President Barack Obama today urged a revival of two devastating mortgage policies that helped inflate the real estate bubble before the economic crash of 2008.
“Let’s make it easier for qualified buyers to buy homes they can,” he said in a campaign-style speech in Phoenix, Arizona, today.
“We should simplify overlapping regulations and cut red tape for responsible families who want to get a mortgage, but who keep getting rejected by banks,” he said, echoing President George W. Bush’s support in 2002 for lower lending standards.
Obama, like Bush, also urged greater immigration. Conceding that this totally unrelated item from his laundry list was “something you don’t always hear about when it comes to the housing market,” the president claimed an influx of new and in many cases low-skill immigrants will spur home buying and house prices.
“It’s pretty simple: when more people buy homes, and play by the rules, home values go up for everybody,” he told a cheering audience of local Democratic activists. “The Senate has already passed a bipartisan immigration bill that’s got the support of CEOs, labor, and law enforcement… let’s get this done.”
This time around, Obama insisted, massive government interference in the private real estate market would not produce the catastrophe Americans endured in the last decade.
“I hope everybody here learned some hard lessons from what happened… It was kind of crazy,” Obama told his Phoenix audience. “So what we want to do is something stable and steady,” he said.
Obama’s proposal to stimulate the real estate sector echoes Bush’s call in 2002 to spur home-buying by immigrants and African-Americans.
“When we meet this project, this goal… we will have added an additional $256 billion to the economy by encouraging 5.5 million new home owners in America… [and] the additional demand will be upwards of $256 billion,” said Bush, at a 2002 event at George Washington University.
“A lot of folks can’t make a down payment,” Bush said at the time. “They may be qualified. They may desire to buy a home, but they don’t have the money to make a down payment… One way to address that is to have the federal government participate,” he said.
Through 2006, increasing federal guarantees of debt, combined with higher-risk lending policies established by President Bill Clinton, drove up personal debt rates and created a real-estate bubble. When real estate demand cooled in mid-2006, overextended borrowers began defaulting at record rates, demolishing the thriving market for debt and wiping out at least $17 trillion in household net worth, according to the Federal Reserve.
The bubble was strongest in southern and western states with many low-wage immigrants, such as California and Nevada. Between 2000 and 2010, immigrants accounted for almost 40 percent of new homeowners nationwide, said White House statement Tuesday.
The 2007 crash took down much of Wall Street, roughly halved the median wealth of Hispanic and African-American households, helped Obama win election in 2008, and has boosted unemployment to a new highs. Since then, wages have also fallen steadily, making it more difficult for many people to buy homes.
Obama played a minor role in the Bush-era bubble. While working as a lawyer and state Senator in Chicago, he encouraged African-Americans to get mortgages, even if they had little income and bad credit ratings. A 2012 investigation by the Daily Caller showed that half of his clients foreclosed or declared bankruptcy.
Since 2008, agencies have rolled back some of the Clinton and Bush rules. For example, home buyers must now show banks they have some savings and a good credit-record before they can get a federally-backed mortgage.
However, Obama’s regulators are now pushing banks to make more loans to people with poor credit scores.