California Dems want a sit-down with Obama over 'insufficient' housing policy

Exasperated over the Obama administration's response to the ongoing housing crisis, a large group of California Democrats has asked to meet directly with the president.

Behind Reps. Zoe Lofgren, Anna Eshoo and Mike Thompson, 27 House Democrats have requested a sit-down with Obama to discuss what they say is a failure of his administration to prevent foreclosures.

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"There still seems to be no bold or effective action taken by the Administration," Lofgren said in a statement.

"Nothing the Administration has tried is working and Californians are the ones suffering," Thompson echoed.

In a letter to Obama, the lawmakers said their previous meetings with other high-level officials – including Treasury Secretary Tim Geithner, Housing and Urban Development Secretary Shaun Donovan and Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA) – haven't yielded sufficient results. This time around, they want to take their argument directly to the top.

"Despite our efforts, we have concluded that efforts by both the government and the private sector have not addressed our nation’s foreclosure crisis with sufficient urgency," the lawmakers wrote Thursday. "We therefore request a meeting with you at the earliest opportunity to discuss additional actions your Administration can take to tackle the foreclosure crisis that is hurting so many of our constituents and slowing our economic recovery."

Among other proposals, the lawmakers are pushing Lofgren's bill to allow underwater homeowners who file for Chapter 13 bankruptcy to skip interest payments for five years – a move designed to reduce principal balances more quickly.

The Democrats said they raised the notion with Geithner, Donovan and DeMarco, "all of whom expressed an interest in the idea," they wrote to Obama.

"However, we have yet to receive a decision from your Administration," they added. "Why not?"

Earlier in the month, the same group of Democrats had urged Obama to use a recess appointment to name a new head of the FHFA, the independent agency that regulates Fannie Mae and Freddie Mac. They argued that DeMarco, the temporary FHFA director, has prioritized the concerns of Freddie and Fannie above those of struggling homeowners.

"The current economic crisis began in the housing market and our economic recovery is dependent on the important work pending before the FHFA," the Democrats wrote Jan. 11. "It is time to move forward and put in place a permanent FHFA director."

The White House has not responded to that request.

Staying true to custom, House Minority Leader Nancy Pelosi (D) did not endorse either delegation letter. But the San Francisco liberal jumped into the housing debate earlier this week when she amplified her support for proposals to reduce both interest rates and principal balances for homeowners struggling to stay afloat.

"There are all kinds of ways that we could have reduced the principle and the interest payments," Pelosi said Tuesday, in an interview with Politico.

"To the extent that we did that we would take some of the upside when ... the market came back," she added. The federal government would have part of the upside, and the owner would have part of the upside."

Pelosi said Washington policymakers ultimately need to conduct "a tough-minded, cold-blooded analysis" to examine how well the nation's lenders have responded to the foreclosure crisis, which still lingers even as Wall Street has rebounded from the recession. Echoing housing advocates and a number of other Democrats, she suggested the banks are prolonging the crisis.

"I've had people come to me and say, 'My banker has said to me ... you are more valuable to me in foreclosure,'" she said. "It's not just about people staying in their homes and the dignity of that. It's also about what this means to our economy. Our economy is never going to be fully well until this happens."

Asked how well the Obama administration has responded to the housing crisis, Pelosi was careful not to be too critical. Still, she conceded that, "Something could have been done sooner."

California lawmakers have been highly energized over the housing issue because the crisis hit their state harder than almost any other. Indeed, one in every 211 California properties was in some stage of foreclosure in November – the second highest foreclosure rate in the country, according to RealtyTrac, an online foreclosure database. Only Nevada is faring worse.

By contrast, the national foreclosure rate was one in every 579 properties, RealtyTrac found.

Speaking to a joint session of Congress in September, Obama raised the hopes of housing advocates on and off Capitol Hill by vowing “to work with federal housing agencies to help more people refinance their mortgages” in order to take advantage of historically low interest rates.

In response, DeMarco tweaked the administration's primary refinancing initiative – the Home Affordable Refinance Program (HARP) – to eliminate the current 125 percent loan-to-value ratio cap, effectively opening the door to more underwater borrowers. The agency also scrapped certain restrictive appraisal requirements, as well as some fees now charged to homeowners who refinance into shorter-term mortgages.

Democrats welcomed those changes, but maintain they'll help only a fraction of the homeowners currently facing foreclosure.

Rep. Elijah Cummings (Md.), among the sharper DeMarco critics, said recently that there's been a "disconnect" between FHFA leaders and Obama.

"I don't think he [Obama] realized how significant the problem was," Cummings, the senior Democrat on the powerful Oversight and Government Reform Committee, told The Hill last month. "And I don't think he realized how his people were not effectively addressing this issue."