By Justin Sink - 08/06/13 08:02 PM EDT
President Obama on Tuesday outlined a series of policies he said would save home ownership for the middle class.
In a speech Tuesday in Arizona, one of the states hit hardest by the housing crisis that precipitated the economic recession, Obama called for winding down Fannie Mae and Freddie Mac.
He also said Congress should authorize a $15 billion program to rehab and demolish vacant lots in areas like the Sun Belt where the collapse left scores of empty and unfinished homes.
The speech was the latest effort by the president to align himself with middle-class economic interests ahead of pitched battles this fall with congressional Republicans over funding the government and raising the debt ceiling.
In a series of speeches across the nation, the president has claimed credit for policies that enabled the economic recovery, and argued that his vision should prevail in the upcoming fights.
“Thanks to the grit and resilience of the American people, we’ve cleared away the rubble from the financial crisis, and begun to lay a new foundation for stronger, more durable economic growth,” Obama said. “But as any middle-class family will tell you, we’re not where we need to be yet.”
Obama said Washington's “highest priority” should be reversing the trend by which “the top were doing better and better, while most families were working harder and harder just to get by.”
He outlined a series of federal programs and policies he hoped could aid the housing market as it looks to rebound from the bust that wiped out some $7 trillion in homeowner equity.
With homes serving as the primary investment of many in the middle class, Obama argued that the nation's financial security was dependent on a stable housing market.
“We give to more hard-working Americans the chance to buy their first home,” Obama said. "We have to help more responsible homeowners refinance their mortgage. And above all, we have to turn the page on the bubble-and-bust mentality that created this mess, and build a housing system that’s durable and fair and rewards responsibility for generations to come.”
The president argued that the government's role in the housing market should remain limited, encouraging the return of private capital to the market and removing the responsibility of backing mortgages from the taxpayers.
“For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” Obama said of Fannie Mae and Freddie Mac. “It was 'heads we win, tails you lose.' And it was wrong.”
Obama acknowledged that his call to reduce the role of government in the mortgage market could seem out of character.
“I know that must sound confusing to the folks who call me a raging socialist every day,” Obama quipped.
But he also pushed for measures that would make it easier for homeowners to refinance at lower rates and for simplifying the regulations and red tape that plague the lending process. And Obama declared that Congress “should preserve access to safe and simple mortgage products like the 30-year, fixed-rate mortgage.”
With his proposals, the president offered at least tacit support for the Senate bill sponsored by Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.), which would wind down Fannie and Freddie but also create a new “Federal Mortgage Insurance Corporation” that would collect insurance premiums but provide less a backstop for private lenders.
Housing and Urban Development Secretary Shaun Donovan said Tuesday that the bill roughly met the principles Obama wanted to see from mortgage reform.
“Similar to what we’ve seen on immigration reform, he’s not going to agree on every detail, but broadly speaking he believes this bill fits his four key principles that he’ll lay out today, but he does want to see them go farther on certain areas, particularly on making housing affordable,” Donovan said.
Obama also asked the Senate to precede with the confirmation of Rep. Mel Watt (D-N.C.) as the head of the Federal Housing Finance Agency. Lawmakers are unlikely to act on the nomination before they return from their August recess.
“He’s the right person for the job, and Congress should give his nomination an up-or-down vote without any more obstruction or delay,” Obama said.