help middle class America, Obama would widen the mortgage-deduction net by creating a “universal” mortgage credit for homeowners who don’t itemize. He says that the credit would give on average a $500 tax break to 10 million homeowners struggling to make their mortgage payments. Cost to the Treasury: $5 billion.
The plan also envisions a $10 billion grant program for state and local governments hit hardest by the housing crisis. The funds would support “critical public services’ or “vital infrastructure spending” that results from foreclosures. It doesn’t say how the federal government would select the state and local governments that would receive money or which specific services meet the criteria. Florida and California, along with Nevada and Illinois, have been among the states bearing the biggest foreclosure brunt.
Obama would also provide an additional $10 billion mortgage revenue bond authority for state housing agencies. The funds would be earmarked for families facing foreclosure and low- and moderate-income people who want to buy their first home. The new housing law already added $11 billion to mortgage revenue bond allocations.
The same is true of Obama’s promise to create an Affordable Housing Trust Fund. He has repeatedly said on the campaign trail that he would allocate $500 million annually for developers to build low-income housing in mixed-income neighborhoods. The new law creates a similar program paid for out of profits from Fannie Mae and Freddie Mac, if those still exist in 2010.
It’s still unclear where Obama stands on several other issues near and dear to the home building industry, such as the mortgage interest deduction and capital gains treatment. But his policy documents make it clear where he comes down on the issue of homeownership. As president, he says he would “fight to ensure more Americans can achieve and protect the dream of home ownership.”