However, such foreclosure actions were not taken as a result of Obama administration policies. Rather, they occurred because the housing market crumbled and credit markets shut down beginning in 2007, well before Obama took office.
According to most estimates, the number of homes actually lost to foreclosure is 3.7 million to 4 million.
The rest were either modified, disposed of through short sales or tied up in a backlogged system caused by the mortgage servicers themselves and the swarm of government programs Romney criticizes in his plan: “President Obama rolled out an alphabet soup of more than 10 housing finance programs rather than offering a real solution.”
So that would be that for the Home Affordable Modification Program, one of the most maligned and underwhelming programs, funded in part via the government’s bank bailout known as the Troubled Asset Relief Program. HAMP and its reams of new guidelines, as Romney sees it, is just as overwhelming as the mounting piles of troubled mortgages facing the servicers still.
The program expires at the end of next year, but House Republicans already cleared a bill to end HAMP. If Republicans gain a Senate majority in November, and Romney wins, they could succeed in their efforts to kill HAMP before it expires.
Romney has given hints along the campaign trail that not every housing recovery program under the Obama administration was a bad idea. He gave a glimpse to the Las Vegas Review Journal in July, seven months after the Lehigh Acres speech. He sat down with the paper’s editors in a state that held the highest foreclosure rate in the country nearly every month since 2007 and one with the highest percentage of underwater borrowers. Three out of every five homeowners in the area owe more on their mortgage than their house is worth. If he wants to win the state in November, he needs to be precise.
Here, he throws his support behind the Home Affordable Refinance Program, known as HARP. Through it, mortgage servicers refinanced more than 1.5 million Fannie Mae and Freddie Mac loans as of July31. In the first seven months of 2012, servicers completed 519,000 HARP refis, more than 400,000 in all of last year, after the program was expanded.
“I think the idea of helping people refinance homes to stay in them is one that’s worth further consideration, but I’m not signing on until I find out who’s going to pay and who’s going to get bailed out, and that’s not something which we know all the answers to yet,” Romney told the paper.
In fact, he appears to like a few more ideas from the administration as well. The Romney plan includes room to “facilitate foreclosure alternatives for those who cannot afford to pay their mortgage.”
This may allude to more short sales or deeds-in-lieu. There’s already a government program built to do just that, but it might be one of the ones Romney vows to throw out. The Home Affordable Foreclosure Alternatives Program, known as HAFA, launched in April 2010. More than 55,000 short sales have been completed through June.
Romney also wants to “responsibly sell the 200,000 vacant foreclosed homes owned by the government.”
But Fannie Mae, Freddie Mac and the Department of Housing and Urban Development reduced their inventory of REO by 18% over the last year to just more than 202,000 properties. At its height of REO inventory in 2010, Fannie held nearly 162,500 previously foreclosed homes. Fannie Mae trimmed that down to a little more than 109,000 properties as of June 30 and is getting more for them as a percentage of the unpaid principal balance than at any point since the recession struck.
The Obama administration also pushed the Federal Housing Finance Agency to develop programs to handle the shadow inventory of foreclosed homes. It launched pilots to rent out properties owned by the government-sponsored enterprises or sell them to investors who would then rent them out.
“Allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up,” Romney said.
Mending a broken foreclosure process is already under way, too. Wells Fargo, for instance, said in August that it would have all consent orders and settlement standards — all 300 of them — implemented by October. Short sales are now more common nationally than REO sales, and those foreclosed homes that are being sold are being unloaded for more money than at any point since 2010, according to RealtyTrac.
The GSE Problem
There are other more complex and politically unsavory problems waiting for whoever takes the reins of the economy in January. The answers to how Romney might approach those, actually came because of an unlikely source: Newt Gingrich.
The Florida campaign lunges toward another debate on Jan. 26. Newt Gingrich, arguably Romney’s most troublesome opponent, stares at his podium. Just before the debate, his ties to Freddie Mac were uncovered. He worked as a consultant to the GSE during the bubble and, according to critics, lobbied members of Congress not to crack down on the mortgage giants even as the housing market was overheating around them.
Romney turns on Gingrich at the debate, and in doing so, reveals what he would do with Fannie Mae and Freddie Mac.
“I think Fannie Mae and Freddie Mac were a big part of why we have the housing crisis in the nation that we have. We’ve had this discussion before. Gingrich was hired to promote them, to influence people in Washington, to encourage them not to dismantle these two entities. I think that was an enormous mistake. I think instead we should have had a whistleblower and not a horn-tooter,” Romney says, almost as frantic as he can get. “He should have stood up and said, “Look these things are a disaster. This is a crisis.’
He should have been anxiously telling people that these entities were causing a housing bubble that caused a collapse that we’ve seen here in Florida and around the country.”
Applause. Gingrich is noticeably uncomfortable. But next, Romney steps a bit too far, and the result might give the industry insight to his preference for the ideal over the reality that Fannie and Freddie have held up the housing market since the crash. For all the disaster they caused, they’re still financing mortgages and by all accounts pretty solid ones. Try getting a GSE loan through today without at least a 720 credit score and a sizable down payment.
“And are they a problem today? Absolutely,” Romney declares. “They’re offering mortgages again to people who can’t possibly repay them. We’re creating another housing bubble that will hurt the American people.”
The Romney campaign did not reply to requests to clarify.
What’s interesting to note, though, was that this part of the debate was kicked off with a question from a voter. The question: “How would you phase out Fannie Mae and Freddie Mac?” Instead of answering, Romney used it to score a blow against Gingrich.
Similar answers come from Romney’s running mate, Rep. Paul Ryan, R-Wis. As head of the House Budget Committee, Ryan released a plan was passed by the House last year to slash spending across nearly every sector of the government, excluding the military.
The long-term outlook of the Ryan plan involves a complete wind-down of the GSEs and an end to the $188 billion in bailouts so far.
The Ryan budget would “privatize the business of government-owned housing giants, Fannie Mae and Freddie Mac, so they no longer expose taxpayers to trillions of dollars’ worth of risk.”
The Romney plan released in September also makes this view clear: “Mitt Romney will reform these government-sponsored companies to protect taxpayers from additional risk in the future by ensuring taxpayer dollars in the housing market are replaced with private dollars.”
The Obama administration’s three options for Congress to consider was released in February 2011 and includes various degrees of government support to the future mortgage market. It allows for a completely private option should lawmakers choose it. But that was where the process stopped with the exception of roughly 15 bills by House GOP members, each largely duplicative of the conservatorship agreements.