Speaker Perspectives: What Would You Have Changed About Housing Policy?
Tonight we kick off “America’s Housing Crisis,” a two-day event bringing together some of the brightest minds in housing to discuss public policy and private sector measures for promoting stability in the housing market.
This evening in New York City, Nobel Prize-winning economist Joseph E. Stiglitz and Chairman of Hang Lung Properties Ronnie Chan will give their perspectives on “Housing in a Global Context.” Tomorrow morning at the Grand Hyatt New York, we’ll hear from a number of speakers at a forum entitled “America’s Housing Crisis: Private-Sector Responses and Public Policy Innovation.” To attend Thursday’s forum, click here.
While most of the discussion on Thursday morning is likely to focus on current issues and future possibilities, we decided to take a look back and pose a question to the participants. Below are their responses.
Q: If you were President Obama, what would you have done differently in regard to housing policy?
Jason Gold, Progressive Policy Institute, Senior Fellow:
I would have taken a different approach to the temporary 2009 “First Time Home buyer (FTHB) Tax Credit.” We need a fundamental shift away from the debt-driven relationship we have had with home-ownership in the past. I would have encouraged saving for FTHB’s through the tax code. My colleague, Anne Kim and I, proposed just such a policy concept with the creation of the ”HomeK”, a down payment savings account for FTHB within the 401k. This allows FTHB to save pre-tax for a down payment at the same time they are saving for retirement.
Stan Humphries, Zillow, Chief Economist:
The reality is that the preconditions for the housing recession were set before President Obama took office. The path of home values since has been largely predetermined.
I think Obama has tried a lot on the policy front. Some of his policy has been underwhelming, but that is more due to the nature of the problem than the policy itself. That said, a few things I would have done differently:
1. I would not have instituted the federal homebuyer tax credit. This wasted $30 billion simply pulling demand forward. It also made the market appear more stable than it was in reality and, thus, delayed the timing of the true bottom in home values.
2. I would have implemented a streamlined refinancing program that applied to all mortgages, not just Fannie, Freddie and FHA mortgages. Obama can’t do this now because it would require congressional action, but he could have done it in 2009 when Democrats controlled both sides of Congress.
3. I would have directed Fannie, Freddie and the FHA to sell non-performing loans to the private sector versus waiting until foreclosure is completed and then selling the real estate-owned homes to the private sector. Evidence from the FHA Single-Family Loan Sale pilot program suggests that the private sector deals more quickly with these loans and, often, in ways that keep current occupants in the home.
4. Investors using Fannie financing can currently only hold up to 10 mortgages. This should have been raised to 20 or 30, and banks should have been compensated for increased costs of financing investors with more than four Fannie mortgages.
Christopher J. Mayer, Columbia Business School, Paul Milstein Professor of Real Estate:
While the president has at times been active in discussing housing policy, programs have failed to reinvigorate housing and mortgage markets. The goals of policy should have been three-fold: return mortgage markets to their normal functioning level, reduce as many “preventable” foreclosures as possible while maintaining incentives for home owners to pay the mortgage, and return private capital to the housing market. However, policymakers have been unwilling to take on the GSEs and their regulator, who have squeezed credit, reduced competition among mortgage originators, and hammered homeowners by actively working to prevent what should have been as many as 15-20 million refinancings. Regulatory uncertainty and litigation has kept private capital from returning to the mortgage market. Foreclosure prevention programs were slow, overly bureaucratic, and often ineffective. Today there are still nearly 4 million homeowners who are seriously delinquent on their mortgage and more than 15 million homeowners underwater, with the government originating more than 90 percent of all mortgages. We have not yet fixed these problems.
Spencer Rascoff, Zillow CEO:
President Obama undoubtedly inherited an impossible situation when he took office in the throes of a disastrous housing recession. I applaud most of the White House’s policy responses to date. However, I believe the White House should have been an earlier and more fervent proponent of facilitating bulk mortgage sales to investors, an idea which helps flush inventory through the system and allows distressed homeowners some hope of staying in their house. Though academics have advocated this for several years, the idea has only recently started to be tested. I also would have liked the White House to grant visas to immigrants willing to buy distressed homes. We have discussed these and other policy prescriptions on Zillow Research.
Scott Simon, PIMCO, Managing Director:
This is a very appealing question, but there is actually very little the president can do given the role Congress has in the process.
What could Congress have done?
1) They could have helped new buyers instead of old borrowers.
2) They could have changed DeMarco’s job description from the Freddie/Fannie conservator to a pro-housing policy agenda.
3) They could have sought streamlined foreclosure/delinquency resolutions instead of delays.
4) They could have used the very cheap U.S. funding rates to buy foreclosed assets and rent them (with or without options to buy).
5) They could have increased mortgage availability instead of going along with the reduction of mortgage availability.
6) They could have implemented a meaningful FHA/VA short refi program.
7) Finally, they could have dealt with the real servicer abuses and conflicts of interest regarding second liens.
Richard A. Smith, Realogy Corp., Chairman, CEO and President:
In the ideal world the U.S. government would have promptly organized an Resolution Trust Corp.-like bank to acquire the high risk mortgages of the major lenders, restructured the mortgages, held and managed assets (foreclosed homes) and then liquidated the holdings through private sector sales when the market recovered. All other aspects of the housing market would have been left to the private sector with the exception of standardized underwriting to shore up confidence in the secondary market. It would have been efficient, substantially less disruptive and would have stabilized the housing market within a year.