Eight years ago, as Barack Obama woke up the day after he was elected president of the United States, he faced housing and economic challenges of a magnitude not seen since the Great Depression. These included a raging foreclosure crisis and deepening recession, plummeting stock market, a contentious $700 billion Troubled Asset Relief Program bailout, and concerns about whether our major financial institutions could survive.
Today, the storm is over and the financial environment is very different. Facing no economic crisis, the new president has much more flexibility regarding the challenges surrounding housing policies that he might want to take on. How will he choose?
The national homeownership rate is at its lowest level in 50 years. Yet, despite recent decades of a bipartisan consensus in the overriding importance of homeownership, this announcement elicited almost no reaction, no calls to arms for new programs or a commitment to reverse this trend.
Instead, the new president faces different, more subtle challenges. Rents have skyrocketed in many communities and rental affordability for lower- and even moderate-income families and seniors has become a real concern. The government has some tools at its disposal — a newly implemented National Housing Trust Fund, pending affordable rental housing Duty-to-Serve requirements for the government-sponsored enterprises, and federal assistance in the form of Housing Choice Voucher Program and public housing assistance. But the federal budget is tight, and the government has limited tools at its disposal. The question is whether the new president will make this a priority, and if so, whether it will turn to government programs, private sector initiatives, or both, to address the problem.
A second issue is access to mortgage credit. Irresponsible lending practices of the last decade gave to more conservative underwriting policies and the Ability-to-Repay rule. Lenders are also exercising more caution in general. The question is whether we have overreacted in the other direction, whether mortgage credit is too restrictive. And if so, is the answer to push the Federal Housing Administration, Fannie Mae and Freddie Mac to do more to meet housing needs? Or will the new administration work to bring in more private sector lending, by trying to revive the mortgage-backed securities market, or increasing bank mortgage loans.
Federal housing policy issues loom large. Remarkably, it's been more than eight years since the government took the GSEs into conservatorship, with no clear end in sight. It is not clear whether Congress has the stomach to take another crack at reform, given its complexity and ideological divisions. Arguably, this will only become a reality in the next several years if the new administration makes reform a priority, and a commitment to see it through.
Divisions also exist when looking at the Federal Housing Administration. Some believe that as a major source of mortgage loans for first-time homebuyers and minorities, particularly for otherwise qualified lower FICO score and low-down-payment borrowers, the FHA should be doing more, whether by cutting premiums and/or focusing more on helping the still-significant number of distressed borrowers with loan modifications. Others believe that the FHA is standing in the way of private sector lenders coming back into the market, and would like to see the FHA return to more historical levels of market share.
Finally, the most contentious partisan issue going into the next administration and the next Congress likely is what will happen with the Consumer Financial Protection Bureau. The mortgage industry has been at a standoff for six years, with one side arguing that CFPB rules and supervision are stifling mortgage lending and other credit, and those on the other side strongly defending and resisting changes to the Dodd-Frank Act and the CFPB.
The recent ruling on PHH v. CFPB by the U.S. Court of Appeals has raised some questions about the structure of the CFPB and we can expect the CFPB's governance structure to be a continuing battle within Congress. The new administration will have to decide whether to wade into this battle — and if it does, whether it wants to take a side in the debate.
As Thanksgiving approaches, we can all give thanks we don't have the crises we faced the last time a new administration took office. But the preceding discussion shows that there is no lack of issues and choices with regard to housing policies. To be sure, there are a host of other domestic and other foreign policy challenges. So the real question is: where does housing rank on the list of priorities being drawn up as a new administration takes power? We will soon find out.
Scott Olson is Executive Director of the Community Home Lenders Association and former Democratic Housing Policy Director, House Financial Services Committee.