Post-election: Real Estate and Obama's 2nd Term

Obama 2nd term and real estateWe’ve explored President Obama’s efforts to revitalize the real estate industry before, but now that he has been re-elected, we’ll look again. This time, our focus is what we can expect, and what we might hope for, in this 2nd term.

HARP 2.0

In October of 2011, President Obama announced an overhaul of HARP program, dubbing the expanded version HARP 2.0. The expanded program helps many more Americans access help with refinancing underwater mortgages. We expect the need for this program to continue, as property values have not recovered completely on the national level.

HAMP

HAMP is also an Obama Administration program, this one intended to help homeowners behind on their mortgage payments; unlike HARP, they must prove serious financial hardship in order to receive help, help which largely comes in the form of loan modification. Because the economy has nowhere near stabilized and unemployment still plagues the nation, we expect HAMP to remain an important resource.

Wall Street Reform/Financial Reform

Obama signed the Dodd-Frank Bill in 2010, seeking to provide oversight and regulation of the industry most blamed for the country’s economic collapse: the banking and finance industry.  This reform established a Consumer Financial Protection Bureau and Financial Stability Oversight Council and set limits on and regulations for large financial corporations.

Many parts of the Dodd-Frank Bill have already changed Wall Street. For instance the credit industry now has limits as how much interest it can charge cardholders, student loans have a an interest rate cap, and banks are held responsible for home loan fraud. However, some parts of the bill haven’t made much impact on this industry, largely due to differing interpretations of the bill in the Senate and House. We will be interested to see if, in the wake of Obama’s victory, the legislative and congressional bodies will be more inclined to reach bi-partisan compromises that allow bills like these to move forward, or if they will continue to languish in bureaucratic quagmires.

The “America Invents Act”

Mostly focused on keeping the U.S. patent system attractive to global companies, this act also includes language limiting patent infringement lawsuits—and thus is of direct importance to real estate. As the National Association of Realtors® puts it, “A number of REALTOR® associations and MLSs have been hit with patent infringement lawsuits in recent years, and this law aims to reduce the number and cost of these lawsuits.” As the act is fairly new, we can’t say for sure how deep its impact will be. But it certainly can’t hurt the industry in the long term.

Mortgage Industry Reform

Under the Obama Administration, the Consumer Financial Protection Bureau (CFPB) began overhauling the mortgage servicing industry, proposing a set of rules aimed at making the industry more transparent and holding servicers more accountable an ending unethical practices like robo-signing.

One of the most important aspects of this reform has been reform of the foreclosure process. Now, thanks to guidelines set forth by the CFPB, many states have already changed this process.  Lenders must first make a "good faith" effort to contact the borrower, explain the foreclosure process, and provide counseling options.

Foreclosures

Though not the only factor in the fact that foreclosures are down nationwide, these revised guidelines have helped slow the onslaught of Americans losing their homes. However, experts have identified a large quantity of foreclosed properties not yet released on the market, the much publicized and dreaded shadow inventory. This inventory, when it arrives, if not dispersed thoughtfully, could have negative implications for real estate. In an October blog, contributing writer Peter Miller asked why “a complete and clear discussion of foreclosures {was} totally missing from the presidential election campaign.” U.S. News and World Report also raised this issue, pointing out that unemployment and shadow inventory are both factors that will force bankruptcies and foreclosures back up again. We predict the President will have to address foreclosure anew in his new term.

HUD and First Time Buyer Programs

HUD, as we have written much about, already offers a wide variety of programs to help homebuyers: first-time buyers; veterans; “good neighbors” like teachers; people in need of FHA loans. But we expect HUD to continue to grow, changing what it offers in response to the changing needs of the country.

Help for first-time buyers, a group the real estate industry will need if it hopes to recover—and to remain a relevant and viable part of the American economy-- must also come from the state level. Perhaps an encouraging federal climate (politically and financially) can help state and city governments foster homeownership for qualified applicants.

What else should the Obama administration do to help real estate in this, its 2nd term? With baited breath and high hopes, we look forward to the next four years. 

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Anna Marie Erwert writes from both the renter and new buyer perspective, having (finally) achieved both statuses. She focuses on national real estate trends, specializing in the San Francisco Bay Area and Pacific Northwest. Follow Anna on Twitter: @AnnaMarieErwert