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Housing policy still key for Obama's next term

(MoneyWatch) Though it wasn't addressed much during the presidential campaign, the path toward a housing market recovery will remain a top issue among the many economic problems President Barack Obama faces in his second term.

The real estate market crash was a major trigger for the economic recession the president stepped into four years ago, and it will remain a major part of the overall economic recovery. His reelection was the least disruptive path for current national housing policy. Introduced under Obama's administration, the programs, such as HAMP and HARP, and regulations created by the Consumer Financial Protection Bureau and the $25 billion national mortgage settlement aren't likely to change.

And for many housing advocates, that's actually a good thing.

"The administration has taken some good steps in the first term, HARP and HAMP among them, but there's a real opportunity to take much stronger steps," said Ethan Handelman, vice president for policy and advocacy at the National Housing Conference.

Despite the millions of foreclosures over the past four years, housing advocates and organizations said the programs and regulations installed have helped distressed homeowners, stopped predatory lending practices and established servicing rules.

But there's still more that needs to be done, including principal reductions and more shared appreciation mortgages, Handelman said.

Private investors in mortgages and mortgage-backed securities still need to jump back in the market -- one they're still fearful of. A meager recovery has helped, but until the mortgage industry adapts and adjusts to the regulations and new standards introduced throughout Obama's first four years, many will remain on the sidelines.

"There's still a lot of uncertainty about regulation and it makes it hard to invest when there's a lot of uncertainty," Handelman said. "There's a lot of important regulatory reform, those servicing standards brought a lot of clarity and improvements in quality, but there's still more that needs to happen. It will take time."

To that end, the Mortgage Bankers Association is calling for the president to establish a federal housing policy coordinator to act as a traffic cop and "ensure a coordinated housing policy where federal and regulatory agencies are effectively talking to each other as the rulemakings and policies are proposed and adopted in order to ensure that they complement each other," the organization wrote in a release.

And there are looming questions surrounding the future of Fannie Mae and Freddie Mac, currently under the federal government's watchful eye. Through the government-backed mortgage giants and the Federal Housing Authority, the U.S. government is backing almost 90 percent of new mortgage originations.

"After dealing with the thorny issues surrounding the fiscal cliff and, likely, tax reform, Obama will need to turn his attention to what comes next for Fannie and Freddie," Zillow's chief economist Stan Humphries said. "It was encouraging last year to see the administration take the baby step of trying to lower loan limits for Fannie, Freddie and the FHA...centrist course of trying to slowly wean mortgage markets off of government life support, while laying the groundwork for a post-Fannie/Freddie mortgage finance system in this country."

Overall, Humphries believes the housing recovery that has taken place over the last year is sustainable and will continue through its own market forces -- there is enough mounting demand to meet supply. As long as the president doesn't lose sight of housing as part of the overall economic landscape, the market may continue to improve.