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Auctioneer Eddie Burks calls out bids during a foreclosure auction in Las Vegas, April 2011. (AP)

Obama's Executive-Power Use Shows He Still Holds Some Cards

Oct 24, 2011

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An advantage of being an Oval Office incumbent seeking re-election was readily evident Monday in President Obama's roll-out of his administration's latest effort to help struggling homeowners.

With many Americans either facing foreclosure and others, because of declining property values or much tighter lending standards, unable to refinance their mortgages to take advantage of lower interest rates, the Obama administration is doing extensive renovations of its current housing policies.

For example, some homeowners whose mortgages, backed by the government-sponsored entities Fannie Mae and Freddie Mac, are now significantly higher than their home's market value will have the chance to refinance, something that's been mostly impossible until now.

The president's executive power allows him to actually put into effect real changes as opposed to merely proposing them which is pretty much all the Republican presidential candidates can do for now.

Of course, as Chris Arnold reported on Morning Edition, the GOP candidates haven't offered much if anything in terms of specific housing proposals. Mitt Romney, for instance, essentially said at last week's presidential debate in Las Vegas that the marketplace should be allowed to sort out the matter.

Many have noted the irony of the Republican presidential candidates when they were in Las Vegas not taking the opportunity to spell out any real policies to address the nation's housing crisis. Nevada has the nation's highest foreclosure rate.

So the steps the White House announced Monday will allow Obama to campaign against his Republican rivals by contrasting his specific policy changes against the GOP's field lack of any policies other than to stand by and watch.

The moves will also allow Obama to try to protect his flank on his housing policies. Some of the president's critics have attacked him for both siding too much with the financial sector and for his largely ineffectual attempts heretofore to repair the housing mess.

Indeed, some of energy behind the Occupy Wall Street arises from frustrations with the lack of federal government success so far in significantly reversing the nation's housing woes.

So the actions announced Monday could allow him to blunt some of that criticism.

Obama's executive power also lets him do an end-run around the impasse created by congressional Republicans who control the House and effectively use the power of the minority party in the Senate to block virtually any controversial legislation.

The Obama White House is calling the president's resort to using his executive power to accomplish what he can without legislation its "we can't wait" initiative. That phrase stands to become as much an Obama mantra as "pass this bill" was in recent weeks.

The New York Times' Jackie Calmes reported on the "we can't wait" strategy which begins this week with the housing moves and will continue mid-week with the president announcing steps to help college students with their related debt. An excerpt:

According to an administration official, Mr. