Proclaiming a rebounding housing market, President Barack Obama on Tuesday pressed Congress to help more Americans secure cheaper mortgages – or affordable rentals – and stressed a need to limit government involvement in the mortgage giants Freddie Mac and Fannie Mae.
“It’s been a long, slow process … it’s taken longer than any of us would like,” Obama said at a high school gymnasium in a city that he noted was “part of ground zero” during the housing collapse. But he said home sales are up, foreclosures are down and “millions of families have been able to come up for air.”
After touring a company that builds prefabricated frames for homes, Obama said, “We’ve got to build on this progress.”
The campaign style stop – the president spoke in front of a banner reading “A Better Bargain for the Middle Class, A Home to Call Your Own” – represented the latest in a series of speeches he is making outside the Beltway to pressure Congress to act on his proposals to boost a slowly recovering economy.
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“If Washington will just end the gridlock and set aside the kind of slash-and-burn partisanship we’ve seen these past few years, our economy will be stronger a year from now,” Obama said.
He focused on an effort that has attracted bipartisan support – for the concept, if not the details – arguing that the two big government-backed mortgage lenders need to be overhauled to prevent the risk of another collapse.
“As home prices rise, we can’t just re-inflate a housing bubble,” Obama said, contending private lending would create “a rock-solid foundation to make sure the kind of crisis we just went through never happens again. “
He also renewed a call for Congress to make it easier for homeowners to obtain or refinance loans, and included a pitch for revamping the nation’s immigration laws, arguing that immigration helps boost the housing market. He noted that the state’s two Republican senators, John McCain and Jeff Flake, voted for a Senate immigration overhaul and urged attendees to encourage Republicans in the House “to stop dragging their feet and get this done.”
The president also called on the Senate to confirm Rep. Mel Watt, D-N.C., whom he nominated as the nation’s top housing regulator.
Obama said Watt had “worked with banks and borrowers to protect consumers and help responsible lenders provide credit” and that the Senate “should give his nomination an up-or-down vote without any more obstruction or delay.”
Much of what Obama outlined was not new, but a restating of principles he’s been unable to get through the Republican-controlled House. That includes calls for more government support for refinancing of mortgages that are greater than the current value of a home.
“The mere fact that he’s addressing it is refreshing,” Gary Thomas, president of the influential National Association of Realtors, said in an interview. “I think finally he’s letting people know that we need to get the housing industry on the right footing so the economy can move forward.”
The Obama administration is now spelling out the parameters of what it wants in a revamp of mortgage-finance titans Fannie Mae and Freddie Mac. Both have been in government receivership since the summer of 2008, when their seizure, along with the failure of investment bank Lehman Brothers, caused a near meltdown of the U.S. financial system.
Fannie and Freddie purchase mortgages from banks, bundling them together into financial instruments called mortgage-backed securities, allowing banks to shed potential liabilities and keep lending to homebuyers.
The mortgage bonds have historically attracted investors because they carried an implicit government guarantee against failure, which is why in the crisis the government seized them to make that guarantee explicit.
Now almost five year later, competing bills are moving through the Senate and House to limit the government role in backstopping mortgages.
“For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” Obama said.
He used his support for a larger private role in the two lenders to tweak his critics, saying his support for private capital taking a bigger role “must sound confusing to the folks who call me a raging socialist every day.”
A bipartisan bill being pushed by Sen. Bob Corker, R-Tenn., and Sen. Mark Warner, D-Va., would keep a role for the government as a guarantor of mortgages, but in a much more limited way. New private companies would bundle mortgages much in the way Fannie and Freddie do now, and the government would back them, but through fees charged on lenders, similar to how bank deposits are guaranteed by the Federal Deposit Insurance Corp.
The White House stopped short Tuesday of fully endorsing the Corker-Warner legislation, saying it was waiting to see details. Housing and Urban Development Secretary Shaun Donovan, who traveled with Obama, noted there were other Senate bills, including one co-sponsored by Sen. Mike Crapo, R-Idaho.
Advisors said Obama wants to see additional provisions that guarantee adequate investment in home affordability for first-time homebuyers and down-payment assistance.
The Republican-controlled House may soon vote on a very different measure that would essentially privatize Fannie and Freddie over five years. The Realtors group opposes the measure.
Consumer advocates welcomed Obama’s call for revamping Fannie and Freddie, but echoed the administration’s concern that the major congressional proposals don’t include access to affordable terms and rates of credit, and threaten bedrock rental programs for low-income Americans.
“I think the important message is he’s very strongly in support of government engagement in the market and a government guarantee to make sure consumers have access to credit,” said Barry Zigas, director of housing policy for the Consumer Federation of America.
As part of his housing push, Obama will answer questions from homeowners, renters and prospective buyers at 1 p.m. Wednesday EDT in a virtual housing roundtable with online home buying site, Zillow.
Zillow CEO Spencer Rascoff will moderate the discussion; Obama will answer questions using the #AskObamaHousing hashtag.