By Daniel Duffield
f the issues which the Obama administration faces during the next four years, housing will be critical. Although many analysts have claimed that the market has bottomed out and that current statistics illustrate the beginning of a turnaround, the rate and range of this recovery remains mostly uncertain.
During the election, neither presidential candidate provided thorough details regarding plans to stimulate the growth of the housing recovery movement and to prevent another mortgage crisis. However, Trulia’s Chief Economist Jed Kolko believes that President Obama’s second term will have several impacts on the housing economy, including a persistent push for refinancing accessibility, a new drafting of mortgage standards to take effect by January 2013, and a potential lowering of the mortgage interest tax deduction for wealthier citizens.
While interest rates have hovered near historic lows for the past few months, many prospective borrowers have faced challenges securing home refinancing. Applications for refinances, according to statistics from the Mortgage Bankers Association’s (MBA) weekly index of mortgage application volume, have consistently declined for five consecutive weeks and have reached the lowest level since the end of August. Last week, refinance application volume decreased 5%, mostly as a result of Hurricane Sandy and the resulting drop in East Coast applications.
Additionally, other homeowners in distress at risk of foreclosure or short sale are facing different challenges. Amidst market uncertainty and post-election chatter on Wednesday, much attention has been directed toward the question of whether Congress intends to extend the Mortgage Forgiveness Debt Relief Act of 2007. If not prolonged, homeowners must pay income taxes for any mortgage debt forgiven in a foreclosure, short sale, or principal reduction, reports CNNMoney.
Conversely, one facet of Romney’s plan, “shared appreciation” loan modifications, may be discarded with Obama’s reelection, according to Kolko. This plan would have attempted to reduce a borrower’s incentive to strategically default on payments in order to receive a principal reduction.
The prospective mortgage standard changes which Kolko anticipates from the Consumer Financial Protection Bureau, will supposedly determine which mortgages are deemed to be outside of borrower’s ability to repay, thereby triggering legal and financial repercussions for lenders.
The Mortgage Bankers Association on Wednesday repeated its request to the president to appoint a federal housing policy coordinator to enforce rules and policies and ensure that communication is established and healthy between federal and regulatory agencies and lawmakers.
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