GOP presidential candidates talk foreclosure policy
Published: Wednesday, January 25, 2012 at 10:21 p.m.
Last Modified: Wednesday, January 25, 2012 at 10:21 p.m.
LEHIGH ACRES — Florida's housing market collapse is providing plenty of material for scenery and talking points in Mitt Romney's campaign here so far, as he has staged rallies at foreclosure hot spots and struggling construction companies, blaming President Barack Obama for the state's struggles and asserting he can solve the problems.
But while the issue is of central importance to many Floridians — nearly 1 million mortgages are in some stage of distress and 2 million more are “underwater” — Romney and the other candidates have offered few concrete solutions.
All of the contenders in Florida's primary argue that repealing new federal bank regulations and reforming or dismantling mortgage guarantors Fannie Mae and Freddie Mac would help free up lending and improve housing prices.
But beyond these popular ideas — which are sharply criticized by consumer advocates and some economists — there has been little discussion on how to directly help the millions of homeowners currently facing foreclosure, and the millions more who will not recoup their home values for years or even decades.
Yet programs that could provide the most immediate relief generally run counter to the Republican contenders' principles of reduced government regulation and limited market intervention.
Still, a robust economic recovery is unlikely until more of this debt is written off, said Kathleen Day with the Center for Responsible Lending.
“Economists on all sides of the political aisle seem to agree that we really have to do some principal write-downs,” Day said. “We need to modify people's loans.”
The dearth of housing policy proposals is all the more glaring in light of the emotional stories related at campaign events — including lost homes to lost jobs, shuttered businesses, bankruptcies and brutal real estate losses.
Among them are the experience of Tampa retirees Chris and Mary Lou Ferguson, who lost $200,000 when they sold their home.
“That's our nest egg, gone,” said Mary Lou Ferguson, who also lost her job in the downturn and attended a shuttered Tampa drywall factory Tuesday to hear Romney's proposals for turning the economy around.
“The banks have to work with people who are underwater,” added Chris Ferguson. “Change the rules. Reasonable controls are good. That's why things went bad because there were no controls.”
The disconnect between struggling homeowners and policy solutions up for debate was best illustrated during a roundtable discussion Romney held Monday in Tampa with eight people who lost homes, jobs and real estate businesses in the downturn.
All criticized the banks for refusing to work with them to reduce interest rates and mortgage principals. Some pleaded for stronger government intervention.
Struggling to keep her business going after the recession, Land O'Lakes homeowner Lisa Shorts tried six times to reduce the mortgage on her home before the bank finally sent her a foreclosure notice.
“They have the capacity to take the loss,” she told Romney. “Why have they not been forced to do that?”
Romney sidestepped the issue, sympathizing, agreeing that banks need to do better but stopping short of promising more government efforts to push mortgage modifications, a solution many Republican economists and some of Romney's own advisors have advocated.
Increasing mortgage modifications is a controversial issue in a party that emphasizes fiscal responsibility and minimal government intervention in the economy.
For every homeowner who complains about their bank, there are others who view debt as a moral issue.
Tampa businessman John Coleman lost money on real estate investments in the housing bust but strongly opposes mortgage write-downs.
“Buy a house you can afford and honor your commitments, your debts,” Coleman said. “I think that's a core conservative value.”
Asked about the housing market at Monday's NBC debate in Tampa, former Pennsylvania Sen. Rick Santorum said simply: “Let capitalism work.”
And Ron Paul offered that, “The best thing you can do is get out of the way.”
Newt Gingrich said repealing the Dodd Frank financial regulations enacted after the housing market collapse would lead the economy to “improve overnight.”
“It has an anti-housing bias,” Gingrich said. “Federal regulators are slowing down and making it harder to make loans for housing.”
But Day called the attacks on the Dodd Frank regulations “ridiculous.”
“The radical notion in Dodd Frank is that lenders have to make a reasonable assessment that the person can afford the loan,” she said. “That is really fundamental. It's quite remarkable the industry abandoned that notion.”
She called for more realistic, non-partisan solutions.
But that's unlikely in a Republican presidential primary, said former Republican National Committee Chairman Michael Steele.
“Beyond the primary, do they resonate with voters, with independent voters in particular?” he wondered of the candidate's answers to the housing question after the debate. “That's going to take some framing a little bit later on by the eventual nominee to put all of that in context so you don't have things sort of hanging out there that can be misinterpreted in a negative way.”
Romney has emphasized the housing meltdown more than the other candidates at his Florida events. His first rally was in a lumber yard, followed by the housing roundtable discussion, a closed drywall factory and a stop Tuesday afternoon in the hard-hit community of Lehigh Acres near Fort Myers.
Lehigh Acres has one of the highest foreclosure rates in the nation and the name has become short hand for the housing crisis. Homes that once sold for more than $200,000 now go for less than $75,000.
Romney is pushing the housing issue hard in part because his campaign views it as one of Gingrich's biggest liabilities. Gingrich collected at least $1.7 million from Freddie Mac.
Standing in front of a foreclosed home as about 200 people gathered amid roughly paved streets and vacant lots with knee-high grass, Romney again slammed Gingrich for saying he worked as a “historian” for Freddie Mac.
“These government sponsored entities in the case of Freddie Mac and Fannie Mae are a large reason why our housing crisis has occurred and I'm running against a guy, as you know, in this primary who was out working for one of these guys, for Freddie Mac,” Romney said.
But while attacking the mortgage guarantors for loose lending standards makes good politics, a major overhaul of the housing agencies would seriously restrict home lending, said National Association of Consumer Advocates executive director Ira Rheingold
Cracking down on the agencies would be “cutting off your nose to spite your face,” said Rheingold, who has pushed for more robust mortgage modification programs.
“If we don't have Fannie and Freddie there is no housing market,” Rheingold said.
Retired architect Richard Roll, 70, is a big Romney supporter. But having seen the housing bust's economic toll in his community around Fort Myers, he strongly supports more oversight of the banking industry.
Waiting for the candidate in a lawn chair under the afternoon sun, Roll talked about the blight on surrounding neighborhoods from empty homes.
“They've got to be induced by either fees or mandates to get these payments down so people can stay in their homes,” Roll said. “We have to keep these houses occupied.”
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