Mitt Romney’s housing policy: GOP candidate offers ideas on mortgages | Bedford NY Real Estate

Mitt Romney’s presidential campaign made the odd decision to release a new policy document about housing issues last Friday in the late afternoon. The Friday afternoon “news dump” is when you put things out that you think will reflect poorly on you, knowing that reporters will give them scant attention. The housing paper was doubly-obscured, first by the weekend and second by release of Romney’s tax documents the same day.

Burying housing policy was a strange choice for the Romney campaign, because housing policy (foreclosures, mortgage disasters, etc.) has been a giant failure for the Obama administration, and one where Romney could easily score substantive points.

Having spent my weekend perusing the Romney position paper, I’m prepared to offer an explanation for why they buried it: It sucks.

Faced with the opportunity to take a nice big swing at the piñata of Obama-era foreclosures, Romney whiffed, offering a “plan” chock of platitudes, bromides, and non sequiturs. Why the campaign preferred dumping it out when they thought nobody would notice to simply not releasing it is a mystery. But perhaps the greater mystery is why they couldn’t stir themselves to write a policy that made sense.

The context here is the epic failure of the Obama administration to do anything of sufficient scale to address the foreclosures roiling the nation. Foreclosures aren’t just unpleasant to the families that experience them, but also have significant knock-on consequences for the rest of the community and consequently constitute secondary shocks to a country already devastated by a severe recession.

In 2009, when the administration was at the peak of its powers—Fannie Mae and Freddie Mac nationalized by the federal government, banks desperately in need of federal money, the president popular and backed by large congressional majorities—President Obama didn’t think addressing the issue was important. His primary premise was the not-unreasonable one that the best solution to housing pain was overall economic recovery. A secondary, less-reasonable premise was that restoring the “confidence” of the banking sector was a key element of broad economic recovery. So at the margin the administration wasn’t interest in diverting federal time and money to housing problem, and discouraged solutions that would help indebted homeowners at the cost of hurting the very banks that TARP was supposed to prop up.

Later programs such as HAMP and HARP were hamstrung by extreme political paranoia about delivering aid to “unworthy” borrowers. So while the programs (especially HARP) have done some good, the policy has been to specifically not target the most severe needs. Bigger plans released this year would do more, but are being blocked by a holdover Fannie/Freddie regulator whom the administration didn’t replace when it had the chance.

To all this, Team Romney has essentially nothing to say. One of their five bullet points is that we need to improve the job market. Another is to sell government-owned foreclosed property to private investors, which is already happening. A third is to encourage short-sales as an alternative to foreclosure, which the administration has been doing for years now through various initiatives that seem to be bearing some fruit.

In terms of something the parties actually disagree about, Romney proposes to replace the Dodd-Frank Act with “sensible regulation.” If we repeal Dodd-Frank and its tools for orderly liquidation, what would we do instead? Well, the last plank of the Romney plan argues that “the Romney-Ryan plan will completely end ‘too-big-to-fail’ by reforming the GSEs,” i.e. Fannie Mae and Freddie Mac.

This is a real head-scratcher. Not only does Romney not say how he would reform Fannie and Freddie, he doesn’t even begin to try to explain how this would end the “too-big-to-fail” dilemma—presumably because it wouldn’t. Fannie and Freddie may have exacerbated the extent of the housing bubble, but this has literally no bearing on the question of whether or not the economy can survive the liquidation of a diversified mega-bank. If a bank goes bust under Romney’s plan—what happens? Nobody knows. Presumably something “sensible,” but Fannie and Freddie have nothing to do with it. Conservatives have long been rightly critical of Fannie and Freddie, and accurately warned that the free lunch they seemed to create for homeownership might someday prove quite costly to the taxpayer. But retreading a timeless conservative argument about the risks of federal loan guarantees, no matter how valid, isn’t a credible response to too-big-to-fail private banks or problems in today’s mortgage lending.

Romney’s housing plan is depressing. Faced with a clear policy area in which Obama has not succeeded, his opponent came out with a seven-page white paper so embarrassing the campaign dropped it on a Friday night.

This housing issue is the entire 2012 economic debate in miniature. There’s stuff to like in the Obama administration’s record, but there’s simply no denying that overall economic performance has been bad and the president deserves his share of the blame. But rather than giving us a pragmatic turnaround guy, the Republicans are offering a copy-and-paste agenda that could have been rolled out any time in the past 20 years and has nothing to do with today’s specific problem

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