Government is the Housing Crisis Cause, and Solution: Poll
NEW YORK (
) -- The Obama administration has made addressing the weakness in the housing market a priority, as it heads into the Presidential elections.
But the public seem undecided on whether the government should do more to stimulate the housing market five years into the bust or reduce its involvement and allow prices to hit bottom on their own.
In a
poll run by
TheStreet
over the last two weeks, readers were asked if Congress should back Obama's recently announced mortgage plan that would allow "responsible" homeowners, including those who owe more than their homes are currently worth, save an average $3,000 a year by refinancing their mortgages at attractive interest rates.
Out of the more than 400 readers polled, 51% said Congress should not back the plan as the government needed to quit trying to fix the housing market and should stay out of housing. The remaining 49% believed that homeowners who are current on their mortgage payments deserve relief.
The narrow majority, however, shows that voters are likely split on housing policy and that the government's role in propping the market will remain at the center of political debates in the run up to the elections.
The Obama administration has announced a slew of measures to boost housing and provide borrower relief in recent days.
Last week, President unveiled details of a broad refinancing program directed at helping "responsible" homeowners, including those who owe more than their homes are currently worth, save an average $3,000 a year by refinancing their mortgages at attractive interest rates.
The $5 billion to $10 billion proposal, first announced at the State of the Union address, is expected to be funded by a proposed "Financial Crisis Responsibility Fee" that would be imposed on the largest financial institutions, based on their size and riskiness.
The refinancing plan, which requires Congressional approval, has already been called
"dead on arrival" , as Republicans are unlikely to approve a "bank tax" and have criticized previous plans from the White House that attempt to help borrowers refinance or modify their loans.
President Obama also put forward a "Homeowner Bill of Rights" that would bring a uniform set of standards to make sure lenders "play by the same rules."
Separately, the
Federal Housing Finance Agency
(FHFA) also announced a pilot program to convert GSE-owned foreclosed properties into rentals.
Meanwhile, the Treasury announced changes to its guidelines on modifying loans, offering servicers
triple the original incentive to reduce principal on mortgages.
The White House is also pressuring the 50 state attorneys general to reach an agreement with the nation's top servicers including
Bank of America
(BAC) - Get Report
,
JPMorgan Chase
(JPM) - Get Report
and
Wells Fargo
(WFC) - Get Report
, over allegedly deceptive foreclosure practices. The
$25 billion settlement is likely to require banks to reduce principals on mortgages, address their foreclosure procedures and offer some borrowers an opportunity to refinance at lower rates.
Nearly 8 million homeowners who are current on their mortgage payments owe more than their homes are worth and are likely to welcome the raft of measures that could ease the burden on their wallets.
At the same time, the government programs are often seen as favoring certain kinds of borrowers over others- such as those with government-sponsored mortgages over private mortgages or those with more equity in their homes compared to those with less.
Banks complain that the government programs are often too restrictive and claim to modify more loans under their own proprietary programs.
Readers of TheStreet seem to be in favor of government programs so long as they do not go soft on reckless lenders or borrowers.
"I don't think this is a "yes/no" kind of question," said one reader in response to the poll. "The homeowners who are underwater need to know there is a light at the end of the tunnel, but I don't think that should come along with a 'get-out-of-jail-free' card for those who engineered this collapse."
There is a lot of quibbling over who gets to qualify as well. "I support the plan only if borrowers who are current on their debt but have 1) a FICO score as low as 620 and 2) waive some of the (just put in place) rules for condominiums owners," another reader commented. "Plus I agree that we should not provide a "get-out-of-jail free" card for the people who traded the credit default instruments with the knowledge that there was nothing standing behind the instrument to sale if there was a default."
The trouble is the mortgage mess is too deep for the government to address without running up a huge deficit and being accused of running a bailout nation. Everything else that it offers comes across as half-way measures that do not please everybody, as the poll results indicate.
But in an election year, doing nothing is not an option.
--Written by Shanthi Bharatwaj in New York
>To contact the writer of this article, click here:
Shanthi Bharatwaj
.
>To follow the writer on Twitter, go to
.
>To submit a news tip, send an email to:
.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
