During a speech this week in Nevada, President Barack Obama announced a new plan designed to fix the nation’s ailing housing market and shore up the economy. At a time when more than 10 million Americans owe more on their homes than they are worth, President Obama said his administration aims to remove restrictions that prevented millions of Americans from taking advantage of existing programs designed to reduce monthly mortgage payments.
The move represents the administration’s response to a comment made by GOP presidential candidate and front-runner Mitt Romney in last week’s eighth Republican debate. Romney said, “The right course is to let markets work.” He also told the Las Vegas Review-Journal, “Don’t try to stop the foreclosure process. Let it run its course and hit the bottom.”
Obama Press Secretary Jay Carney countered on Monday, saying, “The answer is not to simply let the housing market bottom out and let investors come in and fix the problem. That’s not a solution. ‘Tough luck, I’m not going to help you’ — that’s not this president’s approach.”
During his remarks in Las Vegas, the president expanded on Carney's comment, criticizing the Senate minority leadership, who led the charge to defeat “The American Jobs Act” and then defeated individual portions of the jobs bill. The president maintains that a robust housing market is part and parcel of a stronger job market.
Washington insiders have been speculating for weeks about whether Romney will release his own housing plan. With the president’s announcement Monday, the Romney campaign may now be forced to unveil its own plan to counter the administration’s proposal.
The president’s plan, developed by Secretary of Housing and Urban Development Shaun Donovan , seeks to allow current homeowners to refinance their mortgages despite how far the value of their homes have fallen, while significantly altering or eliminating steeply prohibitive refinancing charges.
Under the changes, the Federal Housing Finance Agency would eliminate the 125 percent loan-to-value ratio cap that previously was part of the president’s housing program. This action would allow more coverage to borrowers who have fallen behind on payments, although they still must have a loan-to-value ratio of 80 percent or more. In addition, homeowners would no longer be required to obtain a new property appraisal as long as loan giants Fannie Mae or Freddie Mac already have a financial assessment on file.
By addressing of the housing issue so soon after Romney’s statement, the president indicates that this issue will continue to be a hot issue throughout the 2012 campaign season. However, the mortgage crisis will only be one facet of a larger debate on the health of the American economy overall.