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New Mortgage Rules Not A Fix All


This is TELL ME MORE from NPR News. I'm Michel Martin. President Obama is just over a week away from taking the oath of office for his second term. In a few minutes, we'll talk about why a prominent minister from Atlanta will no longer be a part of those festivities.

But, first, we're going to begin a series of conversations that we plan to have over the next few days. The president, as you might imagine, had a long to-do list for his first four years in office, but not everything got checked off. So we want to talk about some of the unfinished business facing President Obama and his team in his second term, and we're going to start with housing.

The housing market, along with much of the rest of the economy, were in free fall when the president took office. He promised bold action and big ideas to help turn things around. We want to talk about whether he delivered on that. Here to talk about that is Keli Goff. She is a political correspondent with She is writing about the unfinished business over the last four years, including the foreclosure crisis, and she joins us from our bureau in New York.

Keli Goff, welcome back. Thanks for joining us once again.

KELI GOFF: Great to be back. Happy New Year.

MARTIN: Happy New Year to you. Also joining us is Ilyce Glink. She is a nationally syndicated real estate columnist and publisher of the real estate advice website, She's with us from Chicago.

Welcome to you, also. Thanks for joining us.

ILYCE GLINK: Thank you. Nice to be here.

MARTIN: Now, Keli, many people will remember that in 2008, the country set a record for foreclosures. More than three million home loans foreclosed that year. And when the president took office in 2009, he said repeatedly that he would envision a program that would fight foreclosures and help struggling homeowners, but as you've written, he's taken some steps, but these programs have consistently fallen short of helping the numbers of people that were promised and envisioned. Why is that?

GOFF: Well, you know, it depends on who you ask, right? Because if you ask a number of progressives and Democratic elected officials, including Congresswoman Zoe Lofgren, Senator Pete Merkley from Oregon, their position is that he simply didn't put the muscle behind fighting the foreclosure crisis that he did other battles, including, you know, fighting to save the auto industry, for instance. [POST-BROADCAST CORRECTION: Senator JEFF Merkley from Oregon, not Pete.]

I mean, their kind of gripe is that where he has invested his political capital, you've seen gains. I'll give you an example of something I've been writing about. It's the student loan crisis. He has really stepped up and put a lot of very conscientious changes that he's put his own political capital behind to get enforced, and it didn't really happen so much with the foreclosure crisis.

MARTIN: Well, let's talk about that. I mean, let's talk about the capital, per se, I mean, because a number of the progressive bloggers, as we've mentioned - Matthew Yglesias, Binyamin Appelbaum, for example - they argue that there are two issues here. One is forcefully injecting capital to actually put some money behind the problem, a contrast to the forceful approach toward injecting capital into the banking system, and restructuring General Motors and Ford.

And then the second question is whether he's made any regulatory changes that would...

GOFF: Right.

MARTIN: ...that would stop or prevent what happened from happening again. So, on the capital piece and on the regulatory piece, what's the scorecard?

GOFF: Well, I think it's - I don't want to give him a zero, but I think we know it's certainly not a knockout. And the way we know that is because he finally conceded it hasn't been one, right? He said himself last year - well, actually, it's 2013, it would be in 2011 - that we have to go back to the drawing board because it hasn't been working.

And, just to clarify, kind of, for your listeners what that means, it doesn't mean they haven't done anything. It means that what they've tried to do has not worked. I'll give you a really quick example. They have this program set up, HARP and HAMP, which were - TARP funds were used to help homeowners facing foreclosure try to refinance their mortgages, for instance. And what we later found out is that the aim was to help about four million homeowners. Only a million have been helped to date.

And part of the reason only a million have been helped is because the eligibility requirements were not clear. So, for instance, the president said: If you are facing financial difficulties, before you get to the point of foreclosure, here are these options for help. You don't have to wait. And yet, what you actually found is that when people tried to qualify for the programs, that wasn't the case. So if someone lost their job, right, it wasn't until 18 months later that they were getting word from a mortgage lender that they could have actually possibly gotten some help before those foreclosure notices started arriving. And here you are a year later, and the person is now facing foreclosure, eviction, etc.

MARTIN: Ilyce, do you have some perspective on this? I mean, from the people that you work with, the people that you talk to, I don't think that there's any dispute that these programs have not had nearly the effect that had been hoped for. What's your perspective on why that might be?

GLINK: Well, I think Keli's exactly right about some of it, which is that no rules were made clear. I don't think anybody had a sense of how bad it was and, really, there were no teeth put into play that would have forced the banks to step up. In the case of the auto bailout, it was pretty clear there was no other money on the street, and they were going under. And there were millions of jobs that would go under with it if they didn't do this deal.

Well, with the banking industry and this sort of, you know, perception that the U.S. was going to pick up the pieces for everybody except maybe Lehman - and maybe Bear Stearns - there wasn't that same sense of, banks, you have to get with the program fast.

The other difference - if I just could step in a moment - is that when you have, you know, 67 million Americans with mortgages, and 27 percent of them are suddenly underwater, there is a logistical nightmare that was going on. Banks were not set up. Their, you know, tens and tens of thousands of people who answer the phones when you call because you have a mortgage question, were not set up to actually do the reverse job, which is to lower your balance and to reduce your payments. It's just not what they were set up to do. It's not what they were trained to do.

I don't think the banks did a particularly adroit job of getting people on the plan, on the program, but with rules not coming down in time, everybody changing their mind, the situation was so fluid, hundreds of thousands of people losing their jobs and, hence, their ability to make mortgage payments right away, you ended up with a conflagration that, for somebody like me who's written about and watched the real estate industry for more than 20 years, you've never seen this before, and everybody was slow. There's lots of blame to go around.

