President Obama seemed regretful last year that he had not taken more aggressive action to turn around the collapsing housing sector. Ever cautious and indecisive, the White House shied away from any bold steps that did not guarantee a clear-cut political victory. Instead, the administration repeatedly clung to the simplest, least-controversial initiatives, papering over problems with piecemeal measures that promised too much, moved too slowly, and failed to live up to their goals.
With the State of the Union address on Tuesday, there are no signs the administration is overhauling its strategy and mapping out a comprehensive housing policy this year to tackle such critical topics as Fannie Mae and Freddie Mac and the lengthy foreclosure backlog. But the White House is hoping Obama can “score” anyway by claiming credit for long-existing endeavors to fix pieces of the housing puzzle. Members of Obama’s team are also crossing their fingers that signs the economy is perking up—such as shrinking unemployment numbers—will boost consumer confidence, spill over into the housing market, and help improve the overall perception of economic growth.
Housing is not expected to be a major focus of Obama’s speech, as there is so little to brag about. The subject is an Achilles’ heel for the administration, which has been whipsawed with widespread criticism by such business groups as realtors, homebuilders, mortgage bankers, and investors, as well as by the consumer-advocacy community. But Obama also cannot ignore housing, an obvious sore spot in the economy. And to the extent he talks about it, Obama needs something positive and reassuring to say.
“They cannot do anything to fundamentally change the dynamics in the housing markets between now and November, or more importantly between now and September or October, when people will be making up their minds about the election,” said Brian Gardner, a policy analyst with Keefe, Bruyette & Woods. “The thing to look for is they do something that looks like they are taking it seriously and acting. It is more about political perception than anything else….”
The White House is itching to tout a nearly yearlong effort by state attorneys general to reach a broad mortgage-servicing settlement, which would provide up to $25 billion in relief to homeowners. The settlement would also clear up an exponentially larger amount of legal liability hanging over the nation’s top mortgage servicers. Sources involved in the negotiations say there is no deal yet, but there is considerable political pressure on the Justice Department and the Housing and Urban Development Department to persuade all 50 state attorneys general to sign on and deliver enough of an agreement to give the president something impressive to say.
There are other less sexy initiatives Obama could talk up. More details are expected in coming weeks about an effort to convert some of the properties accumulated through foreclosures into affordable rental units. Also being discussed are ways to let borrowers facing foreclosure turn over their deeds for leases and become renters. Obama could mention that Fannie and Freddie recently announced they would provide one-year forbearance on mortgage payments for borrowers who have lost their jobs.
But sources tracking the administration’s moves are not predicting anything new or daring will be unveiled, like a major change with the Federal Housing Finance Agency that oversees Fannie and Freddie or something significant to arrest the slide in home prices.
A growing chorus of Democrats wants to hear more from the president than he is likely to offer. Consumer advocates, mortgage and investor groups, and even the Federal Reserve Board are calling for reducing principal on mortgages, including those backed by Fannie and Freddie, as a way to address some of the more than $7 trillion in lost home equity.
“Housing remains ground zero for our economy and job creation, and the president must act with the urgency this crisis requires,” Rep. Elijah Cummings, D-Md., told National Journal.
But despite disappointment with the administration’s track record, there is little competition for Obama from the Right.
“Republicans are helping the president out immensely by shifting the public’s focus themselves from jobs to economic inequality,” said Charles Gabriel, a managing partner with Capital Alpha Partners. “As a result, Obama could ‘win’ on housing, politically, merely by dueling to a draw in the tug of war between perceptions that his foreclosure mitigation efforts have been hapless against Republicans who have offered little other than cold-turkey alternatives. And if the general economy recovers before the housing sector, rather than vice versa, he’ll still get points.”
This article appears in the Jan. 23, 2012, edition of National Journal Daily.