Daily Archives: November 10, 2012

It’s not a fiscal cliff—it’s an austerity crisis. | Katonah Realtor

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Reading the headlines this week, you might get the impression that the country was hurtling towards a huge deficit catastrophe on Dec. 31. From the front page of Thursday’s New York Times (“Back to Work: Obama Greeted by Looming Fiscal Crisis”) to today’s Wall Street Journal (“Pressure Rises on Fiscal Crisis”), the rhetoric suggests that the U.S. is facing a crisis akin to problems that have engulfed Europe. (A Yahoo headline from 2011: “The U.S. Fiscal Crisis: Just Like Greece, With One Exception.”)

In fact, the problem with the fiscal cliff is precisely the opposite: The tax hikes and automatic spending cuts that would kick in after Dec 31 would sharply curb our federal deficit through enacting major, sudden austerity measures that would save the U.S. government about $720 billion in 2013 alone, according to the Bank of America’s estimates, which would be about 5.1 percent of GDP.

“If we let all of those changes [happen], there would be a sharp reduction in the budget deficit—in decline in debt to GDP, falling deficits as a share of GDP,” says Chad Stone, chief economist at the Center for Budget and Policy Priorities. “It’s all a dream for people who want really sharp austerity.”

So the reason that the fiscal cliff could push us into another recession in 2013 is because it enacts too much deficit reduction upfront, not too little. By contrast, the reason that Europe became mired in a fiscal crisis in the first place is because profligate nations haven’t done enough to curb their spending and raise revenue to their more fiscally responsible neighbors’ satisfaction.

The folks who want to avoid the fiscal cliff for fear of its impact on a still-faltering economy are effectively arguing that now isn’t the time to enact austerity measures: Instead of taking money out of government programs and people’s paychecks, the government should be putting that money into the economy. And certain parts of the fiscal cliff bring more bang for the buck than others, CBBP’s Stone points out: Payroll tax cuts and unemployment benefits are more effective way to boost economic growth in the short-term than the Bush tax cuts for upper-income Americans, according to a new report from the Congressional Budget Office.

So if it’s immediate austerity that we want to avoid, and stimulus that should take its place, why is there so much talk about the need for major deficit reduction as a solution to the fiscal cliff? It’s because lawmakers decided months and years ago that they wanted this austerity crisis to happen as a way of creating leverage for more sensible, long-term deficit reduction measures.

Despite all their hand-wringing over the fiscal cliff, it was Congress and the White House that decided in the summer of 2011 that we would raise the debt ceiling only on the condition of reducing the deficit by over $2 trillion, with some cuts upfront and the rest attached to the supercommittee with a sequester trigger. (As President Obama reminded us in his speech today, “Last year, we cut more than $1 trillion in spending that we couldn’t afford.”) It’s also because lawmakers decided nearly a decade ago that the Bush tax cuts would be phased out in 2010, which Obama and Congress then extended for another two years because of the weakness of the economy.

The essential dilemma, as both the U.S. and European countries like Greece have begun to discover, is that weak economies don’t respond well to immediate austerity measures. The deficit hawks arguing for a bipartisan “grand bargain” or similarly ambitious deficit-reduction plan want to replace the kind of austerity that we’re facing now with austerity that takes effect further down the road, not undo it altogether. Others simply want to put austerity off for at least a year by extending all the tax cuts and suspending the sequester.

All of these solutions affirm one underlying truth: The reason the fiscal cliff is so scary is that it’s an austerity crisis.

via washingtonpost.com

Obama holds onto “revenue” caveat in averting “fiscal cliff” | Pound Ridge Realtor

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Repurposing their respective arguments from Friday’s round of press conferences, President Obama and House Speaker John Boehner, R-Ohio, in this week’s addresses made their cases for and against extending tax cuts for the wealthiest two percent of Americans, with a view to avoid the so-called “fiscal cliff” at year’s end.

