Why the Candidates Aren’t Talking About Housing

Source: The Wall Street Journal
By Nick Timiraos

Few events have reshaped the nation over the last half-decade as much as the housing crisis—particularly in key battleground states such as Florida, Ohio, and Nevada. But neither the Obama nor the Romney campaign has had very much to say about it. Housing’s absence from the campaign debate has led to lots of head-scratching among pundits, though there is an obvious explanation for why it has taken a back seat: housing is a political loser. All potential fixes are messy. Some are very expensive and reward irresponsible behavior. None will be a cure-all. And each will leave someone feeling left out. That was the view articulated two years ago by Richard Berner, then the chief U.S. economist at Morgan Stanley, shortly before he joined Obama’s Treasury Department. “Many policy options are available to fix America’s dysfunctional housing and mortgage markets,” he wrote. “But the political will to deploy them is scarce.” President Barack Obama has shied away from much discussion of his housing record (it is hard to find on his campaign website), though he continues to push Congress to liberalize rules that would allow more homeowners to refinance, the latest in a series of programs his White House has put forward. His administration failed to spend large sums of the money it had allocated for reworking troubled mortgages, for which it has received heavy criticism from the left. White House officials have argued that those policies nevertheless helped move the mortgage industry towards providing more sustainable loan modifications, and default rates on modified loans are down significantly from four years ago. Though it has a better record stabilizing mortgage markets to keep credit flowing to borrowers who have been able to refinance loans and buy homes at ultralow interest rates, the administration has offered little in the way of concrete plans to remake failed mortgage giants Fannie Mae and Freddie Mac. The Federal Housing Administration is also facing unprecedented losses given its role backing large volumes of low-down-payment mortgages since 2007. Republican challenger Mitt Romney has offered little detail about what his administration would do differently, passing up what would seem to be a golden opportunity to put Mr. Obama on the defensive. One of his top economic advisors, Glenn Hubbard, was an early champion of the push to boost refinancing. Mr. Romney hasn’t embraced that issue, which would align him with Mr. Obama. Mr. Romney faces a delicate balancing act. He has criticized Mr. Obama’s housing-rescue efforts as simply kicking the can down the road and says that he would focus on growing the economy instead. But that leaves an impression that he might recommend doing even less for at-risk homeowners looking to the government for more help. If your opponent is unpopular for promising to fix the problem and then falling short, it could be risky to advertise that you would offer even less. Mr. Romney walked into this political minefield last October when he told a Nevada newspaper that foreclosures should be allowed to run their course. Nevada had recently passed a law that brought foreclosures to a standstill and has led to large declines in home sales. Critics jumped on the statement as proof of Mr. Romney’s apathy towards struggling borrowers. (Mr. Obama, as a candidate in 2008, argued that heavy-handed intervention, such as an interest-rate freeze and foreclosure moratorium proposed by Hillary Clinton, also risked delaying a market recovery). Mr. Romney’s campaign website, in a new page added this week, says he would promote foreclosure alternatives—presumably short sales, where banks allow homeowners to sell at a loss—for those who can’t afford to stay in their homes. It also says he would roll back a wave of forthcoming regulation designed to curtail the abuses of the subprime years, but which the mortgage industry and even some consumer advocates call ill-conceived. Mr. Obama has learned how difficult the housing problem is to fix, while Mr. Romney has discovered how hard it is to talk about in a sound-byte-driven campaign cycle. In short, housing doesn’t fit easily onto a bumper sticker. At least until next month’s presidential debates, a serious discussion may have to wait.

URL to original article: http://blogs.wsj.com/developments/2012/09/06/why-the-candidates-arent-talking-about-housing/

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