Obama, Romney Spar on Mortgage Rules

October 4, 2012

Mortgage rules being drafted by federal banking regulators came under the spotlight last night in the first election debate between President Barack Obama and his Republican challenger, former Massachusetts Gov. Mitt Romney.

The President defended provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, as necessary to prevent a repeat of the loose lending practices that resulted in the country’s financial crisis in 2007. “Does anybody out there think that the big problem we had is that there was too much oversight and regulation of Wall Street?” Obama said midway through the 90-minute debate.

Gov. Romney cited the qualified mortgage (QM) rule as a key example of the problems Dodd-Frank has created in the mortgage market, because the law left it unclear what a qualified mortgage looks like. That has created confusion among lenders, hurting mortgage availability to consumers.

“Dodd-Frank correctly says we need to have qualified mortgages,” Romney said, “and if you give a mortgage that’s not qualified, there are big penalties, except they [lawmakers] didn’t ever go on and define what a qualified mortgage was. It’s been two years. We don’t know what a qualified mortgage is yet. So banks are reluctant to make loans, mortgages. Try and get a mortgage these days. It’s hurt the housing market because Dodd-Frank didn’t anticipate putting in place the kinds of regulations you have to have. It’s not that Dodd-Frank always was wrong with too much regulation. Sometimes they didn’t come out with a clear regulation.”

The qualified mortgage rule is intended to ensure lenders make loans only to borrowers who can demonstrate a reasonable ability to repay them. NAR’s position is that the definition should be broad, rather than prescriptive, so lenders can make safe, affordable mortgages to all creditworthy borrowers, not just those with the strongest credit profiles.

The candidates’ discussion of the QM rule was the only time housing came up in the debate. They also sparred over a broad range of domestic issues, including the economy, taxation, the federal deficit, health care, energy, and education.

On taxation, Gov. Romney said he wants to reduce rates across the board, including bringing the top corporate rate down to 25 percent from 35 percent, and decrease deductions and credits.

“I want to bring down the tax burden on middle-income families,” he said. “And I’m going to work together with Congress to say, OK, what — what are the various ways we could bring down deductions, for instance? One way, for instance, would be to have a single number. Make up a number, $25,000, $50,000. Anybody can have deductions up to that amount. And then that number disappears for high-income people. That’s one way one could do it.”

President Obama said he wants to continue existing tax rates, although for households with incomes of more than $250,000 a year, rates should return to what they were in the 1990s. He also said he would seek to bring down the top tax rate for small businesses.

On health care, Obama defended the Patient Protection and Affordable Care Act, enacted in 2010, saying premium increases last year rose “slower than any time in the last 50 years. So we’re already beginning to see progress.”

Romney said he would seek to replace the law, although he supports the law’s protection for people with preexisting conditions and the provision enabling adult children to stay on parents’ coverage.

Read REALTOR® Magazine’s exclusive Q&A with the two candidates in the September/October 2012 issue of the magazine.

— Robert Freedman, REALTOR® Magazine