For his part, the president pointed at his reelection victory Tuesday as a message “loud and clear” that Americans “won’t tolerate dysfunction, or politicians who see ‘compromise’ as a dirty word – not when so many of your families are struggling.”

On Friday, Mr. Obama said that while he’s “open to compromise,” he won’t allow a deal to go through that extends the Bush-era tax cuts – set to expire at the end of the year – for the top two percent of high-income families. Both parties are scrambling to arrange a bargain before a series of tax increases and spending cuts go into effect Jan. 1, potentially hurling the United States into another recession.

“At the end of this year, we face a series of deadlines that require us to make major decisions about how to pay down our deficit – decisions that will have a huge impact on the economy and the middle class, now and in the future,” the president said. “Last year, I worked with Democrats and Republicans to cut a trillion dollars’ worth of spending, and I intend to work with both parties to do more.

“But as I said over and over again on the campaign trail… if we’re serious about reducing the deficit, we have to combine spending cuts with revenue – and that means asking the wealthiest Americans to pay a little more in taxes,” he continued. “That’s how we did it when Bill Clinton was president. And that’s the only way we can afford to invest in education and job training and manufacturing – all the ingredients of a strong middle class and a strong economy.”

The same budget battle in 2011 that eventually led to $1 trillion in cuts also brought the government within minutes of shutting down. On Tuesday, voters elected the same legislative makeup – a split Congress and Democratic White House – that has struggled over the president’s term to break free of partisan gridlock and move budget legislation.

While insisting he’s “open to compromise and new ideas,” and said he’s invited leaders of both parties to the White House to discuss solutions next week, the president issued a caveat: “I refuse to accept any approach that isn’t balanced,” he said. “I will not ask students or seniors or middle-class families to pay down the entire deficit while people making over $250,000 aren’t asked to pay a dime more in taxes.

“This was a central question in the election,” he continued, “and on Tuesday, we found out that the majority of Americans agree with my approach – that includes Democrats, Independents, and Republicans.”

But delivering the Republicans’ weekly response, Boehner, too, recycled his gist from Friday’s press conferences, arguing that allowing the top two rates to rise would be letting “our nation’s economy go off part of the fiscal cliff in January.”

Democrats “believe that doing that will generate more revenue for the federal government – but here’s the problem with that,” the House Speaker said. “Raising those rates on January 1 would, according to the independent firm Ernst & Young, destroy 700,000 American jobs. That’s because many of those hit by this tax increase are small business owners – the very people who are the key to job creation in America. I used to be one of them.

“This week, I offered congratulations to President Obama, along with an alternative to sending our economy over any part of the fiscal cliff,” he continued. The pillars of his own framework, Boehner explained, include tax reform “that closes special interest loopholes and lowers tax rates,” entitlement reform, and a rejection of “arbitrary” national defense cuts.

“A stronger economy means more revenue – which is exactly what the president is seeking,” he said, adding that a brief conversation with Mr. Obama this week left him “hopeful that we can continue those talks and forge an agreement that can pass both chambers of Congress.”

via cbsnews.com

Quick tip: Top 5 social media faux pas for real estate pros | Chappaqua NY Homes

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When it comes to social media there are a lot of articles telling real estate professionals what they need to do, but it is just as important to know what not to do.

Just like in any social situation, there are some important social norms you need to know and a few faux pas’ you need to avoid.

Here are my top 5 social media faux pas you need to avoid:

