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What ‘Four More Years’ Means for Housing

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One of the issues most central to the downturn will continue to sit squarely on the Obama administration's plate for the next four years -- housing. While many have heralded the bottoming of the market and the start of a recovery with recent data, the pace and reach of the recovery remains largely in question.

Neither candidate really indulged us with in-depth details on how they plan to assure the budding housing recovery takes hold (and another crisis doesn't). But Trulia's Chief Economist Jed Kolko has some thoughts on what "four more years" means for housing.

Related: Housing On the Mend But "Stunning" Lack of Talk on the Campaign Trail: Zillow's Humphries

According to a recent post by Kolko, in President Obama's second term, we can expect to see the following:

  • A continued push for refinancing availability
  • A new set of mortgage standards by January 2013
  • A possible cut to the mortgage interest tax deduction for (only) the wealthy

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Although mortgage rates have lingered at record lows for months, some prospective refinancers have had difficulty. Refinancing applications, as measured by the Mortgage Bankers Associations weekly index of mortgage application volume, have decreased for five straight weeks and are at their lowest level since the end of August. Last week refinancing application volume fell 5%, largely due to a decline in East Coast applications around Hurricane Sandy.

Related: Hurricane Sandy Ranks Among the Worst Economic Disasters: Mark Zandi

Others, who are losing homes in foreclosure or looking to offload them in short sales, are facing different issues. To boot, amid the market tanking and post-election chatter Wednesday, one of the stories that nonetheless attracted the most attention was on whether Congress will extend the Mortgage forgiveness Debt Relief Act of 2007. If not extended, homeowners would be expected to pay income taxes on the part of their mortgage that's forgiven in a foreclosure, short sale or principal reduction, CNNMoney reports.

On the other hand, one item that was on Romney's plan, "shared appreciation" loan modifications, might be out the window with Obama's re-election, according to Kolko. These might-have-been modifications "reduce a borrower's incentive to strategically fall behind on their payments in order to get a principal reduction."

Related: The 'Mortal Enemy' of Home Prices: Excess Housing Inventory

The new mortgage standards that Kolko expects from the Consumer Financial Protection Bureau, which comes by way of the Dodd Frank Act, "will define which mortgages are judged to be beyond a borrower's ability to repay and would therefore trigger legal and financial implications for lenders."

The Mortgage Bankers Association on Wednesday renewed a call for the president to appoint a federal housing policy coordinator "to act as a 'traffic cop', not to make rules and policies, but rather to 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."

How do you think the lawmakers and the Obama administration should approach housing in the next four years? What policy and changes would you like to see? Let us know in the comment section below!