Pinpointing the prime cause of California’s slow recovery from recession is easy: Too little has been done about the crisis in housing construction, values, and foreclosures.
While only one in 579 homes nationally is “under water,” with resale value deflated beneath the balance of its mortgage loan, that figure is one in every 211 here. In some California counties, the scene is exponentially worse: Fully 51 percent of mortgages in San Joaquin County (65,230 homes) were “upside down” in that manner in the third quarter of last year. The crisis may be worse in a few other places, like Nevada and Arizona, but it is plenty bad here and precious little has been done to fix it.
The result is that construction jobs are not yet coming back and housing-related businesses from carpeting to air conditioning, tile sales to swimming pools, all still suffer. So do other firms that depend on them, including everything from newspapers, whose advertising from such companies has tanked, to truckers who now haul far less than in pre-housing-bust days.
Summed up by Nancy Pelosi, the San Francisco Democrat and former speaker of the House, “Our economy is never going to be fully well until something is done about foreclosures.”
That’s why it’s refreshing to see both Gov. Jerry Brown and most of the Democrats in California’s congressional delegation at last begin putting significant political pressure on President Obama to do something about this.
Of course, Obama pledged he would do plenty about it when he won office three years ago and took over ex-President George W. Bush’s historical half-trillion-dollar bailout of many banks and the country’s biggest mortgage lenders, the Federal National Mortgage Assn. and the Federal Home Loan Mortgage Corp., better known as Fannie Mae and Freddie Mac. Or simply Fannie and Freddie in the lexicon of many politicians.
The trouble is that Fannie and Freddie have done little or nothing to ease things for homeowners, failing to provide much motive for under-water borrowers to stay in their homes and keep making loan payments. This despite the fact that together they took about $169 billion in bailout money intended to help homeowners get back on their feet.
But Obama has left Edward DeMarco in charge of the Federal Housing Finance Authority as acting director, even though – in Brown’s words – he has “ignored” the California foreclosure crisis by “failing to exercise…full authority over residential mortgages underwritten by Fannie Mae and Freddie Mac,” both of which were seized by the government in 2008 as mortgage losses mounted.
Agreeing with Brown, 27 Democratic California representatives in late January formally requested a housing-focused meeting with Obama. Their language was heated, by the standards of talk by party mates to a sitting President: “We have concluded that efforts both by the government and the private sector have not addressed (the) foreclosure crisis with sufficient urgency.” One possible result: Obama pledged once again in his State of the Union speech to do something. Just not much, and what he does plan could be stymied by Republicans in Congress, unlike actions by the Housing Finance Authority, which can often act on its own.
The California Democrats griped that they’ve already met with Obama underlings like Treasury Secretary Timothy Geithner, HUD Secretary Shaun Donovan and DeMarco, with nothing to show for it.
All, they said, expressed interest in a bill by San Mateo County’s Zoe Lofgren which would excuse under-water homeowners who file for Chapter 13 bankruptcy from making interest payments for five years, during which time they would still make loan payments, with all the money going toward lowering the principal balances on their loans.
Opposed by banks, this idea has received no support from California Republicans, some of whom represent areas most impacted by the housing crisis, including areas like Merced, Madera, San Bernardino and Riverside counties. So it’s unlikely to pass a House vote. And despite their alleged interest, the Obama appointees have done nothing to put the Lofgren idea into action, even though some legal authorities believe they could do it without a congressional vote.
The California Democrats accused DeMarco of placing the interests of Fannie Mae and Freddie Mac “above those of struggling homeowners.”
That’s language Obama needs to hear and might respond to, since anything he does to ease the foreclosure crisis can only help his reelection changes.
Other members of Congress have suggested Obama “did not realize how significant the crisis was.” Surely, he should by now.
Whatever its cause – and some blame policies adopted under Presidents Bush and Bill Clinton for promoting loans to people with no ability to pay them back – the crisis has been bad enough that Brown says it was the single biggest factor in California’s portion of the national recession.
That means Obama needs to act, as he should have done so long ago. If pressure from Brown and the California Democrats in Congress can get him moving, it will be all to the good.