  1. Don’t outsource your social media. Many real estate professionals want to hire someone to “do it for them.” You wouldn’t outsource taking your best client to dinner would you? Then don’t outsource one of the biggest opportunities you have to connect and build relationships with past, present and future clients.
  2. Don’t automate it. Turn off those automatic notifications, they are considered spammy and no one wants to look spammy – especially as a first impression!
  3. Don’t sync your Facebook to your Twitter and vice versa. Many real estate pros do this in an effort to save time. Don’t do this – it looks lazy. Plus, the language and conversation on Facebook and Twitter is very different. You can certainly post the same type of content to each channel, but do so separately and make sure to use the right lingo for each network.
  4. Don’t just promote your listings. There is nothing worse than only seeing a feed of listings on a real estate professionals Facebook or Twitter feed. To talk about your listings on social media – highlight an amazing photo using Instagram, or take a quick 15 second video of the home or homeowner using an app like Tout, Ptch or Videolicious. Social media is the place to get creative when talking about real estate – not the “same old, same old.”
  5. Don’t be a broken record. No one wants to hear the same things over and over from your or your brand. This is where having a content strategy really comes into play. Take the time to brainstorm all of the different things you could talk about on your social channels and then make sure you have a nice balance day to day of content.
Did I miss any social media faux pas? I’d love to hear from you, leave me a comment below!
via next.inman.com

MBA CEO calls for Fannie, Freddie policy change | Armonk NY Homes

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Mortgage Bankers Association CEO David Stevens told the Independent Mortgage Bankers Conference that his hope is for more transparent policy making at Fannie Mae and Freddie Mac. Stevens added that those mortgage players outside of the government-sponsored enterprises should also be able to provide their own input.

“Fannie and Freddie need to start making clear, detailed, fully-baked presentations of planned policy changes of significance in advance,” Stevens said. “Our market is fragile, and the stakes are too high to allow these two companies to continue to throw change after change at lenders, with no avenue for input in the formative stages.”

Newly enforced rules and regulations are making it even more difficult for borrowers to qualify for a home loan, the CEO mentioned. Policies are intersecting and decidedly influencing the future opportunities of homeownership and rental.

Stevens did not skip over the Secure and Fair Enforcement for Mortgage Licensing Act and what he perceives is misguided regulation. “This patently unfair and ineffective law does little to provide assurances to consumers that their loan officer meets minimum qualification and testing standards,” Stevens said.

Additionally, the SAFE Act forces the cost of licensing onto independent mortgage bankers and does not allow talented loan originators to compete fairly in the labor market. “This is unfair, and we aim to change it.  It won’t be easy, and it will take time, but we are committed to the objective of securing uniform, federal qualifications and testing standards for all loan originators, regardless of whom they work for,” the CEO said.

In an interview with HousingWire after the session, Stevens reemphasized what he addressed at MBA’s annual Chicago conference last month. “These are really important times because we’ve got these plethora of rules coming out; nobody’s coordinating any of this,” Stevens said. “We’re all in favor of rule makings, we need better regulation, but we need clear coordinating.”

Encouraging his audience to become MBA members in 2013, Stevens emphasized that the time to join is now. “If you don’t join this year and you don’t like Washington, I don’t want to hear it,” Stevens said.

2013 MBA Chairman Debra Still encouraged the conference to see clearly, face squarely the changes that are seen in the mortgage industry and to step up and be the change. “As leaders, it’s our job to create direction and focus for our organizations,” Still said.

via housingwire.com

Prepare for new Medicare taxes in 2013 | North Salem NY Real Estate

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With President Obama’s victory at the polls, it is now abundantly clear that Obamacare is here to stay. So far, we’ve experienced only the easy parts of the massive health care law, but starting in 2013, the hard parts will begin to take effect. In particular, two additional Medicare taxes will kick in. These tax increases will affect only high-income taxpayers: married couples with adjusted gross incomes over $250,000, and singles with AGIs over $200,000.

This is a tiny percentage of the population — only about 4 percent of all taxpayers earn more than $200,000. However, the one-third of taxpayers who itemize could be affected by the more restrictive limits on deducting medical expenses.

Increased Medicare taxes for high-income workers

Everyone who works — whether a business owner or an employee — is required to pay Social Security and Medicare taxes. Employees pay one-half of these taxes through payroll deductions; the employer must pony up the other half and send the entire payment to the Internal Revenue Service. Business owners must pay all of these taxes themselves. These taxes consist of a 12.4 percent Social Security tax up to an annual income limit, and a 2.9 percent Medicare tax on all wage or net self-employment income.

Starting in 2013, the 2.9 percent Medicare tax will go up by 0.9 percent. However, this increase will apply only to married taxpayers with wage or self-employment income of $250,000 and single taxpayers with income of $200,000. Only the amount over these thresholds is subject to the additional 0.9 percent tax.

Thus, for example, a self-employed single person with net self-employment income of $300,000 would pay a 2.9 percent Medicare tax on the first $200,000 and a 3.8 percent tax on the remaining $100,000. If a single employee has wage income of $300,000, the employer would withhold a 1.45 percent Medicare tax up to the $200,000 threshold and 2.35 percent after that.

Employees will have to pay the entire increase out of their own pockets. Thus, employers will continue to pay a 1.45 percent Medicare tax on their employees’ wages. Employees will continue to pay 1.45 percent until their wages reach the $200,000 or $250,000 ceiling. Then they will pay the additional 2.35 percent.

If you’re a high-income taxpayer, you may wish to earn as much money as possible in 2012, rather than in 2013, when it will be taxed at higher rates.

New Medicare tax on investment income

Starting in 2013, high-income taxpayers will be subject to a brand-new Medicare tax on their “unearned income.” A 3.8 percent Medicare contributions tax will be imposed on the lesser of (1) the taxpayer’s net investment income, or (2) any excess of modified adjusted gross income over $200,000 ($250,000 for married taxpayers filing jointly).

Thus, all single taxpayers with MAGI over $200,000 and married taxpayers with MAGI over $250,000 will be subject to this tax. This is a small proportion of the population, but a significant one for the real estate industry.

The tax applies only to investment income. This includes:

  • gross income from interest, dividends, annuities, royalties and rents other than those derived from an active business;
  • the net gain earned from the sale or other disposition of investment and other nonbusiness property; and
  • any other gain from a passive trade or business.

This includes just about any income not derived from an active business or from employee compensation.

Example: Sue and Sam, a married couple filing jointly, have a MAGI of $300,000 in 2013, which includes $100,000 of net investment income. Their MAGI is $50,000 over the $250,000 threshold, thus they must pay the 3.8 percent tax on $50,000 of their investment income. This results in a $1,900 tax.

This new tax applies to rental income, except for rentals owned by real estate professionals. So, starting in 2013, real estate professionals who earn profits from rentals will have a substantial tax advantage over everyone else. For details, see “How the new Medicare tax applies to rentals.”

Reduced personal deduction for medical expenses

All taxpayers are entitled to a personal income tax deduction for medical and dental expenses for themselves and their dependents. Eligible expenses include both health insurance premiums and out-of-pocket expenses not covered by insurance. However, there are two significant limitations on the deduction, which make it virtually useless (unusable) for most taxpayers.

However, to take the personal deduction, you must (1) itemize your deductions on IRS Schedule A, and (2) only deduct the portion of your medical expenses that exceeds an adjusted gross income threshold. For many years, the threshold has been 7.5 percent of AGI. Starting in 2013, the threshold for the itemized medical expense deduction goes up to 10 percent of AGI. However, people 65 or older will be exempt from the increase until 2017.

Example: In 2013, Sue and Sam have an AGI of $100,000 in 2013 and $30,000 in uninsured medical expenses. They may deduct only the portion of their expenses that exceeds 10 percent of their $100,000 AGI: $10,000. Thus, they may deduct only $20,000 of their expenses.

Because of this tax change, it’s advisable to pay as many medical expenses as possible in 2012, rather than waiting until 2013. See “Deducting health expenses will become more difficult in 2013.”

via inman.com

7 steps to retexturing drywall | Waccabuc NY Real Estate

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It’s a pretty common scenario on the home improvement scene: You’ve removed some wallpaper or wainscoting, or you’ve relocated a door or a window, or maybe you’ve just repaired same drywall damage caused by one of life’s little mishaps. No matter the origin, you end up with some drywall that doesn’t have any texture on it. And now, you’re at a loss as to exactly how you’re going to get that flat, unadorned piece of drywall to blend in with the texture on the rest of the wall that’s surrounding it.

In truth, matching drywall texture is always a tricky process unless you’re experienced at it. Even the pros can have a tough time with it. You first have the issue of matching the existing texture for the main body of the patch, and then feathering the new texture out onto the old in ever-decreasing amounts so that the transition between new and old is seamless. It’s difficult to come up a perfect match, and the larger the area is and the more centered it is on the wall or ceiling, the more likely it is that you’re going to see it.

The other problem you’re likely to run into is what’s known as “flashing.” After the patch is done and painted, the new texture will tend to absorb paint differently than the old texture, due to differences in previous paint, materials and other factors. The result can be a difference in sheen that also contributes to the patched area standing out from the rest of the wall, even if the texture matches. And the more sheen the new paint has — satin or semigloss as opposed to flat, for example — the worse the problem can be.

Start fresh

For all those reasons, especially if you’re not an experienced drywall texture matcher, your best bet is to simply start over with a fresh, flat wall. That doesn’t mean that you need to tear off all the drywall and replace it. It just means that you want to get rid of the old texture.

Tarp the floor in front of the wall with plastic sheeting. Don’t use canvas painter’s tarps, as the dust is hard to get back out of them. Wear a respirator to prevent breathing in the dust from the sanding and scraping operations, and always wear eye protection.

Sand or scrape the old texture on the wall to remove the majority of it. You don’t need to get rid of all of it — in fact, you want to be careful not to sand too deep and cut into the paper cover on the drywall. What you’re looking to do is knock down all of the high spots. Brush the wall down with a dry paintbrush or soft broom to get the bulk of the dust off it. Roll up the plastic sheeting to contain all the dust and dispose of the plastic, then put down new sheeting for the next operation.

The next step is to apply a light skim coat of drywall joint compound over the entire wall. You can use all-purpose compound for this, but topping compound will go on smoother and sand easier. For best results, thin the joint compound with a little water first to give it a smoother, creamier consistency that will allow it to trowel on easier. Use a 12-inch or larger drywall knife, and spread it onto the wall in broad strokes. The goal is to apply a thin, uniform coat over the entire wall, with as few ridges from the trowel as possible. Some ridges are going to be inevitable, and don’t worry about them — they’ll sand off later. But the fewer the better, since that’ll save you some sanding labor.

Allow the compound to dry completely. It will become lighter as it dries — how long it takes depends on temperature, humidity, and the thickness of the coat — but be sure that the entire wall is completely dry before proceeding. Next, sand the wall again lightly to remove any ridges, and then check your work. Use additional compound to fill in any low spots or flaws, allow the additional compound to dry, then lightly sand again. Thoroughly brush the wall down again, and you now have a smooth, uniform surface to work with, eliminating the need to try to match textures.

You’ll now want to seal the wall, using a drywall sealer or other primer. This will help to prevent uneven absorption of the paint. After the primer is dry, apply the texture of your choice to the entire wall. When the texture is dry, prime everything a second time, which will seal the texture itself. This step is especially important if you’re using satin or semigloss paint. If you’ll be painting the wall with a dark color, have your paint store tint the primer for you, which will give you a more uniform finish color. Finally, paint the wall.

via inman.com

In Westchester, 12,600 Con Ed Customers Without Power | Mount Kisco Real Estate

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From Con Edison:

NEW YORK – Con Edison, aided by utility workers from across the United States and Canada, continues to replace utility poles, string wires and install transformers to restore service to those affected by Hurricane Sandy and this week’s Nor’easter.

As of 5:30 p.m., Con Edison reported approximately 28,000 customers out of service. There were about 12,600 customers out of service in Westchester County; 8,700 in Queens; 5,100 in Brooklyn; 1,400 in the Bronx; 400 in Staten Island; and fewer than 100 in Manhattan.

