As the federal government has worked to right the housing market and reduce the amount of bad debt, down payments have steadily increased. Some of the rise results from financial institutions tightening their standards. But the government also sets required down payments in many cases.
The next administration will decide whether to continue increasing the amount of money needed to buy a home or whether it’s time to loosen the standards to encourage a rebound in residential real estate.
At a time when mortgage rates are at all-time lows and housing prices are reasonable, many households that could benefit the most can’t get credit or can’t afford down payments, Zigas said. “What you’re seeing is a continuation of the credit crunch that emerged in 2009,” Cecala said. “Mortgage credit, in particular, is very tight and tough to come by.”
In Romney’s view, credit is scarce because lenders are unsure how they’ll be affected by the new mortgage and housing finance rules being implemented under the mammoth Dodd-Frank Act.
A second Obama administration or Romney would take over “with the market adjusting to these new rules,” Zigas said. “There are some who say it’s going to lead to a contraction in mortgage credit. I don’t believe that.”
In the end, so many other parties are involved in crafting mortgage-market policy and implementing it that differences between Obama and Romney would be muted. Not only are other administration officials and lawmakers involved, but also think tanks, academic researchers, consumer advocates and representatives of all corners of the financial sector.
“The starting positions of President Romney or Obama are likely to be different, but the legislative process will lend itself to compromise,” Wartell said.
One of the Obama administration’s signature actions has been the creation of the Consumer Financial Protection Bureau, the first financial regulator charged with protecting consumers from fraud, abuse and misrepresentation of mortgages and other financial products. Many Republicans have sharply criticized the CFPB and its power.
“Romney has staked out that he’s opposed to the regulation, he wants to reduce it and roll back Dodd-Frank and limit the CFPB’s authority,” Cecala said.
While it’s unlikely that a Romney administration would eliminate the new agency, it would certainly take a very different approach to regulating consumer finance and how much leverage Wall Street enjoys.