A Look Back at Housing

August 6, 2013

President Obama today will pitch mortgage reform as the latest piece of his overall plan to “rebuild the cornerstones of middle class security.” Though the plan so far is short on specifics, there’s talk that “[t]he U.S. government may continue to play an outsized role in the nation’s roughly $10 trillion home loan market.” The president is expected to address winding down mortgage giants Fannie Mae and Freddie Mac and to push for wide access to 30-year mortgages in recognition that “owning a home has always been at the heart of the American Dream.”

Indeed, when President Obama came into office, that dream was threatened by the destructive aftermath of a burst housing bubble – “a crisis unlike we’ve ever known” – and he boldly pledged to help between 7 and 9 million families avoid foreclosure. His response to the crisis was to roll out what has been described as “a very weak housing plan” that was ultimately “inadequate to the scale of the housing crisis.” The rollout of the Home Affordable Refinance Program (HARP) – designed to help borrowers refinance their mortgages – was roiled by confusion and hampered by “high fees, restrictions, and long delays.” Even after its bumpy start the program was found to have helped lenders more than it’s helped borrowers. And an Inspector General’s report on the Home Affordable Modification Program (HAMP) – designed to help borrowers lower their monthly payments through loan modifications – reported that “[w]hile HAMP has helped about 865,000 homeowners avoid foreclosure through permanent mortgage modifications, more than 306,000 homeowners have redefaulted out of the program” at an additional cost of $815 million to taxpayers.

What’s the state of the American Dream today? From 2009 on, at least 3.4 million homes have been foreclosed upon. Homeownership is at its lowest rate in 18 years and is expected to worsen next year. And young adults are less likely to form their own households, instead choosing to remain at home with their parents. In fact, the percentage of young adults 18 to 34 who are living at home with their parents – a staggering 32% – is the highest on record.

It’s worth noting, then, before President Obama rolls out his next housing plan that he’s made big promises before, and it’s hard to believe when looking at the results so far that things are working as intended five years into his presidency.

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