Con Edison has restored service to more than 1 million customers since Hurricane Sandy, which was by far the most destructive storm in company history, struck the New York area. Crews are working around the clock to restore the remaining customer outages this weekend.

Many of the outages still left in the company’s service area involve small groups of customers.

It’s been a massive job. Crews have replaced 60 miles of electrical wiring and gone to tens of thousands of locations to make repairs or tend to emergencies.

The company is also working with the New York City Buildings Department to expedite the restoration of an additional 35,000 customers in Staten Island, Brooklyn and Queens whose electrical equipment may have been damaged by flooding and cannot be safely re-energized without repairs by an electrician.

The customers requiring inside-the-premises electrical work are not listed on the Con Edison Outage Map or included in the total number of outages reported by the company. Con Edison and the New York City Buildings Department are collaborating to guide customers through the process of repairing their own equipment. For information, click here: http://www.coned.com/es/Energy-Services-Flyer.pdf.

The safety of customers and workers remained Con Edison’s highest priority, as crews responded to thousands of downed wires and hundreds of blocked roads.

Customers can report downed power lines, outages, and check service restoration status by computer or mobile device at www.conEd.com. They also can call 1-800-75-CONED (1-800-752-6633). When reporting an outage, it is helpful if customers have their Con Edison account number available, if possible, and report whether their neighbors also have lost power. Customers who report outages will be called by Con Edison with their estimated restoration times as they become available.

The company urges customers to pay close attention to reports from city and municipal officials. Important information will be posted on www.conEd.com.. For instructions on how to report an outage, click here:http://bcove.me/6sx1yox5.

Con Edison offers the following safety tips:

·       Never operate a portable electric generator indoors or in an attached garage. Be sure to place the generator outside where exhaust fumes will not enter into enclosed spaces. Only operate a generator outdoors in a well-ventilated, dry area, away from air intakes to the home. The generator should be protected from direct exposure to rain and snow.

·       Use extreme caution before going into a flooded basement. Know whether there are electrified services or unsanitary conditions and wear high rubber boots. Also, know how deep the water is and probe it with a wooden stick, if necessary, to gauge the depth. Keep children out of basements where there is water.

·       Do not go near downed wires. Treat downed wires as if they are live. Never attempt to move or touch them with any object. Be mindful that downed wires can be hidden from view by tree limbs, leaves or water.

·       Report downed wires to Con Edison and your local police department immediately. If a power line falls on your car while you’re in it, stay inside the vehicle and wait for emergency personnel.

·       If your power goes out, turn off all lights and appliances to prevent overloaded circuits when power is restored.

The company is in constant communication with the New York City Office of Emergency Management and the Westchester County Department of Emergency Services and company personnel are working closely with city and municipal emergency officials. Con Edison is also getting strong assistance from numerous state and federal agencies.

via yorktown-somers.patch.com

Canada’s housing market cools, trade gap narrows | Cross River NY Real Estate

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Canadian housing starts fell more sharply than expected in October, according to data on Thursday that confirms a welcome slowing in the country’s once-booming property market after the government repeatedly tightened mortgage rules.

Other data from Statistics Canada showed new home prices continued their modest rise in September while the trade deficit narrowed in that month on an oil-led export recovery.

Markets focused on the housing starts, which were down 8.9 percent from a year earlier as both single and multiple urban housing starts slumped, Canada Mortgage and Housing Corp (CMHC) said.

The seasonally-adjusted annualized rate of housing starts was 204,107 units in October, down from 223,995 in September and 18.9 percent below the cyclical peak reached in April.

“The October move was the most decisive one yet that a housing correction is under way,” said Jonathan Basile, director of economics at Credit Suisse Canada.

Analysts polled by Reuters had forecast starts would decline to 211,500 in October.

The report echoes a string of data that the Canadian housing market is cooling, but does not appear to be heading for a crash landing as happened in the United States.

Housing prices and construction roared higher in 2011 and the first half of 2012, aided by low interest rates. The market started slowing after the government tightened rules on mortgage lending in July for the fourth time since 2008 in a bid to prevent home buyers from taking on too much debt.

The most scrutinized aspect of the CMHC report was the sharp drop in starts of multiple-family units, as analysts look for clues that overbuilding in the Toronto condo market is waning.

In urban areas, starts fell 10.1 percent at a seasonally adjusted annual rate, to 182,134 units in October. Urban singles starts decreased 7.6 percent while multiple urban starts dropped 11.4 percent.

“While multi-unit starts are extremely volatile month-to-month, this downshift to the lowest level since February could be an early indication that momentum is fading in the sector,” said Robert Kavcic, economist at BMO Capital Markets.

While fading momentum is what policymakers hope for, it also means the housing market will not be as powerful a driver of economic growth as it was.

“The sector will likely remain a drag on growth through much of 2013, a stark shift from recent years,” Kavcic said.

Prices of new homes in Canada rose for the 18th consecutive month in September, increasing by 0.2 percent from August and by 2.4 percent on the year.

EXPORTS

Canada’s struggling exports are also expected to be a drag on growth in the third quarter as the trade deficit grew in volume terms even though it narrowed in dollar terms.

The trade deficit narrowed unexpectedly to C$826 million ($826 million) in September as exports increased by 1.9 percent while imports were unchanged. Canada’s surplus with the United States grew to C$3.47 billion from a revised C$3.25 billion in August.

The overall increase in exports reflected a 4.2 percent jump in energy shipments, mainly crude oil and crude bitumen. But much of the export gain was due to price hikes, and export volumes were much less impressive.

“Today’s report suggested that the hit to growth will likely be larger than previously estimated,” said Dawn Desjardins, assistant chief economist at RBC Economics.

Imports were flat, with higher imports of metals and chemicals compensating for lower shipments of consumer goods and motor vehicles.

($1=$1 Canadian)

via reuters.com

Obama’s Housing Policy: Fix Is Crucial To President’s Economic Legacy | Katonah NY Real Estate

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President Barack Obama secured reelection while managing to talk around one area of economic policy in which experts frequently charge him with failure: managing the national housing crisis.

In a campaign dominated by talk of joblessness and what to do about it, the president hardly mentioned the epidemic of foreclosures, the fact that roughly one-fifth of all homeowners with mortgages owe the bank more than their properties are worth, or the uncomfortable reality that the American housing market is now largely propped up by taxpayers via public control of the mortgage finance giants Fannie Mae and Freddie Mac.

But while ignoring these issues was apparently a successful electoral strategy — Obama carried most of the “Foreclosure Belt” states, including California, Nevada, Colorado and Florida — that option is unlikely to be available to the president as he begins his second term. The stakes are high. Some experts see Obama’s ability to rejuvenate the housing market as directly influencing his legacy as a failed or successful steward of the American economy.

“There are very important questions left unresolved regarding the future of the housing finance system,” said Julia Gordon, the director of housing policy at the Center for American Progress, a left-leaning think tank. “The answers matter not just for the housing market but for the future of economic growth and the future of the middle class.”

Gordon and other housing experts say they expect that with the market stabilized — prices have ticked up 3.5 percent since the market bottomed out in October of last year — the administration will turn to the biggest unresolved housing conundrum: what to do with Fannie Mae and Freddie Mac, wards of the state since a bailout in 2008 that has cost $188 billion.

After the bailout, Congress created a new regulator-overlord, the Federal Housing Finance Agency, to limit further losses and get taxpayers off the hook. The financial bleeding has stopped, but Fannie and Freddie now hold even greater sway than before. Along with the Federal Housing Administration, which backs riskier loans, Fannie and Freddie own or insure more than 90 percent of all new loans made in the United States. In short: they are the mortgage market.

So what comes next? For a while, many Republicans clamored for rapid elimination of the companies, but the prospect of no housing finance system at all seems to have cooled their ardor, though Fannie and Freddie remain popular punching bags. Obama’s win all but guarantees some level of government support going forward, even if Fannie and Freddie don’t survive.