MARTIN: If you're just joining us, we're talking about the unfinished business of the first Obama administration. We're focusing today on the foreclosure crisis. We're speaking with Ilyce Glink. She is a nationally syndicated real estate columnist. Also with us is Keli Goff of - that's an online publication - who has been writing about this, also.

So, Ilyce, I wanted to just ask you briefly about the mood out there. What's the mood out there? I mean, real estate and the whole selling of real estate, there's so much kind of hype and dreaming...

GLINK: Oh, yeah. Real estate is about hope in the future.

MARTIN: ...attached to our - and emotion. Right, right. All right.

GLINK: You know, buy today. You'll afford it more tomorrow.

MARTIN: But what is the mood out there?

GLINK: I would say that it's fractured at the moment. So we've had seven years of a housing depression. Everybody's like, oh, I look at the media and I just wonder what they're smoking some days, because the new numbers will come out from the National Association of Home Builders and it's like, oh, we're up 15 percent from last year. OK. But you're still down 83 percent from your high. It's not even close to reality in terms of parity.

Some markets are starting to come back. Property prices which are down 30-odd percent went up 1 to 2 percent last year. We're so far away from getting back to a place where everybody's going to be all happy. And you've got a lot of competing interests. The real estate lobby - as I'm sure Keli could speak directly to - is the strongest lobby that there is, you know, made up of the realtors and the home builders and the mortgage bankers. Those guys aren't to be trifled with, and they've been out in force trying to keep things like the mortgage interest deductions holding steady, getting more help. But even amongst them, they're fractured.

MARTIN: Well, to that end, though, let me ask you about this. I want to hear from both of you on this - and, Ilyce, I'll ask you this first. The Consumer Financial Protection Bureau, which is a new agency designed in part, you know, to address the failures - regulatory failures that may have contributed to the crisis. They are now out with some new rules on mortgages. Can you briefly, briefly tell us what those are and what the reaction to those have been?

GLINK: It's a codification of what's already going on, which is the absolute pendulum swinging. So 10 years ago, anybody with a pulse and a 750 credit score could get a loan, leveraging up as much as 10 times over their income. Today, they'd like to see you with 20 percent down, maybe 30. If you've got the whole amount in cash, maybe they'll lend you money. And this is a codification, basically. You got to be able to pay your mortgage, and if you can't pay your mortgage, you're not getting a loan.

MARTIN: Well, what's wrong with that? I mean, because there's been a lot of criticism. What's wrong with it?

GLINK: There's nothing. Well, the realtors say that is going to, you know, crimp the housing recovery. Mortgage bankers say that's fewer people who are getting loans. The home builders say that nobody's going to be able to buy our houses, and homebuyers are, like, what do you mean I can't buy a house? So everybody's unhappy.

MARTIN: So what you're saying is that the rules are now too strict, that the requirements are just so stringent that...

GLINK: No. I'm saying that - no. I'm saying we're going back to where I was 20 years ago when I started writing about real estate and we didn't have a housing crisis.


GOFF: Well, I - look, I'm so glad she - that this is where the conversation has gone, because I actually think that this speaks to precisely what the cautiousness was that was exhibited by the Obama administration on how to address the crisis, because sort of the elephant in the room that's politically lethal to talk about is the blame game, right? There are a lot of voters who did take the attitude of: you brought it on yourself, right? And so I think that did somewhat sort of stymie the president in terms of how to address that, particularly when he was facing reelection and wanted to position himself as someone who is not totally liberal and, you know, believes in fiscal responsibility.

And, in fact, even when you look at some of the programs that were set up to help struggling homeowners, the key language that I saw pop up was responsible borrowers. Right? Well, you know, one person's definition of responsible is different from another person's definition. There are plenty of people who feel like if someone gave me a mortgage, then they deem me responsible. Why is it my fault that then I ended up defaulting on it?

MARTIN: Or underwater.

GOFF: I think they were hesitant. Sorry.

GLINK: But, Keli, you know what they missed? And I just - this drives me crazy. Yeah. What is a responsible homebuyer? Well, it's all those people who had jobs and were able to make their mortgage payments, and then, by no fault of their own, millions of people lost their jobs. And suddenly...

GOFF: Right.

GLINK: ...they became irresponsible, but they were very responsible. They had high credit scores and good incomes.

GOFF: Well, I think that just, again, reinforces...

GLINK: What is it?

GOFF: ...why they were cautious about who to give the money to, Michel, you know, and so that's - so the money kind of ended up not being distributed as widely as it could have and...

MARTIN: All right. We have a minute left, so Keli, I'm going to ask you this. Is there a priority for the second term that the president and his team have identified in this area?

GOFF: Well, yeah. I mean, there were - first of all, there are billions of dollars that were not distributed as quickly as the money could have been. And I think that actually putting some teeth behind - as she said earlier - behind eligibility requirements, which they're actually doing now, Michel. So if they continue down that route of actually saying here's who's qualified, and we're going to do everything in our power to work with the banks to make the distribution more efficient, then we're going to see some more movement, because we're already starting to see improvement on who's being helped.

MARTIN: That was political correspondent for, Keli Goff, and also with us, Ilyce Glink. She's nationally syndicated real estate columnist and publisher of the real estate advice website

Thank you both so much for joining us.

GOFF: Thanks, Michel.

GLINK: Thank you. Transcript provided by NPR, Copyright NPR.

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