Romney win would have taken housing in new direction: Trulia chief economist

Despite silence during campaign, candidates differed on key regulatory strategies
November 08, 2012 02:30PM

Although both presidential candidates largely ignored the housing crisis during the race, Trulia chief economist Jed Kolko argues that housing policy would look very different had Romney won. For one, Obama has emphasized stimulating the housing market, making it easier for mortgage borrowers to refinance to a cheaper interest rate. On the other hand, Romney’s housing plan did not even mention refinancing, despite support from one of his economic advisors.

Obama has also worked to better regulate lenders, establishing the Consumer Financial Protection Bureau, under the Dodd-Frank Act. The Bureau will introduce new mortgage standards by January 2013 crafted to penalize lenders that push consumers into unaffordable loans. Romney had blasted Dodd-Frank for holding back mortgage lending and pledged to “repeal and replace” the legislation.

Another major difference in housing policy between Obama and Romney was their approaches to mortgage-interest deductions. Romney proposed a $25,000 cap on all itemized income tax deductions. This would have reduced the mortgage-interest deduction for many middle class taxpayers. Obama has proposed cutting deductions only for the wealthy – although the President won the ten states that benefit most from the mortgage-interest deduction, according to Kolko.

However, Romney supported increasing “shared appreciation” loan modifications, which would require borrowers who received reductions in their unpaid principal balances “to share some of the economic benefit with whoever took the hit for the principal reduction if the home’s value appreciates,” explained Kolko, who also backed the idea. “Shared-appreciation loan modifications are an approach to principal reductions that Democrats, Republicans, and even a financial regulator could all learn to love.” [Trulia]Christopher Cameron