“There is a clear understanding that the government has to play a role in the mortgage finance system,” said Mark Zandi, chief economist at Moody’s Analytics. “Without that support, the 30-year fixed-rate mortgage, the mainstay of the system, can’t exist.”

Given the stark ideological differences between the president and a severely conservative House of Representatives, and the looming fiscal cliff that will dominate everyone’s attention for the rest of this year, a permanent fix to the Fannie and Freddie problem is probably still far off. In the meantime, the advocates for partial debt forgiveness, or principal reduction, for underwater homeowners will be watching closely to see what becomes of the enemy within: Edward DeMarco, a conservative career bureaucrat who has held the “temporary” job of acting director of the Federal Housing Finance Agency for three years.

DeMarco, in the past year, has resisted intense pressure from the Obama administration to allow principal reduction on Fannie and Freddie loans, even when a private bank or another arm of the federal government would foot the bill.

Debt forgiveness, when combined with other relief, such as a lower interest rate, can bring monthly mortgage payments down dramatically. A study by DeMarco’s own agency found that targeted principal reduction could save taxpayers as much as $1 billion.

Stan Humphries, the chief economist at Zillow, recently told The Huffington Post that the large supply of underwater homes means that fewer are on the market at any given time. As a result, despite the high foreclosure rate, inventory in many areas is actually very tight. Humphries compared it to a stock with few available shares for trade, a situation that can lead to price volatility and continued disruption in the housing market — and in the economy.

DeMarco, though, has said that bailing out homeowners poses a “moral hazard” that could encourage homeowners still current on their loans to intentionally default in order to cash in on the aid. His obstinance has delighted Senate Republicans, and all but ensures that the Senate will kill any nominee Obama puts forward to replace him as head of the agency.

Recently, some have speculated that Obama will fire DeMarco, though that course poses its own challenges. DeMarco is a bureaucrat, not a political appointee, and would need to be fired for cause. Moreover, those who work under him, and would be next in line to replace him as acting director, share his views, according to two sources familiar with the inner workings of the agency.

For all his power, it isn’t clear whether replacing DeMarco with an administration loyalist would move the scale much for underwater borrowers hoping to see some of their debt slashed. Banks pledged to spend at least $10 billion earlier this year as part of the national mortgage settlement to write down the debt on some of these loans.

By the time a replacement for DeMarco is found, there might not be much left for borrowers with Fannie or Freddie loans. Moreover, there doesn’t seem to be much inclination within the administration to use any of the $40 billion or so in unspent dollars from the Troubled Asset Relief Program that was pledged for housing support to jumpstart a new underwater relief program.

Instead, administration is promoting a bill before Congress that would expand its existing refinance program.

Still, housing advocates want to see DeMarco gone. One of their biggest beefs is that thanks to his effort to save every penny for taxpayers, Fannie and Freddie have abandoned their mission to provide broader access to the housing market for middle and low-income borrowers.

Under DeMarco, the two companies have tightened lending standards to exclude all but those with the very best credit from participating. The average Fannie Mae borrower credit score from 2001 to 2004 was 718, a few points less than the median credit score of all U.S. consumers. By 2011, the average score had soared to 762, which is at the very top end of the range and is considered “excellent” by the rating services.

This means far fewer people are qualifying for a Fannie or Freddie mortgage, and even those who do qualify report long waits for approval. The United States doesn’t need another housing bubble, but it needs a system that allows financing for people with the ability to repay what was borrowed, said John Taylor, president of the National Community Reinvestment Coalition, a group that advocates for low-income borrowers. That’s good for families and good for the economy, he said.

For more than 70 years, since Fannie Mae was established during the Great Depression, it and its later-arriving cousin Freddie Mac provided this vital role, Taylor said. It wasn’t until they tried to catch up with the Wall Street subprime machine that they went off course, he said. A readjustment given the horror of the housing crash makes sense, he said, “but the pendulum has swung too far.”

via huffingtonpost.com