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Few people would argue that there is a simple solution to the current mortgage and housing crisis. This crisis, however, has been brewing for years and now through two administrations. Is it sufficient that the present administration can clearly articulate the problem or is it time that we begin to demand specific answers from our policy makers?
Last month, the White House promised to dedicate between $50 billion and $100 billion of remaining bailout funds to prevent foreclosures. But the actual plan won’t be unveiled for at least a week and might not be enough to prevent the foreclosure tsunami from drowning more homeowners.
Instead of delivering the details, President Obama merely reasserted the obvious today in Fort Myers, Fla.: “The question is: Can we work to design a system where the banks recognize it’s in their interest to avoid foreclosure?“ President Obama couldn’t have chosen a better place to address the nation as Fort Myers is an area devastated by foreclosures and sinking home prices. When will the details be revealed?
The administration has several ways to spend money on foreclosure prevention. Forecasting the future of public policy is not an exact science however, specific developments point to likely possibilities.
The Obama administration is expected to push Congress to let bankruptcy judges alter the terms of primary home loans. Earlier this week, Obama said it “makes no sense“ that judges are not allowed to do so. The President said he would announce his housing strategy in the coming weeks. Meanwhile, home prices are not expected to hit bottom until year-end at the earliest.
Officials are considering a plan to have government controlled mortgage giants Fannie Mae and Freddie Mac underwrite failing loans, industry sources said. The government would then give other mortgage companies a subsidy to follow the lead of Fannie Mae and Freddie Mac according policy insiders.
The Obama administration is crafting a mortgage rescue program that would potentially allow Fannie Mae and Freddie Mac to offer loan modifications for hundreds of thousands of borrowers and offer a model for other lenders to follow. The evolving plan would be similar to a proposal that Democrats in Congress favor to fund a mortgage guarantee program hatched by the FDIC under which the government would insure loans against default.
The real question is not whether our President can accurately articulate the problem as he did today in Fort Myers, but instead, how long it will take for the present administration to develop and clearly express public policy that will help home owners in Fort Myers and across the nation.
