Obama to unveil housing proposals in Phoenix speech

President Obama will detail on Tuesday a broad plan to bolster the housing market that includes winding down and eventually ending mortgage giants Fannie Mae and Freddie Mac.

During a trip to Phoenix — an area in one of the states hardest hit by the housing crash — Obama will lay out a series of steps he thinks will ensure that the sector continues its upward trajectory while expanding home buying and renting opportunities.

{mosads}The president is expected to highlight a plan to overhaul Fannie and Freddie, shore up the finances of the Federal Housing Administration (FHA), streamline and expand refinancing for homeowners, revitalize communities that bore the brunt of the housing crash and ensure that those who rent have decent and affordable options. 

Obama is making his first trip back to the area since early in his presidency to discuss the progress being made on the housing front with a focus on “what more we can do to accelerate the recovery and help the hardest hit communities,” a senior administration official said on Monday. 

The president also will press for comprehensive immigration reform as an avenue to help push up housing prices, combining two major Arizona issues. Between 2000 and 2010, immigrants accounted for almost 40 percent of new homeowners nationwide, according to the White House. 

On Wednesday, he is expected to tout his plan during a question and answer session with Zillow, a group that tracks market trends. 

Another senior White House official said that the “aspiration has never been to simply build back to where we were” but instead to “build a stronger foundation.”

The president will turn back to mortgage finance reform as legislation begins to move in Congress to wind down Fannie and Freddie. The plan does not include a specific timeline — House and Senate proposals put the mortgage giants on a five-year path. 

But his proposal does suggest a non-legislative action that would significantly reduce Fannie’s and Freddie’s investment portfolios over the next five years.

Obama will emphasize the need for a major reduction in the government’s role in mortgage finance, which stands at more than 80 percent. 

He is expected to say that he is willing to work with Congress on a plan that eliminates the possibility of taxpayer bailouts — Fannie and Freddie got about $188 billion to stay afloat after being taken over by the government in 2008 — by putting the onus on private capital to bear the majority of losses.

The plan also will highlight the need to preserve the 30-year fixed-rate mortgage. Many Democrats and housing market experts argue that a plan approved by the House Financial Service Committee would put the popular loan out of the reach of most homeowners. 

The Senate has a bipartisan plan that the main co-sponsors say would keep the 30-year product in place. 

A senior administration official said the president likes certain parts of the plan crafted by Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.) “but it needs to go further” and any proposal needs the backing of Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking member Mike Crapo (R-Idaho). 

The official argued the plan needs to take more steps to ensure an affordable rental housing market. 

The White House is proposing that all private capital must be wiped out before the government pays out on catastrophic guarantees provided through government reinsurance of private-market loans.

The idea is that in a new system, the “government should continue to provide robust, explicit, and targeted support to help ensure access to affordable and sustainable mortgage products for low-wealth, first-time homebuyers and borrowers in historically underserved communities.”

That includes the government ensuring a deep and liquid financing market for the development and rehabilitation of multifamily housing.

Obama also will suggest non-legislative steps to start a gradual transition to the new system and to facilitate the wind down of Fannie and Freddie by decreasing investment portfolios by 15 percent a year, knocking them down to a manageable balance by 2018.  

The plan also would help some homeowners save $3,000 a year by refinancing under the government’s refinancing program (HARP) that nearly tripled the number of families who received refinancings to more than 2.6 million total. 

That plan includes streamlining refinancing for borrowers with government-insured mortgages, waiving closing costs for borrowers who refinance into shorter-term loans to more rapidly rebuild equity, while expanding eligibility to borrowers who do not have government-backed mortgages by creating special programs through the FHA and Fannie and Freddie.

The plan urges regulators to implement mortgage rules — such as the qualified mortgage (QM) — in a way that is clear so potential borrowers aren’t denied access because of any ambiguity. 

The Housing and Urban Development Department is working to update its rules for when government will rescind its guarantees, and partnering with the Federal Housing Finance Agency (FHFA) and other federal agencies to institute a common framework for government guarantees across the market.

Last week, the Senate Banking Committee approved a bipartisan bill to shore up the FHA. The House Financial Services Committee approved a GOP-crafted measure the prior week that eliminates Fannie and Freddie, puts the private sector in position to dominate the market and dissolves FHA’s connection to the federal government and puts them on a self-sustaining path. 

As part of his overhaul housing plan, Obama also is pressing the Senate to confirm Rep. Mel Watt, a Democrat from North Carolina, to lead the FHFA. Many Republicans oppose Watt’s nomination because, they say, that the agency should be headed up by someone unconnected to politics.