If you missed the President’s “speech” on Zillow.com this morning, or are just looking for some analysis on the conversation, you have come to the right place!
At 10 am this morning on Zillow.com/whitehouse, Zillow CEO Spencer Rascoff had the opportunity to sit down with President Obama and host a Q&A session regarding the housing market. The unique aspect to this sit down was that the questions posed to President Obama were submitted by everyday American (such as you and me) through social media services. The goal of the session was undoubtedly to answer the questions homeowners (and prospective homeowners) have regarding the market, however what unfolded was anything but a Q&A; in fact I would go so far as to call it a Q&R (Question and Redirect).
At the risk of receiving piles of hate mail from those who worship the President because pop-culture tells them they should, I am going to provide you with the play-by-play break down and critique of what we just witnessed.
Below, I will paraphrase the questions posed and the answers provided, and at the end of each section you are invited to check off a poll as to whether you believed his answer was helpful or not. Also, please note my comments (I couldn’t help myself ;-)) are marked with an asterisk *.
Let’s begin:
Q: I refinanced my home loan under HARP (Home Affordable Refinance Program), but I am still underwater by nearly 30%. What will low interest rates do for my property value in the future?
A:
– What we have done with HARP in the past, and through lowering interest rates via the Federal Reserve, has worked but the housing market is still soft.
– We need HARP 3.0 (currently with congress for decision) to be approved and passed.
– Suggested that HARP 3.0 will help homeowners who are underwater to build back equity (*a blatant fallacy as these refinances lower the interest rate but do not touch the outstanding principal balance of a loan; so you end up with a lower payment but you’re underwater the same amount that you were prior to the refinance).
*Does not address anything regarding the over-encumbrance of the property.
Q: What can Obama do to help second time home-buyers, aka homeowners who were foreclosed on in the past and are now looking to buy again, who are faced with home prices that are not affordable due to the dramatic drive up in prices lately?
A:
– Begins by telling a story of his first home with Michelle, and the process he went through when purchasing it.
– Talks about how what he has done has brought house prices back dramatically (*cough cough, shameless plug anyone?)
– Talks about how homeowners who are still in their homes and are underwater will see a rise in their property values because of rise in surrounding property prices.
– Suggests to keep interest rates low (*home prices have been driven up because of low interest rates, and his suggestion to help home-buyers who cant afford to buy at these prices is to keep interest rates low…)
Q: What is happening with HARP 3.0(latest revision to the “underwater refinance program” that allows for non-freddie/fannie loans to qualify)? Is it going to be passed?
*This is the first question he actually addresses.
A:
– Says there is bipartisan support for the bill in congress.
– Says that even though there is support, congress is “broken” currently.
– Digresses into a discussing on how to build a stronger housing market for the future.
– His idea for a stronger housing market in the future is Fannie Mae and Freddie Mac Reform (*cough cough plug for his upcoming legislation)
Q: How is Obama going to help the hardest hit areas get their equity back?
A:
– Talks about a special fund that he had set up to help the hardest hit areas. Goes on to say that this fund he set up did stuff like “counseled” homeowners (*Yes, the people who just saw the value of their home decrease by 50%, lost their jobs, and can’t afford their payment REALLY need someone to talk to – that’s exactly the kind of help they needed, money well spent sir!)
– Says that the efforts they have made in the past have worked.
– Says he is working with Mayors in the hardest hit areas (*does not specify as to what he is working on, or what they are doing).
– Suggests that as investors buy properties and rent them out, property values of surrounding homes will increase due to the decrease in vacant properties (*natural appreciation, cool, I have a spare 15 years burning a hole in my pocket that I can use to wait until my property breaks even).
*DOES NOT ONCE ADDRESS PRINCIPAL BALANCE – no talk at all about bringing balances down to a reasonable level to encourage homeowners to stay in their homes and build back the equity they lost!
Q: I am living at home with my parents, I can’t afford to rent or buy a property because I have student loans. Will I ever be able to buy or rent?
*Personally I think this question should’ve been asked to the caller’s “magic 8 ball”, but that’s just me.
A:
– Says that renting is a great option.
– Says that what he has done in the past few years has worked to bring back home prices.
– Digresses into a conversation about how we need education reform to lower costs for students, because then they will have money to put towards buying a home (*Um, sir, you’re missing one major element here: students are graduating into a climate where they can’t find employment…)
– Begins discussing how we need immigration reform, and how that will bring even more buyers into the market (* uh, wouldn’t that drive prices up even more, and make it even harder to find a rental due to increased demand; thus leaving Timmy here SOL at his parents casa?)
