Refinancing, Regulations, and Deductions: Housing Policies to Expect from Obama

• November 9, 2012
• 3 Comments

by Shilpi Paul

Though neither presidential candidate spoke too much about housing policy during their campaign, Trulia’s Chief Economist Jed Kolko made a few assertions about what Americans should expect from another Obama presidency.

Here is what Kolko sees:

• Obama will continue to encourage refinancing. — Historically low interest rates are leading many homeowners to refinance their mortgages, and other Obama policies made it easier for homeowners to refinance to avoid foreclosure. Expect more of the same, says Kolko.

• The Consumer Financial Protection Bureau (CFPB) will lead to new mortgage regulations. — CFPB, created with help from newly elected Senator Elizabeth Warren, will likely force lenders to use new standards by which to judge a borrower’s ability to pay off their mortgage, in order to keep unqualified borrowers from taking out a large mortgage. Romney wanted to repeal the related Dodd-Frank Act to ensure that lenders keep lending; now, said Kolko, the Act and new mortgage regulations are a reality.

• Mortgage interest deductions are safe. — Mortgage interest tax deductions help many Americans with their tax bills. Though Romney wanted to cap all itemized tax deductions, Obama will cut the deduction only for the wealthy. This is particularly good news for our area, Kolko told UrbanTurf. “Maryland and Virgina are #1 and #3 in the table of mortgage interest deduction claimed per household,” said Kolko, “with DC also on the top ten list.”

• Shared appreciation loan modifications may have been defeated along with Romney. Romney was in favor of “shared appreciation” loan modifications, which is a way for borrowers to lower their unpaid principal balance in exchange for sharing the appreciation with whomever took the hit. “Shared-appreciation loan modifications are an approach to principal reductions that Democrats, Republicans, and even a financial regulator could all learn to love. It would be a shame if this approach to keeping more people in their homes goes down in defeat,” said Kolko.

For Kolko’s full analysis, click here.

This article originally published at https://dc.urbanturf.com/articles/blog/refinancing_regulations_and_deductions_housing_policy_to_expect_from_obama/6277

3 Comments

1. adam said at 4:49 pm on Saturday November 10, 2012:

   “Though Romney wanted to cap all itemized tax deductions, Obama will cut the deduction only for the wealthy. This is particularly good news for our area, Kolko told UrbanTurf. “Maryland and Virgina are #1 and #3 in the table of mortgage interest deduction claimed per household,” said Kolko, “with DC also on the top ten list.””

   This is quite an odd analysis

   First off, it’s mostly the “wealthy” that take advantage of the mortgage interest deduction- you have itemize to get it, and 2/3 of taxpayers don’t itemize.  So by cutting the mortgage deduction (assuming he actually does that), Obama would be hitting nearly only the “wealthy.”

   Second, a major reason that MD and VA are #1 and #3 in the table of mortgage interest deduction claimed per household is that the household there are “wealthy.”  So Obama cutting the mortgage deduction for the “wealthy” is not good news for our area.

1. Betty Butterly said at 5:54 pm on Saturday November 10, 2012:

   Interesting… but explain how..  “cutting the mortgage deduction for the wealthy is not good news for the area.”  It could actually be a blessing.
   People will still live here and still have jobs here but SOME will probably not spend as much on housing as a result.  Ever wonder why so many of the McMansions are not furnished.?

1. Seriously? said at 11:20 am on Monday November 12, 2012:

   Good point @Adam.  @Better Butterly, I purchased my home a few years ago.  I bought a home I could afford and I have no issue paying my mortgage as I am a responsible consumer.  However, when I did my calculations of if/what I could afford to buy I did so with the reality that a certain portion of my monthly debt (e.g. the mortgage interest) was deductible and therefor I could apply it towards my income to debt ratio.  There is nothing wrong with this approach because that is how you know what you actually have to work with.  This is how business operate as well when they make a several year operating budget; they look at what their income is and what expenses they have and project an NOI.  If I lose my deduction because now I am “rich” according to our president (and I am so far from that living in this part of the country)I may not be able to afford my home anymore as will a couple of million people just like me.  This will cause me to either 1) have to sell my home assuming the market doesn’t collapse because I am in a huge group of people that suddenly have to do this or 2) assuming the latter does happen I lose my home because I can no longer afford it and the market tilts like it did in 2008 and then I lose my home to foreclosure.  @Betty; do we really want to go through another 2008?  Is “leveling the playing” an excuse to make us all a little poorer by forcing us out of our homes?  You can’t change the rules on people and then call them irresponsible . 

   And as for the Dodd Frank bill, does anyone know a lender at a bank?  have you asked them what it’s like to underwrite a loan today?  Is anyone confused why banks by the thousands big and small are getting out of the mortgage business?  Consolidation is good and well but I prefer competition so that I know I can get the best service and performance but that’s not how Elizabeth Warren sees it, to her competition is evil because government can’t control it and to her and her cronies it’s all about CONTROL!