July 2012

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COVER STORY can push past Congress by mod- ifying existing programs like the Home Affordable Modification Program. But here, again, there could be opposition—not from politicians, but from Fannie and Freddie, who might have to realize even greater losses than they've already sustained on insured mortgages. There's one hugely bright On the Campaign Trail: tory picture between now and November, but beyond that, things get murky. Democrats could conceivably hold the Senate and the White House, and perhaps even pick up the House, giv- ing them carte blanche to push more principal reductions, refinances, and rental deals with investors. There's a better chance that Republicans will make great gains, taking over the Senate and the Oval Office, meaning Obamacare, Dodd-Frank, and agencies like HUD and the FHFA could be on the chopping block. But the likeliest scenario of all is more of the same: more mixed government, and more stagna- tion. Get used to it. An old New York mayor once said, "There's no Republican or Democratic way to clean the streets." Maybe so, but there's plenty of Republican and Democratic ways to leave them dirty. spot for fans of the adminis- tration's action: sales of REO to investors who will convert the properties to rentals. The Federal Housing Finance Agency (FHFA) has already invited investors to prequalify for a pilot phase. "This is an impor- tant step toward increasing private investment in foreclosed properties to maximize value and stabilize communities," said FHFA Acting Director Edward J. DeMarco. Important, sure, but how important? It's hard to say—though, as Federal Reserve Chairman Ben Bernanke pointed out in February, REO-to-rental is hardly a "silver bullet" for all the housing market's ills. This, in any case, is the regula- Obama and Romney on Housing What do the candidates really think about the housing and mortgage markets? Here they are in their own words. Barack Obama Obama // Announced intention this spring to wind down the GSEs and bring more private capital to the mortgage markets. But: "It's going to be a complicated process," Treasury Secretary Timothy Geithner warned in February. "We don't expect to legislate this year." Mitt Romney On Fannie Mae and Freddie Mac: Romney // "I think you know that Fannie Mae and Freddie Mac were a big part of why we have the housing crisis in the nation that we have . . . And are they a problem today? Absolutely. They're offering mortgages again to people who can't possibly repay them. We're creating another housing bubble, which will hurt the American people." On Refinancing and Other Workouts: Obama // Would ease FHA refinancing rules, saving homeowners about $3,000 a year, paid for by a fee on big banks: "While government can't fix the problem on its own, responsible homeowners shouldn't have to sit and wait for the housing market to hit bottom to get some relief." Romney // Has stated that the government is doing too much to stall foreclosures: "Don't try to stop the foreclosure process; let it run its course and hit the bottom," he's said. "The idea of the federal government running around and saying—'Hey, we're going to give you some money for trading in your old car, or we're going to give you a few thousand bucks for buying a new house, or we're going to keep banks from foreclosing if you can't make your payments'—these kind of actions on the part of government haven't worked." On Government Housing Agencies: Obama // Wants them to enforce a new homeowner's bill of rights: "Now that our new consumer watchdog financial agency is running at full steam, now that Richard Cordray is in as the director of the Consumer Finance Protection Bureau, they're moving forward on protections like this." Romney // "I'm going to take a lot of departments in Washington, and agencies, and combine them. Some, [I'll] eliminate . . . Things like Housing and Urban Development, which my dad was head of, that might not be around later . . . I'm going to probably eliminate for high-income people the second home mortgage deduction." In early June, campaign representatives hinted Romney might also dismantle the CFPB. On Default Regulations: Obama // Obama continues to insist on tighter regulation of the market: "We've all paid the price for lenders who sold mortgages to people who couldn't afford them and buyers who knew they couldn't afford them. That's why we need smart regulations to prevent irresponsible behavior." Romney // Romney states that he would "Repeal Dodd-Frank and replace with streamlined, modern regulatory framework" on his website: "Bankers have been very slow in renegotiating the mortgages, helping people go through the process, short sales and so forth that allow these products, these homes, to be taken out of the market so they can be bought by new investors. Government has made it harder for the banks to do it." THE M REPORT | 25

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