Is Obama’s Housing Play Smart Politics or Smart Period?

Is Obama’s Housing Play Smart Politics or Smart Period?


During a recent event in Falls Church, Virginia, President Obama announced a plan to help under water homeowners refinance their current loans and save up to $3,000. The initiative would not contribute to the deficit because it would be paid for by a small fee imposed on the largest bankers.

The political optics played well, of course.  There’s the President setting up his run in purple state Virginia, a place he managed to win (barely) in 2008, but that snubbed him with Republican Gov. Bob McDonnell’s win the next year and a GOP takeover in its state Senate in 2011.

So, naturally, Speaker of the House John Boehner responded to the plan saying it is just the latest in a series of efforts that only delay the inevitable, which stops the housing market from recovering.

“All this will do is delay the clearing process,” Speaker Boehner said.

However, some banks don’t agree with Boehner on this one.  A banker who spoke with Politic365 on condition of anonymity said that it is better for homeowners to stay in their homes and pay something, thereby keeping the property up, rather than letting them rot.

“What’s happening in a lot of cases is that homeless people will squat in the homes and destroy them, making it even more difficult for the banks to eventually sell one day,” the source told us. “We had one case where the family remained in the home and used the cabinets for firewood to stay warm and at the end of the day the home would have had to be gutted in its entirety.”

That sentiment supports the President’s efforts to keep families from getting kicked out their houses.

“Help more families keep their homes. Help more neighborhoods remain vibrant and whole,” the President said. “Help keep more dreams defended and alive.”

If Congress approves the measure, those with government serviced loans (GSE) through Freddie Mac and Fannie Mae and who are current on their loans would be eligible for a streamlined application process.  Non-GSE lenders would qualify if they met the following requirements:

  • They are current on their mortgage: Borrowers will need to have been current on their loan for the past 6 months and have missed no more than one payment in the 6 months prior.
  • They meet a minimum credit score. Borrowers must have a current FICO score of 580 to be eligible. Approximately 9 in 10 borrowers have a credit score adequate to meet that requirement.
  • They have a loan that is no larger than the current FHA conforming loan limits in their area: Currently, FHA limits vary geographically with the median area home price – set at $271,050 in lowest cost areas and as high as $729,750 in the highest cost areas.
  • The loan they are refinancing is for a single family, owner-occupied principal residence.  This will ensure that the program is focused on responsible homeowners.

This effort supplements already existing initiatives to convert foreclosed homes into rental property, give unemployed homeowners a year’s forbearance, rehabilitating properties and expanding loan modification eligibility to include more borrowers. The measure includes a homeowners’ bill of rights including the right to appeal a modification rejection, be free of hidden fees and to get hardship assistance.