White House signals more aggressive stance to protect homeowners

The Obama administration has signaled to allies that it will take a more aggressive role this year in protecting homeowners from foreclosure, a posture that fits with Obama’s populist campaign stance.

Housing is poised to become a significant issue in the 2012 campaign season and President Obama’s allies acknowledge the administration’s efforts to help homeowners, while well intentioned, have fallen short.

Democrats in Congress and liberal advocates have pushed the president to do more to protect homeowners as analysts expect the pace of foreclosure to pick up in the election year.


The message has sunk in

“There’s an understanding now in the administration that there needs to be a comprehensive strategy to diminish the foreclosure rate and clean up the housing problem,” said Rep. Barney Frank (Mass.), ranking Democrat on the Financial Services Committee, which has jurisdiction over the mortgage giants Fannie Mae and Freddie Mac.

Frank said the economy is showing good movement but argues to achieve a full recovery the administration needs to do something comprehensive on housing.

“There’s a lot of conversation going on,” Frank said of talks with the administration to find solutions that do not require the expenditure of taxpayer money, a constraint during a time of record budget deficits.

He expressed disappointment the Department of Housing and Urban Development did not do more to take advantage of the $1 billion Congress made available to it temporarily to help unemployed homeowners.

Frank and liberal-leaning advocates want the administration to put more pressure on banks to do more to help troubled homeowners refinance mortgages.

“We need to put more pressure on the banks,” Frank said.

“The four largest servicers are the four largest banks. I don’t believe investors have a right to resist that,” he added.

He acknowledged that many borrowers were irresponsible and some should not be saved but stressed the importance of tackling what many experts see as the biggest obstacle to the economic recovery, the mired housing market.

“The other thing to remember, the main reason is not to help individuals, it’s to help the economy,” he said.

Putting more pressure on the banks to help troubled homeowners refinance has emerged as the most likely option, given the extreme difficulty of persuading the GOP-controlled House to set aside more money to avert foreclosures.

The administration could dramatically speed the pace of home mortgage refinancings by clearing obstacles at Fannie Mae and Freddie Mac but Edward DeMarco, the acting director of the Federal Housing and Finance Agency, which has oversight of the mortgage giants, has been hesitant to take an activist role. Obama's hands are tied because Senate Republicans refused to confirm his nominee to replace DeMarco.

A White House official said Obama has taken the housing crisis seriously since the start of his term and will look to augment the effort in the months ahead.

“From day one the President has worked to stabilize the housing market and help responsible homeowners stay in their homes, including through refinancing efforts, foreclosure prevention programs and programs directed at the hardest hit states,” said White House spokeswoman Amy Brundage. 

“The President will continue to expand on these efforts and look at new ways to help homeowners, just as he has over the past few months with new programs to help underwater homeowners and expanding forbearance so more unemployed homeowners can stay in their homes,” she said.

The Center for Responsible Lending estimates the nation is only halfway through the disclosures stemming from the 2008 housing market bust.

“It’s not good for the economy,” said Kathleen Day, a spokeswoman for the non-partisan group.

Wade Henderson, president of the Leadership Conference on Civil and Human Rights, which has played a leading role in advocating for homeowner relief, said the administration is gearing up for action.

“They’re examining all the options that can contribute to a solution,” he said. “The administration is beginning to look at how its influence can encourage” lenders to help underwater borrowers.

He expects “more over pronounced oversight and some interventions consistent with the market.”

He said the efforts to date have fallen short.

“It’s fair to say those initiatives were modest,” he said.

The administration’s Home Affordable Modification Program proved to be a disappointment as far fewer homeowners participated than was first expected. Critics contend the program’s tepid performance was due to reluctance among mortgage servicers to process refinancing applications. 

Henderson believes Gene Sperling, director of the National Economic Council will be an important ally, noting that his efforts were instrumental to expanding a mortgage payment forbearance program for the unemployed from three to 12 months.

Obama acknowledged in July that his administration’s housing policies did not meet expectations as many underwater homeowners were unable to obtain refinancing.

“We’re going back to the drawing board, talking to banks, try to put some pressure on them to work with people who have mortgages to see if we can make further adjustments, modify loans more quickly, and also see if there may be circumstances where reducing principal is appropriate,” he said.

There’s evidence housing is heating up as a potentially explosive political issue.

Hundreds of anxious homeowners attended a rally at the state capitol in South Carolina this week to demand greater attention to housing problems, particularly the expected surge in foreclosures. The event drew GOP presidential candidate Newt Gingrich and House Assistant Democratic Leader Jim Clyburn (D-S.C.).

Housing experts warn the issue could become a problem for Obama if he does not take significant action. 

“The failure of administration to point to any successful intervention that helps homeowners and the persistence of weakness in the housing market is tailor-made for becoming a political football as this campaign heats up,” said Barry Zigas, director of Housing Policy for Consumer Federation of America.