President Obama paused on his trip through Los Angeles on Wednesday to conduct a novel interview on housing policy with the chief executive of the real estate website Zillow.com.
The president reiterated his call for the passage this year of a broad housing agenda, which included expanding refinancing to more borrowers and overhauling the nation’s housing finance system.
The interview, which was broadcast live on Zillow.com and the White House’s website, came a day after Obama lent his support to a plan that would replace mortgage giants Fannie Mae and Freddie Mac with a new approach to mortgage guarantees. Getting the housing market fully functional again is critical for the nation’s economy, the president said.
“This is where most Americans have their wealth,” Obama said, seated next to Zillow.com head Spencer Rascoff. “If we get that right, it makes a big difference everywhere else.”
In an interview that broke little news and in which the president faced no hard questions, Obama took the opportunity to talk up his support of a bipartisan plan to replace the two mortgage giants with a system that would preserve staples of the housing market, such as the 30-year, fixed-rate mortgage.
The president noted that the U.S. is somewhat unusual in that most advanced countries do not have such a large government presence in the housing market. And he added that prior to the Great Recession, Freddie and Fannie had a much smaller share of the mortgage market.
“You can’t have a situation where the government is underwriting and guaranteeing all the mortgage lending that is taking place around the country, and big profits are being made by these quasi-private institutions,” Obama said. “And then if things go wrong suddenly, taxpayers are on the hook.”
The government has been trying to reduce the portfolios of both companies, Obama said. The long-term goal is to let the private market provide loans and take most of the risk.
The president also called for the passage of legislation that would broaden a refinancing program to more borrowers. He noted that while interest rates have ticked up, many homeowners could still benefit from a lower interest rate. And while the housing market is rebounding, real estate remains on weak footing.
“All of us recognize that it is still a soft housing market in part because it is still a soft employment market,” Obama said. “There are still a lot of folks who are out of work and the real economy is directly related to the housing market. “
The president said he personally would benefit from refinancing his home in Chicago.
“I would probably benefit from refinancing right now, I would save some money,” he said. “When you’re president you have to be a little careful about these transactions.”
Obama took questions via social media and over video. Responding to a homeowner in New Orleans, Obama said there is no specific policy answer for those who lost tons of equity during the downturn and are now searching to buy a new house.
“It’s tougher now for folks who have lost their equity,” he said. “I can’t say there is a magic formula in a situation that was just described in a place like New Orleans."
Places such as Florida, Phoenix and Nevada were particularly hard hit, the president noted. And he endorsed the idea of rehabbing homes and putting them on the rental market.
“Obviously, if somebody is living in them, they are more likely to maintain them,” Obama said. “And it creates the kind of atmosphere in the neighborhood that allows property values to go back up.”
The buy-to-rent phenomenon is already playing out on a big scale, as big investors have been buying up homes, rehabilitating them and renting them out for profit. The president called the emergence of these institutional investors in housing “good business sense.”
“We know that a basic principal of the free market is that if you can buy low and sell high, you are in a pretty good spot,” Obama said. “That can be good business sense for them, but just as importantly or more importantly for those middle-class families where they saw these property values drop, having that kind of stabilization can really make a difference.”