Housing is "extremely important to the President," a key White House advisor told the Mortgage Bankers Annual convention in Chicago.
"Housing is one of the core causes that got us into this mess, and it is key to getting us out," said James Parrott of the President's National Economic Council. "It may not lead us out of the recession, but if we don't get housing going, the recovery will be much slower and more painful."
Parrott made his remarks to frame a session on the political outlook for housing finance, an outlook economist Mark Zandi said is surprisingly strong. "I don't think our problems are overwhelming," he said. "All we need to do is a few things around the edges."
As the chief economist at Moody's Analytics sees it, the most telling statistic going forward will be the share of sales that are distressed properties, and whether it is rising or falling. Once the percentage starts to fall, house prices will stabilize and then start to grow, he predicted.
Jared Bernstein, a former economic policy advisor to Vice President Biden who now works at the Center on Budget and Policy Priorities, agreed, adding that "we're close" to that point now.
To push the market along, Bernstein would urge Fannie Mae and Freddie Mac to do more regarding loan modifications and perhaps even engage in principal writedowns. And he would ask Congress to turn over authority to run the government sponsored enterprises to the Administration on a temporary basis while they rid themselves of bad loans.
Bernstein said he finds no fault with the way the Federal Housing Finance Agency is overseeing the GSEs to protect taxpayers. "But their rationale is wrong," he told the conference. "Their loans are defaulting, so it's going to cost the government, either way."
A third panelist, consultant Brian Chappelle of Potomac Partners, said there are "lots of opportunities to make policy changes that would have a meaningful impact" on the housing market. But perhaps the most important would be for lawmakers and regulators to strike a better balance, a suggestion that won approving applause from the audience.
As it is now, Chappelle said, Congress and regulators are "going after the whole mortgage system for problems that no longer exist, and that has a suffocating effect on the marketplace."
The consultant said every large lender he talks to "is scared to death that someone will come in with a fine-tooth comb and fine technical problems (with their mortgages) that have nothing to do with underwriting. There has to be balance on both sides, or the only thing lenders can do is tighten up on the front end."
