Housing AWOL on the trail
9/16/2012WASHINGTON — Call it the political elephant in the room: 1.2 million families across the country are now at some stage of foreclosure; 3.8 million homeowners have been foreclosed upon since September, 2008; 11.4 million owe more on their mortgages than their houses are worth; $6.5 trillion in home equity has been lost by owners since 2005; home building and sales are intimately linked with job creation.
Yet the subject of housing policy was virtually a no-show at the Democratic and Republican conventions and in the party platforms.
Mitt Romney didn’t mention housing policy in his convention speech. President Obama barely touched it, saying, “I’ve shared the pain of families who’ve lost their homes.”
The Republican platform panned the Obama Administration’s response to the housing crisis as having “done little to improve, and much to worsen, the situation.”
The GOP solution: privatize pretty much the whole mortgage finance system, kill Fannie Mae and Freddie Mac — which fund about two-thirds of all new home lending — and cut the role of the Federal Housing Administration, the primary source of mortgage financing for first-time and minority purchasers who have moderate incomes and less than 20 percent down payment.
The Democratic platform claimed credit for assisting 5 million struggling homeowners “restructure their loans to help them stay in their homes” — a total far beyond most analysts’ estimates for the Home Affordable Modification Program and related federal efforts.
Last month, an independent study by federal and academic economists reported that rather than the 3 million to 4 million families projected by the White House to be assisted by the mortgage modification program, the actual number will be barely one-third that target.
The Republican platform, meanwhile, blamed the whole subprime mess and housing collapse on Fannie and Freddie, even though private investment banks such as Lehman Brothers and Bear Stearns played far larger roles in the securitization that fueled the subprime mania.
The roles of Wall Street and the big banks get no direct criticism from the Republicans, even though the private secondary market they control would be the foundation for any new system of mortgage finance under a Romney administration.
Even on a subject that has broad support among voters — continuing tax benefits for hom eownership, particularly the mortgage-interest deduction — the parties waffled.
The Democratic platform ducks the issue; President Obama has proposed reducing the mortgage deduction for owners with incomes above $250,000.
The Republican platform drafters initially rejected any pledge of support but later relented with language agreeing to continue the deduction if Congress fails to enact comprehensive tax reforms.
So why has housing, which traditionally leads the economy out of recessions, suddenly become a political orphan?
Perhaps both parties feel vulnerable about any serious discussion of their own roles in the crash — regulators blind to widespread irresponsible lending during the Bush years — and the painfully inadequate response to the foreclosure explosion during Mr. Obama’s. Or perhaps neither side has politically viable solutions for fixing the system.
Perhaps it is both.