How Obama Took Ownership of the Mortgage Issue

Yesterday, I surmised that this election will come down to which issue: economy, gas prices, or national security will be the one that will be at forefront of the election. I also surmised that McCain owns two of the three: national security and gas prices, while Barack Obama owns the economy.



I think one of the main reasons that Barack Obama owns the economy issue is that he got out front of the mortgage issue. In fact, the manner in which Obama now owns the mortgage issue has many great lessons.



First and foremost, Barack Obama took the mortgage issue head on. Not only did he quickly assign blame but he also immediately proposed sweeping ideas to fix the problem. He first began speaking about the issue in August. He blamed the problem on unscrupulous mortgage professionals and the close relationship between lobbyists and the D.C. political apparatus. He also proposed a series of steps to fix the problem.



The rules currently governing mortgages were written in the 20th century to make borrowing easier to understand for borrowers. We need to update these rules for the 21st century and enact the regulatory and disclosure laws that the mortgage industry has been lobbying against.


That is why I have proposed a Home Score system that would create a simplified, standardised metric for home mortgages – rather like the annual percentage rate (APR), the effective interest rate a borrower ends up paying on a loan – allowing prospective home buyers easily to compare various mortgage products so they can find out whether they can afford to make the payments.
I have also introduced a bill in the US Senate called the Stop Fraud Act that would treat those who commit mortgage fraud as the criminals they are.


Owning a home represents a big part of the American dream and all Americans – no matter what their income level – should have the power to reach for that dream. But that is not going to happen until we stop the unlicensed, unregulated, fly-by-night mortgage brokers who are hoodwinking low-income borrowers into taking on loans they cannot afford.


If we are serious about stopping this crisis and preventing much larger turmoil in US housing markets, Washington needs to stop acting like an industry advocate and start acting like a public advocate.



He followed this up with a series of bailout proposals and he backed the massive bailouts of the Dodd/Frank bill. For better or worse, he formulated a clear policy in which he pinned blame on one group, identified the victims, and proposed sweeping reform and relief for victims.



McCain, on the other hand, didn't say anything until late March. So, right off the bat he was behind the ball against Obama.

Republican John McCain said Tuesday that government isn’t in the business of saving and rewarding banks or small borrowers who behave irresponsibly though he offered few immediate alternatives to fixing the growing housing crisis.

“I will consider any and all proposals based on their cost and benefits,” the certain GOP presidential nominee, who has acknowledged in the past that the economy is not his strong suit, told local business leaders south of Los Angeles.

Democrats accused McCain of lacking the skills needed to lead a country on the brink of recession.

Now, McCain could have set up an interesting debate between the two candidates. Had he talked to someone like me, a mortgage broker (and political junkie), I could have told him that he was not only right on the policy but on the politics. Had McCain stuck with his hands off approach, here is how he could have turned the debate. McCain could have been for those that paid their mortgage responsibly while Obama was for those that were irresponsible. While the media turned the narrative into one of borrowers being taken advantage of by unscrupulous mortgage professionals, the public in general doesn't necessarily see it that way. .Here is a comment to another post of mine.

Been following this from your post on Power Line, and thanks for that.

Government always makes the rules that cause the problems, then tout government as the solution to the problems they created.

You've outlined this pretty well, and, as you've said, everybody shares a little fault. However.

Consumers, borrowers, PEOPLE have been educated out of their common sense.

My husband and I would NEVER have found ourselves in the position of many of these borrowers because we know, and did, the following:-

There is no such thing as a free lunch.- We went through a realtor to use a mortgage broker. Every paper they needed we had at our fingertips and THEY had within 24 hours.-

We instructed the realtor that we had no intention of buying 'what we could afford'. We went 20k lower so we wouldn't EVER be house poor or at risk of missing a payment or losing the house because of financial difficulties.-

Nobody like it - not the bank, the broker, or the realtor, but we said "tough nougies".- When we had the closing, I cried (it pissed off the attorney). I cried because, as I read every, single document, I realized how one sided the deal was (for ex., the bank reserved the right to come inspect my house's interior at any time, (seemed....unnecessarily intrusive), and I did read every document before signing.

Most borrowers are on time with their mortgage. Many of them made sure that they wouldn't over buy and kept their payments within reason. Many more struggle every month to make their payment but they make it EVERY SINGLE MONTH. Most of these borrowers have no use for a bailout of those that weren't as responsible as them. Barack Obama loved to use personal stories of folks that he saw as being taken advantage of. John McCain could have trotted out many more regular folks that have been able to make their payments on time and their personal story was their steadfast refusal to pay for the irresponsibility of others.



McCain could have turned this into a plan to bailout those that were irresponsible against one that stood up for those that were responsible. Of course, after Obama hit McCain hard for a few weeks for not caring about those that are struggling, McCain reversed course and proposed this.

McCain sketched out a plan Thursday to help 200,000 to 400,000 homeowners trade burdensome mortgages for manageable loans in a speech in Brooklyn. Aides said the plan could cost from $3 billion to $10 billion.

Still missing were details on exactly who would be eligible for help; McCain said he wants to aid those who borrowed sensibly but now can't handle their mortgages....

Unlike the Democrats, McCain would have individual borrowers apply to have their mortgages refinanced. Democrats would have the mortgage-holders apply for refinancing, which Holtz-Eakin said could leave taxpayers on the hook for risky loans that lenders want to unload.

McCain proclaimed that this was not a bailout but if it walks and talks like a bailout...you get the idea. Now, suddenly after waiting nearly six months, McCain followed Obama and essentially proposed the exact same thing. Rather than using this opportunity to propose a free market solution that challenged and differentiated from Obama's, he proposed roughly the exact same thing.



You simply aren't going to get ownership of an issue if you let your opponent talk about it for six months and then after waiting, you propose something with little difference between your opponent. McCain had an opportunity to take ownership of this issue, but he showed none of that courage that he showed in supporting the surge. Instead, he folded like a lawn chair at the first sign of criticism. By doing so, he ceded the issue to Barack Obama.