Q: If President Obama suggests reforming Government Sponsored Entities (such as Fannie and Freddie), and decreasing the Government’s stake in them, what model does he suggest will fill the gap? (who will pick up the extra loans that Fannie and Freddie no longer take on?)
*GREAT question
A:
– Says that he wants to reduce the Government stake in the GSEs incrementally yet substantially over the course of many years.
– Wants the private market to step in and pick up the slack (excess loans the GSEs would no longer be able to underwrite).
– Suggests that the Government’s role should really only be to ensure that there is a 30 year mortgage option, and that homes which are not higher end and have less value can still be financed (*Yes! As a taxpayer that’s exactly what I wanted to here! Let’s stop using taxpayer money to underwrite the good loans on good properties, and only use it to underwrite the more risky properties! Bravo, why didn’t I think of that!)
* Fails to explain why the private market would be interested in moving back in and picking up the excess loans not snatched up by Fannie and Freddie.
Q: My property is underwater but it is not owned by Fannie or Freddie, how can I refinance?
* Man, if this isn’t a “plant” question then my name isn’t John.
A:
– Great question, this is exactly the purpose of my proposed bill, HARP 3.0!
– It would allow you to refinance your underwater mortgage even if it is not GSE owned.
– Suggests everyone to contact their congressmen and push for the bill to be passed.
Q: I’m a teacher and I can’t afford to rent because the rate keeps going up each year, and while home loan payments would be more stable I have no job stability, how does he plan to help?
A:
– Teachers need to be paid more.
– Government needs to buy and hold more properties so there are more rentals on the market thus lowering rental rates by increasing supply, so that renters can save up to buy real estate.
*I’m sorry Mr. President, I must be confused, I thought she was asking how he was going to create job stability.
– Tells a whimsical story of how he and Michelle lived with his parents when they were first starting out, and then went on to be renters.
– Compliments Zillow for making homeowners/buyers more informed.
All in all I thought President Obama did a wonderful job of displaying his public speaking and agenda pushing prowess. Smooth redirects, and excellent mannerisms worked wonders to divert everyone’s attention from the fact that he really didn’t give us much of anything here.
What I took away from this Question and Redirect was the following:
1. Obama is proud of the work he has done in the past couple years to get us where we are today.
2. He wants HARP 3.0 to be passed.
3. He wants GSEs to be less Government Sponsored, and seemingly wants taxpayers to be on the hook for just the junk loans.
4. He has no idea how to get the private market back into underwriting the majority of home loans once he dials back Fannie and Freddie.
5. Renting is good.
6. The Government should become a property management company.
7. Congress is broken.
8. Barack and Michelle are just like you and I! They had all the same issues coming up.
–
Thank you Mr. President, may I now have my 30 minutes back???
I look forward to your thoughts below, so please do share!
And, if you’re skeptical as to my paraphrasing skills, please do seek out the actual video and/or transcript for this interview… I assure you, while it may seem hard to believe this “dance” occurred, it really did!
-JJM
John is the Vice President here at JohnHart, and as such is responsible for managing and directing the firm towards obtaining its ultimate goals.
He is also one of our main contributors on the Blog. (please see his profile page on the main site for more information.)
Oz has spoken, but Mr.Wizard, what about the jobs you promised…you dare to question the great and powerful Oz? We’ll no Mr. Wizard but you promised…I promised you obamacare, I’m not done yet, amnesty will be next, after that will be a carbon tax and for grins and giggles I plan to nationalize the police. Do not question the great and wonderful Oz, I can’t respond without my teleprompter.
The questions that was put towards the President cannot be answered. What person wants the leader of the free world to tell them “Hey lost your job..can’t pay your house note, then you better start packing.”
Real of life is sometime where in the valley other times where on top of the hill. No man made system or man is going to change that.
Take a closer look at the questions ask to the President. Then ask yourself “How would I answer that as a leader of the free world to someone hurting?”
You can’t…you just can’t answer those question.
James I appreciate your feedback but I disagree, in fact I am going to try and answer those questions how I think the president would have done it if he wasn’t concerned with politics and maintaining his image:
1. While what we implemented in the past with regards to HARP and HAMP have helped, there is still much work to be done, and I want the American people to know that I do not think my work is complete. In fact I feel like my greatest work is still ahead of me. While we have eased the burden of payments being unaffordable, the issue still remains that millions of homeowners are deeply underwater. The reason behind this is that the principal balance of these over inflated loans have not been adjusted to meet the market value of the property. While we may not be able to reduce everyone’s mortgage I think there is still a lot more people that we can help, and incentives that we can put in place to encourage home retention. Thank you for the question, and rest assured I am working diligently to find more extensive solutions to the problems we are faced with in the housing market.
