The Dodd-Frank Wall Street Reform and Consumer Protection Act would be thrown out the window under a president Mitt Romney. The Republican nominee is no fan of the expanded Home Affordable Refinance Program or the Home Affordable Modification Program which he says are confusing and poorly administered. Loan originators, meanwhile, could expect to increase purchase production by more than $100 billion in 2013 if the Republican takes up residence in the White House.
Romney said that alternatives to foreclosure will be easier for borrowers if he is elected president. Among the alternatives a Romney administration would simplify are short sales, deeds-in-lieu-of-foreclosure and shared appreciation.
Loan modifications, however, weren’t listed among the foreclosure alternatives.
The housing plan was outlined in the white paper Securing The American Dream And The Future Of Housing Policy from the Romney-Ryan campaign.
The Dodd-Frank act would be replaced with “sensible regulation” that is not overly complex and gets credit flowing again. Romney’s regulations would ensure responsible lending while enabling banks to reject fewer mortgage applications.
Romney noted that the 2,319-page law has already produced more than 9,000 pages of new regulations, and financial regulators have only made it through a third of the regulations so far.
The paper said that smaller banks that lack the resources of their large brethren are being disproportionately impacted from the law. Smaller financial institutions are forced to hire more lawyers at the expense of loan originations.
Romney highlighted how the new mortgage rule to implement a simplified three-page disclosure had 1,100 pages of guidelines.
The paper criticized the Obama administration for failing to define the characteristics of “qualified mortgages” more than two years after Dodd-Frank passed. As a result, lenders have been paralyzed from the lack of certainty, and credit-worthy borrowers are being rejected for mortgages.
“This regulatory burden is significant enough that there are even some cases where small banks have more compliance officers than loan officers,” the paper said.
The campaign claims that a return to more normal lending standards would increase home sales next year by 600,000. Using an average loan amount of $200,000, that works out to around $120 billion in residential originations.
Fannie Mae and Freddie Mac would be reformed in manner that ends the “too-big-to-fail” policy and provides long-term, sustainable solution housing finance reform.
While Obama reportedly boasted that Dodd-Frank ended “too-big-to-fail,” the Romney campaign says that the president has done nothing to reform the government-sponsored enterprises even as their collective costs to U.S. taxpayers have exceeded $140 billion.
“The politicians should have realized that when you interfere with the market — as they did with Fannie Mae, Freddie Mac, and with their homeownership initiatives — bad things can happen,” the paper quoted Romney as saying.
Romney says that 200,000 vacant real-estate-owned assets — more than half of all foreclosed homes — owned by the government would be “responsibly” sold, with the REO sales conducted in a manner that the campaign says will enhance communities.
He pointed to a Government Accountability Office report that stated vacant REOs reduce the prices of nearby homes by between $8,600 and $17,000. In addition, vacant homes often attract vagrants and criminal activity. Moving the homes out of government hands will help nearby home values and cut down on police costs.
“The Romney-Ryan plan will reduce the outsized role of the government and revitalize the private sector’s role in the housing market to end the housing crisis and preserve the American Dream of homeownership,” the paper stated.
Instead of offering a clear vision of housing finance policy, Romney claims that the Obama administration has responded to the housing crisis in a manner that is confused and reactive. He says poorly administered programs with names like HAMP and HARP had overstated goals that were never met.
“In the case of one program, when the goals were not being met the administration’s solution was to expand it, creating ‘HARP 2.0,'” the campaign said. “In his state of the union address this year — nearly three years after the program was first launched — the president proposed expanding the program further.”
Romney claims that the failure of the Obama administration to implement an effective policy has the government guaranteeing 90 percent of all new home loans and forced the Federal Reserve to announce a new program to purchase more than half of all GSE mortgage-backed securities issued each month.
“The end result of the last four years is that the federal government now has a dominant role in our nation’s $16 trillion housing market, the private sector has been forced to the sidelines, taxpayers are on the hook for even more than when the financial crisis ended, and there is no clear plan for the future of housing finance,” the paper stated.
