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Tomorrow is the election day of our presidential candidates and homeowners all across the nation are waiting in anticipation for their respective candidate to rescue us from our current economic crisis. The crash of the housing market due to the Subprime Mortgage Crisis was one of the most prominent factors leading to the economic downfall we are facing today.

Whoever becomes president for the next four year term will need to focus much of his efforts in stabilizing the housing market as catalyzing the housing recovery will be in lockstep with our economic recovery. How does Governor Romney and President Obama plan on helping struggling homeowners? Let’s pick their brains a bit on this sensitive subject.

President Barack Obama

What He Did

First, what did Obama do during his 1^st term tenure? Obama’s housing recovery efforts were executed via the Making Home Affordable Program (MHA). The MHA has various programs available and is well known for their HARP – refinancing program, HAFA – Short sale & Deed-in-lieu program, and HAMP – A Loan Modification program. Although results did not meet our expectations, several updates to these programs were implemented throughout the years and these programs did help millions of borrowers at risk of foreclosure.

One well known action he enforced was the $25 billion dollar settlement with 5 of the nation’s largest banks for the robo-signing foreclosure abuses, helping millions of borrowers by reducing their mortgage payments.

Obama’s Plans

Obama’s plan for the housing recovery consists of multiple plans of action including Broad Based Refinancing which helps borrowers who are current on their payments refinance their homes. The plan aims to streamline their refinance program by way of different requirements such as no longer having to submit a new appraisal or tax return when applying for the refinance program. For borrowers in pre-foreclosure, he aims to press mortgage lenders to increase the forbearance period from 4 months (under FHA) and 3 months (under HAMP) to 12 months for homeowners who lost their jobs.

He also plans on expanding the HAMP eligibility, tripling incentives to encourage the reduction of principle for underwater borrowers, and encouraging the GSE’s (Government sponsored enterprises) regulator, the Federal Housing Finance Agency (FHFA), by promising incentives to Freddie and Fannie if servicers forgive principle in addition to the HAMP modification.

According to Obama’s 2013 FY Budget plan, he also plans on putting $5 Billion to the Department of Housing and Urban Development (HUD). HUD’s goals are to keep struggling borrowers in their homes, create jobs in hard hit communities and revitalize areas ravaged by foreclosure.

Governor Mitt Romney

Romney’s Plan

Here are the 5 points directly from Mitt Romney’s website:

• Responsibly sell the 200,000 vacant foreclosed homes owned by the government
• Facilitate foreclosure alternatives for those who cannot afford to pay their mortgage
• Replace complex rules with smart regulation to hold banks accountable, restore a functioning marketplace and restart lending to creditworthy borrowers
• Protect taxpayers from additional risk in the future by reforming Fannie Mae and Freddie Mac

Although both made promises to reform Fannie Mae and Freddie Mac, here is an excerpt from the white paper, Securing the American Dream and the Future of Housing Policy discussing GSE’s reformation.

“End “Too-Big-To-Fail” And Reform Fannie Mae And Freddie Mac. The Romney-Ryan plan will completely end “too-big-to-fail” by reforming the GSEs. The four years since taxpayers took over Fannie Mae and Freddie Mac, spending $140 billion in the process, is too long to wait for reform. Rather than just talk about reform, a Romney-Ryan Administration will protect taxpayers from additional risk in the future by reforming Fannie Mae and Freddie Mac and provide a long-term, sustainable solution for the future of housing finance reform in our country.”

One notable option for struggling homeowners from Romney is the Shared Appreciation Modification in which the lender agrees to write down the principal of a mortgage and then get a percentage of the price increase when the home is sold. This way, both parties win. No foreclosure, the borrower gets reduced mortgage payments, and the lender benefits from the appreciation of the home.

What Very Important Factor That Has Been Omitted In Both Plans?

The extension of the Mortgage Forgiveness Debt Relief Act of 2007. This act relieves homeowners from receiving a huge tax liability due to the forgiven debt (considered income) when doing a refi, short sale, modification, or even foreclosure. This extension was mentioned in the FY 2013 Budget plan by Obama but we are awfully close to the end of the year and any mention of this is sparse.

What are your thoughts on this topic? Which candidate do you think will actually help struggling homeowners get out of their slump? Please comment on our website: www.seattleshortsaleblog.com All comments are welcome!

Peter