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How to fix housing policy

What role should government play?

The Obama administration is gathering public opinion on how to improve the housing finance system, including the operations of Fannie Mae and Freddie Mac and the federal government’s role in the system.

The Treasury Department released questions last week seeking comment from the public, and Inman News asked real estate professionals to weigh in on some of these questions. Responses to one of those questions follows, and other questions will be addressed in subsequent articles.

How should the current organization of the housing finance system be improved?

Steve Wiley
Broker-owner
Smarter Choice Real Estate
Lincoln, Neb.

Knee-jerk fiscal policy and government loan support must stop. Tax-credit incentives should run longer and should have a gradual phaseout. Turning them on and off like a water tap and expecting the same result is ludicrous.

The capital markets will stabilize if we do not kill economic activity and individual investment with over-taxation. The Reagan-era tax-rate reductions achieved a stronger economy and a comparatively stable capital marketplace. Why not try this again?

Judson Voss
President
Roxx Productions LLC
Mooresville, N.C.

In a perfect world, the financing system would be completely privatized. I understand that Fannie Mae and Freddie Mac are deeply entrenched in our current system and it would be difficult to divest from this position. 

The Obama administration has been getting further entrenched in housing finance with workout plans and loan-modification bailouts that will continue to default at the same rate as those without modifications. 

At some point, the federal government needs to move into a debt-insuring role and no longer be the main provider of financing for housing. The market needs to be able to support itself regardless of what that means to the economy.

Pamela Dela Cruz
Broker-owner
Pamela Dela Cruz & Associates LLC
Walnut Creek, Calif.

The newest change was the approval of mortgage debt relief for California. It FINALLY got caught up with the federal government’s program.  There should be a moment of silence, then celebration for this!

In focusing on the short-sale process, the current organization of the housing finance system can be improved by the following:

1) Eliminate the lengthy and bureaucratic documentation requirements to apply for a short sale (i.e., eliminate proof of income, proof of hardship, proof of financial expenditures, etc.) The reason why homeowners want to apply is because their home is now valued down 50 percent to 70 percent since they bought it!

2) Guarantee in writing that the owner-occupied property, as well as the investment property, is free and clear from any deficiencies — this is not to be confused with taxable income, but rather lien holders chasing after the borrowers for the difference after the short sale or foreclosure occurs. Lenders are reserving their right to sue up to four years after the occurrence.

3) Ensure that short sales will NOT have an equally negative impact on the credit scores and financial buying power of the consumer (as a foreclosure). According to myfico.com, (it is generally not possible to) differentiate which type of loss is (on the credit report), whether it be a short sale, a deed in lieu, or a foreclosure.

James Crumbaugh III
CEO
Allison James Estates and Homes
Lake Suzy, Fla.

I believe that we must have both private-sector lending and government-sponsored lending as we have always had. If the decision is made to have more regulations regarding sound lending practices, then those regulations need to adhere again to the past lending practice.

Those subprime loans should never have been allowed or the consumers’ ability to pay once the loans convert should have (been) based on front-end and back-end formulas after the subprime loan converted.

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What’s your opinion? Leave your comments below or send a letter to the editor.

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