The White House unveiled yet another plan to prop up beleaguered homeowners and a floundering housing market today through its regulatory apparatus and housing assistance programs for veterans and service members. The president knows that few are going to object to this program — after all, who is going to question expanded benefits for already underpaid service men and women? In the broader context, however, this program is really evidence of an expanded federal effort under President Obama to take homeownership from an opportunity to an entitlement.
My Reason Foundation colleague Anthony Randazzo noted last week over at Real Clear Markets, that the $26 billion settlement with the big mortgage banks and providers last month really amounted to political extortion by the Obama administration and state attorneys general. Just 6 percent of the settlement funds are going to restitution for wronged homeowners. The vast majority of the funds will be used to further subsidize the consumer side of the market and further insulate homeowners from market accountability by reducing interest rates, lowering downpayment requirements, and allowing homeowners with underwater mortgages to refinance. While the administration claims to only provide benefits to those “wrongfully” foreclosed upon, or inappropriately charged interest rates that were too high, the reality is that these criteria are a slippery slope. Indeed, as Randazzo notes, the responsible homeowners — the ones who put hefty downpayments on their homes, lived well within their means, whose credit ratings allowed them to borrow at lower interest rates — are the ones that end up paying the price for those that lived beyond their means, made poor investment decisions, or gambled on exotic financing to finance their homes.
These programs and the Obama administration’s policy approach, however, reflect something more fundamental. This isn’t just about providing relief to servicemen and women. This program is further evidence that the Obama administration is effectively reconstituting the housing market to be more favorable to borrowers and hostile to lenders. The White House’s “fact sheet” on the new programs notes: “While the government cannot fix the housing market on its own, the President believes that responsible homeowners should not have to sit and wait for the market to hit bottom to get relief when there are measures at hand that can make a meaningful difference.” The language implies that the housing market is the federal government’s responsibility, and borrowers shouldn’t have to bear the burdens of market dynamics. The federal government’s responsibility is not just to second guess the market but to drive housing market dynamics though programs that explicitly prop up borrowers.
Once up a time, federal housing programs were intended to ensure shelter was available to everyone. Under the housing policies of the Obama administration, the federal government is decidedly tipping the scale in favor of the borrower and transitioning middle-class housing and homeownership into a federally guaranteed entitlement.