Policies in the U.S. real estate market after election day
The U.S. presidential election is on every U.S. property owners mind these days. The newly elected president will play a defining role in U.S. housing policies and regulations. It’s fair to say that almost everything having to do with a standard residential mortgages hang in the balance of the election. From U.S. foreclosures procedures, short sales, regulative frameworks and more. Basically, U.S. housing policy and regulation changes are going to impact your U.S. market strategy and bottom line. Although neither President Obama or Republican candidate Romney have provided detailed housing policies, Obama’s track record and Romney’s sweeping statements give some indication of what to expect.
What U.S. real estate investors need to know:
President Obama aims to develop frameworks to regulate the housing recovery while Republican nominee Romney aims to scale back governmental involvement and look towards market regulation through privatization. Given these goals, an Obama administration would be more likely to continue to drive the U.S. housing market through collaboration between government regulation and private industry. On the other hand, a Romney win might indicate some major changes to current U.S. housing policy approaches. Romney has advocated views on housing from the deregulation of oversight to full-blown privatization of U.S. housing industry. Essentially, Romney is committed to U.S. housing policies with as little governmental intervention as possible while Obama supports continued regulation.
President Obama VS. Republican Candidate Romney: 3 Key Differences on Housing Policy
1) Supports Dodd-Frank financial regulations, including stricter rules for mortgage professionals and a new consumer agency combating fraud and abuse.
2) Proposed funding with private sector to partner on rehabilitating foreclosures and raise property values.
3) Wants to expand refinancing opportunities to underwater homeowners whose mortgages aren’t held by Fannie Mae or Freddie Mac.
Republican Nominee Romney
1) Critiques Dodd-Frank as overly bureaucratic, wants to replace it with streamlined regulations to encourage private investment in mortgages.
2) Critiques government regulation as problem holding back a housing recovery and aims to scale back governmental intervention (such as the complete privatization of Fannie Mae and Freddie Mac).
3) Argues that the slow implementation of Dodd-Frank financial regulations hinder credit availability.
Top 3 U.S. housing policies with change on the horizon:
At the peak of the 2008 recession, a federal conservator took over housing giants Fannie Mae and Freddie Mac to avoid a total real-estate meltdown. The GSEs have backed more than 90 percent of the U.S. home mortgages originated since then. In addition to an estimated $360 billion bailout, the U.S. Treasury Department has now taken control over both entities.
The Federal Banking Reserve’s involvement in U.S. housing policy with the latest Q3 initiative has committed to a monthly $40 billion purchase of mortgage backed securities. Despite the Feds involvement in U.S. mortgage markets, the newly elected U.S. President will determine how much of the housing market will continue to be subsidized by the federal government, and through what structure.
Last year, President Obama outlined three possible ways to change the role played by Fannie and Freddie in the mortgage market but didn’t express a preference for any of the options. Both President Obama and Mitt Romney have indicated that Fannie Mae and Freddie Mac need to be restructured however this would require legislative reform. Romney has expressed the need to privatize U.S. housing markets and would wind down the housing giants’ portfolio, aiming to privatize the GSEs entirely.
One issue in the upcoming election of interest to U.S. real estate investors is changes to the federal tax deduction for mortgage interest. Currently, homeowners may deduct the interest on mortgage loans for primary and secondary residences up to $1 million of mortgage debt. Also, the interest on home equity loans up to $100,000 may be deducted. Reducing or eliminating the MID could result in greater foreclosures and further price deductions.
Obama supports a continued federal tax deduction for mortgage interest, although his fiscal 2013 budget would limit MID for married taxpayers making more than $250,000 and for single taxpayers making more than $200,000. On the other hand, Mitt Romney has indicated that he would maintain the MID, while Romney’s running mate, Paul Ryan, has expressed support for eliminating tax breaks such as the mortgage deduction.
U.S. Foreclosure Sales
The question of U.S. foreclosure relief remains a front and center issue with 25% of American homeowners owing more on their mortgages than the property is worth (a.k.a. underwater mortgages). Both Obama and Romney support the government selling some of the 200,000 foreclosed-upon homes owned by Fannie, Freddie and the Federal Housing Administration and converting them to rental housing.
Romney aims to turn his attention to measures that increasingly privatize housing but hasn’t set forward a clear alternative model to avoid increasing U.S. foreclosures. Under Obama’s administration, the U.S. housing market has instituted the Home Affordable Modification Program and the Home Affordable Refinance Program to mediate U.S. foreclosures and announced this year to begin the pilot sales of these homes. Romney has expressed support of exploring foreclosure alternatives such as short sales, deed-in-lieu transactions and shared appreciation.
Only a few days left until election day. Who would you rather see in the oval office?