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Obama’s Housing Promises

by Morgan on November 5, 2008

A guest post from Frank Shump. Frank is a veteran from the financial services industry, and currently authors a blog called Thefinancecastle.com, which documents his thoughts on money matters and his adventures in self employment.

I was up late much like millions of other viewers to see the final results of the presidential election last night. I was not at all surprised to see that Obama won by a significant margin, but after the votes were tallied and the celebration died down, I thought to myself: ?I’m glad I’m not that guy!? Historic significance aside, the next president-elect is going to have his hands full. From the economy being in the dumper to housing prices continuing to redefine the pricing floor, how is Obama going to help bring stability in the face of a ballooning Federal deficit? Let’s look at what we have so far.

Obama on Home Ownership

In terms of home ownership, according to Obama’s official site, he aims to provide new mortgage interest tax credits in place. The credit will ?ensure that middle-class Americans beneft fromt his home ownership tax incentive.? The proposal claims to provide 10 million home owners, most earning under $50,000 annually, with about $500 in savings. Direct relief to home owners could certainly be seen as a plus. Obama also says he’s been ?closely monitoring? the subprime mortgage situation for years and introduced legislation two years ago to fight off mortgage fraud and protect consumers from abusive lending. The act, aptly named STOP FRAUD (how clever?), increases funding for federal and state law enforcement programs and creates new punishments for mortgage professionals that are guilty of fraud. Also a plus, right?

Obama on Clear Home Loan Disclosures

The president-elect also stretches the importance of transparency. As president, he claims to enact laws the make sure that homeowners get the accurate and complete information about their mortgage so they don’t..say..buy an adjustable rate mortgage and then go under when the payments double or triple. The measures will create a new score, called HOME (Homeowner Obligation Made Explicit..again, clever), which will supposedly help provide borrowers with a standardized borrowing metric similar to APR for their mortgages, so that they know what their long-term obligations are and it would also include tax and insurance obligations as well.

Is it enough, can it work?

Laying out these objectives on paper seems like some good ideas. After all, who doesn’t want to crack down on fraud and give tax credits and promote transparency for home owners. In the months to come however, the president-elect will have to tell us how he’s going to pay for it. Tax credits mean less money for Uncle Sam at a time when we’re expected to borrow $550 billion in the current fiscal quarter. Couple that with total borrowing for this budget year clicking in at $1.4 trillion, and you have to wonder how the government is going to do anything except stop the bleeding. I’m cautiously optimistic that Obama will get some of these objectives through, but it’s important to understand that he’s working with very little wiggle room on the budgeting side.

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  • whoward
    500.00 in incentive isn't going to cause any buyer to move forward on the purchase of a home. We need something much more substantial. The current tax credit of 7,500 hasn't helped increase new home sales at all. The public just doesn't buy it, primarily because it's a loan disguised as a tax credit.
  • The government needs to cut military spending by 75% and use a portion of that money on infrastructure (taking overall spending lower). I hate kaynes, but this is the only thing that gives the US a chance of avoiding an hyperinflationary recession.
  • Jbarbruy
    Here is a plan of the people by the people for the peoplei have seen simular ideas around but i think this is the problem solver Instead of bailing out the banks and other financial istitutions why not bailout the people let me ask you when was the last time that your current banking institution actually helped or acomidated you? Dont confuse helping you with accomidating your money. Ok here is the meat instead of we the people lending our money to the Banks why not turn it over to each and every American lets say for everyone 19 and over give them 1 million dollors and everyone else 500 thousand Taxed of course and the check would need to be deposited into a financial institution of people choice with that money people that currantly have homes payoff thier mortgages and people wanting to buy a home would buy up the exsiting homes thus would stabilize home values banks couldnt blame the housing crisses anylonger for thier losses the people 18 and younger would have the opprotunity to further there education ect something like this would get the worlds attention we the people are the driving force of our econmy not the other way around. Something this big may not be a fix all but it would be desisive oh and on Monday watch the econmy of our great country flourish with our greatest resouce the people striving to better our world our kids that are our future would carry our light forward I know that the powers to be fear something like this because they could no longer control We the Masses and our Politicians would begin to understand that they are doing the JOB for us not their special interest.
  • Andrew_Diego
    How funny that Bozo Ears Obama thinks a $500 tax credit (is that “chump change” as he likes to call thousands of dollars in tax increases on other people) and transparency will “solve” the housing crisis. Are people who make under $50K going to come to the rescue and fix the housing problems? Hell no. Did fraud help cause this horrible problem? Damn right. Will stopping fraud do enough to correct the situation? No way. BO’s plan sounds like…well…lipstick on a pig if you ask me.

    The housing crisis is a credit and lending crisis. There is far too much of a housing supply and simply far too little demand, due to the credit and lending situation. Perhaps he should work with the FHA and make some changes to the qualification requirements for buyers. Not just 1st time buyers, or minorities, buy any employed person or family who want to buy, can prove their ability to make the payment, and are willing to buy a distressed home (REO, foreclosure, short sale, etc.). I believe this would be the best place to start, but then again BO has Freddie and Fanny morons on his economic advisement staff. I guess he learned at Harvard to get advice from the bozos who helped cause this horrific mess, in order to get us out of it. How brilliant.

    Andrew
  • pookia
    Woking with your bank is a nightmare...They should do something now to help the homeonwer in trouble not the banks.
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