2. Thank you for the questions, and while I cannot imagine how hard the past couple years have been for you, I can tell you that the future is bright. As a second time home buyer who has gone through foreclosure I am sure that you are facing much adversity when it comes to purchasing another home, and I am even more certain that the recent run up in prices has not helped your situation. Demand for property is extremely high and one of the problems that regular buyers face is the unfair competition that comes from investors. Many of these investors use leverage to purchase proprties for flips, and given that interest rates are so low they have nearly unlimited capital with which to invest. The good news is that over the past two years we have seen credit requirements loosen, which means that in the near future you will not only be able to qualify for another mortgage, you will be able to qualify for a higher amount; thus giving you an even playing field when it comes to purchasing power. Furthermore as I taper interest rates the profit margin for Leverage Flips will drastically decrease, thus weeding out a lot of the intense investor purchases currently happening. Thank you for the question and know that the worlds best economists are working day and night to make life for the average american people better.
3. He answered this question fine.
4. Thank you for the question and I would like to say that areas like Arizona, Nevada, Florida, and California, are top priorities for me. In the past few years we have put measures in place to help those areas, and they have lightened the burden quite a bit. However, as I mentioned earlier there is still more to be done. The major issue in these areas is the difference between what is owed on a property and what the property is worth. As I mentioned earlier I think there is still much work to be done to help homeowners severely underwater. One of the programs I propose, and this is a Zillow exclusive, is that all home owners in hard hit areas who had a negative amortization loan receive a principal reduction of their loan. The people I am referring to are those who had a loan that grew above the original loan amount, some grew up to 150% of the original money lent; these loans are no longer legal, and I believe some retribution is in order for those deceived.
5. Timmy, absolutely. Integral part of the housing market is the direct correlation it has to the jobs market. I understand that you are currently employed but the excess supply in the labor force creates an environment in which it is cheaper to replace you than it is to pay you more. As I work to decrease unemployment, the cost of replacing you with an adequate person will increase, and guess what happens then: Timmy gets a raise, and can afford to move out. Hang in there buddy, times are changing for the better. P.S. tell mom I want some meatloaf!
6. The model that I am suggesting to fill the gap when the GSE’s are dialed back is something, and mind you I am still working on this, like a stop-loss situation for the private market. In exchange for them moving back in and underwriting more loans than the currently are I would be willing to share in any losses on homes going into default, granted the loans are underwritten correctly, NO JUNK or NO DOC loans! Statistically speaking default is more of a danger in the first several years of homeownership than it is further down the line, so I would propose that the stop-loss is only for the first five years of the loan. There will inevitably be more stipulations to the agreement but I believe that if we stabilize the housing market, increase employment, and are diligent when issuing loans, default will become a thing of the past; and hey isn’t it better that the american tax payers are only on the hook for a percentage of the loss as opposed to the whole loss currently?
7. He answered this question fine as it was a planted question.
8. While the lack of rentals available is causing a surge in rental rates, the real issue behind your question is job instability. I believe there is much work to be done in reforming how teachers are compensated, but there is hope. As I mentioned earlier to Timmy, as unemployment decreases the supply of skilled teachers will undoubtedly decrease as well, thus making you a more valuable asset. That will bring you job stability. Furthermore as we all know I like promises, so I PROMISE THAT I WILL CLEAN UP THE BUREAUCRACY IN OUR FEDERAL GOVERNMENT, FREE UP SOME CASH, AND DEDICATE IT TO OFFERING A LITTLE SUBSIDY TO PUBLIC SCHOOLS. I will also allow tax breaks for corporations donating money to public schools; however I will only put these provisions in place after meeting with the head of the teachers union and discussing major reform, as their power and policy to keep inadequate teachers in place has become intolerable. We must focus on education.
In closing I thank you for this opportunity, and I look forward to the future as I hope you do. We have made great strides but there is much more to do. As a side note I believe that corporate tax reform is needed to truly address employment, and until congress and I see eye to eye on that unemployment will make marginal moves. Please push your congressman to reform corporate tax policy, we cannot afford to lose any more corporations to foreign nations due to tax issues.
Thank You
The Big O