By Tom Butala
The Obama Administration has threatened to veto two housing-related bills if passed by Congress, according to HousingWire.com.
Last week, the Republican-controlled House Financial Services Committee (HFSC) approved the FHA Refinance Program Termination Act (HR 830) and the Emergency Mortgage Relief Program Act (HR 836). In addition, the HFSC voted yesterday to end the Home Affordable Modification Program and the Neighborhood Safety Program, through the The HAMP Termination Act of 2011 (HR 839) and the NSP Termination Act (HR 861).
“The Administration is committed to helping struggling American homeowners stay in their homes, and has taken many steps over the last two years to stabilize what was a rapidly-declining housing market,” the Obama’s Office of Management and Budget said, according to HousingWire. “The Administration believes that the EHLP (Emergency Home Loan Program) is an important tool in helping these Americans struggling to stay in their homes.”
The Obama Administration introduced these programs over the past two years in attempts to jump-start the nation’s troubled housing sector. Though HAMP and the other programs have provided support to some extent, critics of the plan say it’s time to move to other actions.
One proposal is to implement larger down payment requirements, wherein homebuyers would be required to put down as much as 20 percent of the home’s value.
“This is not the solution,” says DePaul University Professor of Finance and Real Estate Rebel A. Cole. “The real solution is sound underwriting by mortgage lenders, which went out the door with the ‘originate to securitize’ model of mortgage finance. Unless the lenders have ‘a dog in the fight’ in the form of recourse, then we are likely to see a repeat of the housing crisis.”
Cole says the proposed risk-retention laws are a good start in holding lenders accountable. He also recommends “clawbacks” on lenders, which will assure that issued mortgages are in fact sustainable.
“In other words, if the borrower defaults, you have to give back your bonus for originating the mortgage,” he says.
HousingWire says the first pair of bills will reach the house floor this week.