President Obama on Monday went to the heart of the nation's mortgage crisis to offer what he acknowledged is modest assistance to homeowners who are under water on their houses, blaming a balky Congress for his inability to deliver the "bold" response he said is needed.
Speaking in Las Vegas, in the state hardest hit, the president bluntly blasted Republicans for blocking his jobs bill and said, "We need to tell them to get their act together."
The president also unveiled a new attack line certain to be repeated often in the coming days: "We just can't wait for Congress to act." The new White House mantra goes along with a planned series of announcements to demonstrate that the president is ready to use executive actions wherever he can to make up for congressional inaction. "I'm here to say that we can't wait for an increasingly dysfunctional Congress to do its job," he said. "Where they won't act, I will."
He acknowledged that executive actions such as the one he was announcing on housing "aren't a substitute for the bold action we need" on jobs. But, he insisted, "They'll make a difference."
For many members of his own party, though, anger is also directed at the administration, and the latest actions being announced fall far short of what they are demanding.
Some of that anger surfaced last week when Rep. Dennis Cardoza, D-Calif., took the unusual step of blasting the president’s housing policies in his announcement that he is retiring from Congress. “I am dismayed by the administration’s failure to understand and effectively address the current housing foreclosure crisis,” said Cardoza, whose district includes three cities particularly hard-hit by foreclosures – Modesto, Stockton, and Merced. “Home foreclosures are destroying communities and crushing our economy,” he said, “and the administration’s inaction is infuriating.”
In his speech in Nevada, the president hoped to rebut this charge and show that he is addressing the crisis as aggressively as he can while dealing with an obstinate Congress. To do that, he announced changes in a federal program that lets homeowners refinance their mortgages even if they lack equity. The new rules are designed to get more homeowners to take advantage of the Home Affordable Refinance Program.
Since HARP was begun in 2009, about 894,000 borrowers have used it to refinance their mortgages, according to the Federal Housing Finance Agency – a small number compared to the 5 million people who have lost their homes to foreclosure and the additional 3.5 million who are expected to do so in the next two years, according to Moody’s Analytics chief economist Mark Zandi. Nearly 15 million borrowers owe more on their mortgages than their properties are worth.
The new help only applies to mortgages through either Fannie Mae or Freddie Mac, which FHFA oversees. But that offers no help to the millions of homeowners whose mortgages are through private lenders – something the White House contends cannot be done without congressional authorization. “Any mortgage is a contract, and the government can’t simply come in and force refinancing of contracts,” Housing and Urban Development Secretary Shaun Donovan told reporters on Monday. “What we can do is take steps today for the portfolio of loans backed by FHFA.”
Donovan added that the administration has asked Congress to pass new laws that would affect private lenders. But that, he said, is “something that is, frankly, unfortunately not in the cards.”
And that is a source of tremendous frustration to members of Congress with constituents who are suffering. The lack of legal authority to do more was lost on several angry lawmakers who attended a recent meeting between the Housing Stabilization Task Force of the House Democratic Caucus and Edward J. DeMarco, acting director of the FHFA. Venting their deep frustration over foreclosures and underwater mortgages, several members at the Oct. 6 session demanded that the FHFA come to the rescue of mortgages held by private banks and hedge funds.
Many of the members who pressed DeMarco are from states that have been particularly savaged by the deepening foreclosure crisis. According to the real-estate research firm Corelogic, 10.9 million, or 22.7 percent, of all residential properties with a mortgage “were in negative equity at the end of the first quarter of 2011.” The 10 states with the most homes underwater were Nevada with 63 percent, Arizona (50 percent), Florida (46 percent), Michigan (36 percent), California (31 percent), Georgia (30 percent), Idaho and Maryland (24 percent), Virginia (23 percent), and Ohio (22 percent). In the 2008 election, Obama carried all of those states except for Arizona, Georgia, and Idaho.
The president used an example to describe the impact of the changes. "Say you have a $250,000 mortgage at a 6 percent interest rate, but the value of your home has fallen below $200,000," he said. "Currently, you can't refinance. You're ineligible. That's about to change. If you meet certain requirements, you will have a chance to refinance at lower rates." He promised lower closing costs and more freedom to shop for good rates.
The changes to HARP will include the elimination of some fees, removing the current 125 percent loan-to-value ceiling, protecting lenders from bad appraisals, and extending the end date for the program until Dec. 31, 2013. The FHFA estimates that HARP refinances “may roughly double,” but adds, “such forward-looking projections are inherently uncertain.”
The president’s announcement comes on the first day of his three-day swing through Nevada, California, and Colorado. The trip combines political fundraising with his continuing campaign for elements of his jobs bill. “We can’t wait” is the newest twist on that campaign and emphasizes Obama’s willingness to use his executive powers wherever feasible. In Denver, he will also announce policy changes designed to help those struggling with student loans.
House Speaker John Boehner’s office was quick to respond on Monday, adopting the president’s new rallying cry and applying it to Republican jobs proposals. “We can’t wait,” said a release from Boehner, “for President Obama to stop campaigning for more failed ‘stimulus’ spending and start working to find common ground.”