Earlier this month, Zillow CEO Spencer Rascoff hosted a public forum on the housing market with President Barack Obama, entitled "A Better Bargain for Responsible Homeowners". The question-and-answer session was presented live online and provided interactive participation through social media, with questions submitted by video recordings, Twitter and emails. Though the event lasted a mere thirty minutes, it sparked a lingering and spirited discussion on the web that kept the topic surging with traffic well into this week (hashtag: #askobamahousing).
At the start, the President asserted that housing is an issue less shaded by politics and chosen parties, and rather a topic on which all of America wants to agree. He highlighted proposals to downsize the role of GSEs’ (Government-Sponsored Enterprises’) involvement in hopes of making way for homebuyers and private lenders to lead the market. He went on to specify "we've got a bipartisan bill — Senators Warner of Virginia and Corker of Tennessee are working together. The principles that they have announced are ones that are pretty consistent with me: Let's have the market get in there. Let's make sure you don't have a 'heads I win, tails you lose' formula for Fannie and Freddie, so that taxpayers aren't left on the hook."
This proposal gives rise to several questions. What happens to mortgage interest rates? What if they drastically increase to where they were before Freddie Mac and Fannie Mae where established?
While some argue that the government should regulate and place restrictions on mortgage interest rates, rising interest rates are typically a sign that the economy is strengthening, provided these rates do not outpace other fundamentals of the economy, such as the unemployment rate.
A question came in from a listener by video about high student loan debt: "I’m wondering, with massive student loan debt, will I ever be able to move into a house of my own?" The President strayed from the subject of real estate for a moment to make a point about affordable education and its impact on the real estate market; explaining how lowering the interest on student loans may help stimulate the housing market. President Obama further explained that this may enable first-time homebuyers to purchase real estate thus causing a positive stimulus in the market. Renting is a great option as well as a viable one for real estate growth. “We must offer more affordable and quality” rental options, said the President, who went on to express his hope that private investors will take risks and invest in neighborhoods that have become dilapidated.
The President also fielded questions about underwater homes and some homeowners’ difficult in refinancing their mortgages, and used the opportunity to promote his HARP 3 (Home Affordable Refinance Program 3) initiative. Proposed by the Obama Administration to congress, and allegedly backed by the likes of “Mitt Romney’s chief economic officer”, HARP 3 is designed to allow more homeowners to refinance, even if their mortgages are not backed by Freddie Mac or Fannie Mae. But if the private sector is not prepared to underwrite these mortgages, who will? Fannie Mae and Freddie Mac would be called upon to underwrite these mortgages, which stood in apparent contradiction to Mr. Obama's prior goals of scaling back the roles of these GSEs.
There was an overall push for a new mortgage-backed security market, though the MBS market remains unstable for long-term investors. The President argued that, while risky, the creation of the Consumer Finance Protection Bureau can help with initiating and educating consumers on good practices and acquiring loans and home mortgages.
The forum lasted only 30 minutes and there was scant opportunity to press the President for details on his answers to the wide-ranging questions, but the President’s consistent message was simple: keep fueling the housing recovery, because we need it for sustained economic growth.
Watch the full Q&A forum below: