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» Election Coverage WITH NEXT ADMINISTRATION DECIDED, HOUSING POLICY EXPECTED TO STAY THE COURSE By Andy Beth Miller and Ashley Harris The 2012 presidential election season had the housing industry, and default servicing professionals in particular, abuzz with a great deal of discussion about what the future might hold should the vote swing one way or the other. Throughout the campaign, housing and the foreclosure crisis still plaguing Middle America were virtually ignored by both presidential hopefuls, which prompted Dave Liniger, co-founder and chairman of RE/MAX, to issue a stern public warning that was echoed in chorus by industry practitioners from across the country. Liniger told President Obama and Gov. Romney to "first, do no harm" in an open letter to both gentlemen. His message was clear and concise, calling for a "less is more" mentality in regards to correction and forced action. First, Liniger maintained, the Mortgage Forgiveness Debt Relief Act must be extended. Initially approved in 2007, this act is set to expire on December 31, barring any action to preserve it. Without an extension, Liniger projects a possible reduction in the nation's home sales by an immediate 20 percent. Liniger also called for clarification of the housing-specific provisions of the Dodd-Frank Consumer Protection Act—more specifically, a clear definition of "qualified mortgage." Liniger said if regulators craft an unreasonable definition, it will become even harder to obtain a mortgage and potentially add to financing costs. "Even the authors of this legislation have said this was not their intent," he wrote. Industry insiders and home servicing professionals sang a resounding "yes!" to Liniger's words of advice to the presidential candidates. Consumers paid close attention to the election rhetoric, but those looking for a semblance of the candidates' plans to address ongoing problems in the housing market were left in the dark. Both men were "frustratingly light on detail" with regards to housing, analysts with Capital Economics observed. The firm's report noted the two former candidates' policies likely had more in common than they cared to admit. On the continuation of current housing policies, President Obama and Gov. Romney largely agreed. Both men supported selling off government-owned REOs to investors, a process that has already been tested to 14 some success. Both favored the greater use of foreclosure alternatives, promoting a shift toward short sales and deeds-in-lieu of foreclosure. And both shared at least a small section of common ground with regards to principal reductions. "Obama supports outright principal reductions on underwater mortgages owned or guaranteed by Fannie Mae and Freddie Mac in an attempt to reduce the delinquency rate. Romney, meanwhile, gave a brief supportive mention to shared appreciation—whereby lenders forgive borrowers some of their outstanding mortgage balance in exchange for a share of future house price gains—in his housing plan," explained Paul Diggle, a property economist with Capital Economics. According to Dale McPherson, president and CEO of Field Asset Services, "[A] newly elected administration may see the election as giving it a green light to completely loosen and free up the default mitigation process, putting the nation on an instant fast-track to market correction." McPherson drove a key point home when he acknowledged that when all is said and done, "most Americans are concerned with … what is going to happen to their jobs, as that directly affects their ability to qualify for a loan, which in turn directly affects the health of the housing market." Now that President Obama has won a second term, his administration is charged with leading phase two of the housing recovery, which ideally will materialize as collaboration with the mortgage industry to reduce regulatory uncertainty, according to a report from Clear Capital. "President Obama's housing policies must evolve to turn the recovery's sprint into a marathon," said Dr. Alex Villacorta, director of research and analytics at Clear Capital. "With a re-election secured, President Obama has the opportunity to stimulate lending activity by being bolder on policy." Overall, the re-election of President Obama for another four years means the markets have one less thing to worry about. Stock markets could also be buoyed by news that the Federal Reserve is more likely to continue quantitative easing for a longer period of time under President Obama than it would have under Romney, considering the former Massachusetts governor wanted to install a more hawkish Fed chairman. But Obama's re-election does not change the bigger economic or fiscal picture. Over the next couple of years, the U.S. economy will remain saddled with an uncomfortably high unemployment rate and will struggle to grow by more than 2 percent a year, according to Capital Economics. And at some point, some combination of tax hikes and spending cuts will be needed to prevent the federal government's debt from spiraling toward 100 percent of GDP, added the firm's chief U.S. economist. As was expected, following the election, investors have turned their attention to the complicated issues of the fiscal cliff and broader industry regulation. The president faces the unique challenge of creating a collaborative environment on Capitol Hill so that legislation to assist homeowners and the market at large can pass. He's likely to even face some opposition from within his own administration. The Federal Housing Finance Agency (FHFA), for example, has expressly banned principal reductions on GSE loans and has so far "made for an effective roadblock" stymying any progress on that front. Diggle speculated that the forced removal of FHFA Acting Director Edward DeMarco may be necessary to procure any support from the GSE conservator. However, it appears Obama has few viable alternatives to DeMarco, according to Barclays. The global banking and financial giant believes that speculation regarding DeMarco and his possible replacement is mostly a distraction with respect to purchase mortgage availability. The bottom line is that loan modifications and mass refinancings have no real beneficial impact on housing demand or mortgage availability, since they generally depress housing turnover, Barclays says. Meanwhile, GSE reform as a "President Obama's housing policies must evolve to turn the recovery's sprint into a marathon. With a re-election secured, President Obama has the opportunity to stimulate lending activity by being bolder on policy." —Dr. Alex Villacorta, director of research and analytics at Clear Capital

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