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From Banking and Finance Law Daily, August 6, 2013

Obama sets forth agenda for rebuilding middle class homeownership

By John M. Pachkowski, J.D.

In a speech in Phoenix, Ariz., President Barack Obama laid out his plan to continue helping responsible homeowners and those who seek to own their own homes. The speech is the second in a series of speeches on the progress the Obama Administration has made since the start of the Great Recession and the work that is left to do to rebuild an economy. All the speeches touch on a “cornerstone” that is necessary to rebuild middle class security. The first cornerstone—jobs—was the subject of the first speech in Tennessee. Future speeches are to focus on education, “ladders of opportunity,” health care, and retirement security.

Build on progress. During his speech, Obama noted that “our housing market is healing,” but “[n]ow we have to build on this progress” to “give to more hard-working Americans the chance to buy their first home,” to “help more responsible homeowners refinance their mortgage,” but also to “turn the page on the bubble-and-bust mentality that created” the Great Recession.

To accomplish these goals, the president provided a number of steps that could be taken “right now, that would make a difference.” He added that “Some of the ideas I put forward today will be new. Some will be old ideas Congress hasn’t acted on yet. But like the other actions we’ve taken, these will not help the neighbors down the street who bought a house they couldn’t afford, then walked away and left a foreclosed home behind. It won’t help speculators who bought multiple homes just to make a quick buck.”

Strengthen the housing market. Obama called upon Congress “to pass a good, bipartisan idea, and allow every homeowner to save thousands of dollars a year by refinancing their mortgage at today’s rates.” He also noted that overlapping regulations should be simplified and red tape cut so that responsible families, who keep getting rejected by banks, can get a mortgage. Another step was for Congress to pass immigration reform. Obama observed that one recent study, the average homeowner has already seen the value of their home boosted by thousands of dollars, just because of immigration. Other steps should ensure that the unevenness of the housing recovery be addressed by rebuilding communities hit hardest by the housing crisis and “make sure families that don’t want to buy a home, or can’t yet afford to buy one, have a decent place to rent.”

Housing finance reform. The President also called for “laying a rock-solid foundation to make sure the kind of crisis we just went through never happens again.” He noted that this process begins by winding down Freddie Mac and Fannie Mae and that there is a bipartisan group of Senators working to toward that end.

Obama also listed four core principles for reforming the national housing finance system. Private capital should play a bigger role. Also, the era of bailouts is over. Obama also noted that “we should preserve access to safe and simple mortgage products like the 30-year, fixed-rate mortgage.” Finally, housing needs to remain “affordable for first-time homebuyers and families working to climb into the middle class.” Obama called on the need to strengthen the Federal Housing Administration.

Debate welcomed. Following the speech, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) issued a statement noting that “the Protecting American Taxpayers and Homeowners Act, puts private capital at the center of the housing finance system; ends the bailout of Fannie Mae and Freddie Mac; and sustains the 30-year fixed rate mortgage—all goals the President today says he supports. Last month, the committee passed this legislation and I look forward to continued debate this fall.”

Hensarling added, “It’s been nearly five years since the financial crisis, which was caused in large part by Washington policies that incented, mandated and browbeat financial institutions to loan money to people to buy homes they ultimately could not afford. It’s been three years since the Dodd-Frank Act failed to do anything about Fannie Mae and Freddie Mac and their record taxpayer-funded bailout. Now it’s time for action to create a sustainable housing finance system—sustainable for taxpayers, for homeowners and for our economy.”

Working with serious partners. The Committee’s Ranking Member, Rep. Maxine Waters (D-Calif), issued a statement saying she was “pleased that the President is making housing finance reform a top priority, and has outlined an approach that is consistent with our recently-released House Financial Services Committee Democratic Principles. Democrats in the House have been taking this effort very seriously for quite some time and stand ready to work with the President on reforming our nation’s housing finance system in a way that protects homeowners, taxpayers, and renters and maintains the affordability of the 30-year fixed rate mortgage.” She added, “I look forward to working with the President and serious partners in the House and Senate on this important issue.”

Companies: Fannie Mae; Freddie Mac

IndustryNews: GovernmentSponsoredEnterprises Mortgages

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