By John Kelly
In their platform, Democrats tell it this way: President Barack Obama's "swift action" stabilized a crisis-stricken housing market and helped millions of American families stave off foreclosure through restructured loans that shaved hundreds of dollars off their mortgage bills. The president "cracked down" on abusive lenders, held financial giants accountable and leveled the playing field for home buyers.
Mitt Romney paints a somewhat different picture.
"President Obama's only plan to address the housing crisis was the same plan he used to try to fix the economy: Spend more taxpayer money on big-government programs," Romney says on his campaign website. The Republican presidential candidate blames Obama for cooking up an "alphabet soup" of "big-government programs" that hindered the housing recovery, saddled taxpayers with a risky glut of government-backed mortgages and created a marketplace of uncertainty where credit-worthy borrowers too often left banks empty handed.
The housing market was on a calamitous trajectory when Obama took office. Perhaps the most common criticism is that Obama was over-cautious in trying to reverse its course. During his term, millions of homeowners have received foreclosure notices, and home values continued to erode through 2011, pushing the nation's borrowers deeper underwater. At a July 2011 town hall meeting, the president acknowledged misreading how long it would take for the housing market to bottom out. Despite having already revamped his housing programs, Obama admitted a need to again go "back to the drawing board."
A little over a year later, home values just saw their biggest quarterly gain in six years, and foreclosure filings hit a five-year low in September. Negative equity levels, while still distressing, are improving.
Zillow's chief economist, Dr. Stan Humphries, said the trajectory of the housing recession was fixed long before Obama took office. Home values relative to income levels had ballooned to 50 percent greater than historical norms. When markets felt the first tremors of home-value declines in 2006, Humphries said, a market correction was already inescapable.
"To suggest that something could have prevented this correction is like saying one can defy gravity," Humphries said. "I believe Obama's housing policies have been more about helping people caught up in the maw of this correction, and it was a mistake to perceive these initiatives as having the ability to change the overall trajectory of home prices."
"Simply put, these economic forces needed to play out," Humphries said.
Below are highlights of the Obama administration's housing initiatives:
The Obama administration created the Home Affordable Modification Program (HAMP), designed to help as many as 4 million homeowners at risk of foreclosure reduce their monthly mortgage payment through modified loans. By offering financial incentives to lenders, the administration hoped participation would be swift and widespread. It wasn't. Three and a half years later, the number of homeowners to receive a permanent modification recently surpassed 1 million, according to the U.S. Treasury, which puts their median monthly savings at $539.
The Home Affordable Refinance Program (HARP) was launched to help underwater -- or nearly underwater -- homeowners refinance into lower-rate loans without having to buy mortgage insurance. Only homeowners with government-backed loans are eligible. The program, roundly criticized early on, was initially limited to homeowners who owed at least 80 percent of the value of their home but no more than 105 percent. Participation was meager. In response, the administration raised the negative equity cap to 125 percent, then eliminated it altogether this year. As a result, HARP refis surged from 93,000 in the last quarter of 2011 to more than 180,000 in the first quarter of 2012, according to the Federal Housing Finance Agency.
Obama extended an $8,000 tax credit to first-time home buyers, a program begun under the previous administration, giving home buyers until June 2010 to close on their purchase and still remain eligible. Humphries has referred to the program as a $30 billion "waste of taxpayer money."
Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which included provisions meant to reform the mortgage lending industry and protect consumers from aggressive lending practices. For starters, lenders will soon face penalties if they fail to consider a borrower's ability to repay a loan. The law's effectiveness ultimately depends on a watchdog agency the law created, the Consumer Financial Protection Bureau. So far, the bureau has made strides to help home buyers more effectively shop for mortgages by requiring lenders to provide simplified disclosure forms that clearly spell out the cost and risks of a loan. And the bureau is soon expected to define criteria for "qualified mortgages," which will guide mortgage companies in deciding which borrowers are able to repay a loan.
The U.S. Treasury rolled out its Second Lien Modification Program -- 2MP. Like HAMP, it offers incentives for lenders to reduce principal payments, but on second mortgages. To qualify, homeowners must have a HAMP modification on their first mortgage. To date, almost 94,000 homeowners have received second-mortgage modifications, saving a median $159 per month, according to government figures.
HARP 2.0 took effect, expanding eligibility to deeply underwater homeowners and lowering, or eliminating, fees for some borrowers. Mortgage lenders were given protections against responsibility for any fraud committed on the original loan. Participation has increased.
Obama announced in his State of the Union address that he was sending to Congress "a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates." The plan, nicknamed HARP 3.0, would expand the program to homeowners with privately held loans and be paid for through a new fee on large financial institutions. It has not passed.
The administration expanded HAMP eligibility to borrowers with higher debt loads and tripled incentives to banks for cutting principal on loans. Extending the program through 2013, the administration also pledged to offer incentives to Fannie Mae and Freddie Mac to make principal reductions on certain loans instead of continuing to limit the program to private mortgage lenders.
The five largest mortgage lenders agreed to a $25 billion government settlement over alleged foreclosure abuses. The settlement called for the banks -- Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial -- to collectively set aside $20 billion in write-downs for underwater borrowers in danger of foreclosure. The remaining $5 billion would be paid to federal and state governments, with roughly $1.5 billion being redistributed in $2,000 checks to 750,000 homeowners who were wrongly foreclosed upon during the housing crisis. After four months, the banks had given $10.56 billion in relief to around 138,000 borrowers. A report found that the vast majority -- nearly $8.7 billion -- went to forgiven debt in short sales, while loan modifications accounted for roughly $750 million in principal reductions.
The Justice Department sues Bank of America for $1 billion, the latest in a string of civil lawsuits brought against the country's largest financial firms. The case accuses Bank of America of running a reckless mortgage scheme called "hustle," in which it allegedly off-loaded "defective" loans to Fannie Mae and Freddie Mac, effectively saddling taxpayers with the risky loans.
See more on Zillow:
The State of Swing-State Housing
Romney's Stance on Housing: 'Let it Run its Course'
Making the White House a Home
By John Kelly