OBAMA VS. ROMNEY - Topic: Lending Standards

OBAMA VS. ROMNEY - Topic:  Lending Standards

Four years after the collapse of the mortgage market, banks continue to limit the availability of mortgage financing in both residential and commercial real estate markets.  On the residential side, bank standards often exceed those set by the FHA, Fannie Mae, and Freddie Mac.  What steps should the federal government take to change this dynamic, given the broader economy’s reliance on a healthy real estate sector?

Obama:  We need to restore trust in the underlying foundation of the mortgage market so borrowers have the confidence to purchase a home and lenders have the confidence to issue a loan, and that’s why we’re mobilizing all tools available to fix our nation’s broken mortgage servicing and foreclosure processing system.  To do this, we need to reduce uncertainty in the market so lenders once again provide consistent with the standards set forward by the FHA, Fannie Mae, and Freddie Mac.  That’s why we’re working through the FHA and with the Federal Housing Finance Agency (the conservator of Fannie Mae and Freddie Mac) to provide greater clarity about lenders’ obligations in making FHA- or GSE-backed loans. We’re also working hard to reduce barriers to refinancing for responsible borrowers, and we’re committed to the same objectives for new organizations.

Romney:  The most important step the federal government can take to help credit-worthy borrowers is to repeal and replace the Dodd-Frank Wall Street Reform Act.  Banks and financial institutions are paralyzed:  Regulators are simultaneously directing lenders to reduce risk (i.e., tighten underwriting) and to loosen standards.  And many community banks face thousands of pages of of new rules (over 8,000 pages at last count), and half of the expected rules proposed by this administration haven’t even been finalized yet.  In short, banks are hiring lawyers, not making loans.  The rules of the road need to be clarified so that responsible borrowers have access to mortgage credit.

Freedman, R. (2012, September/October). Two visions come into focus. REALTOR, 10-11.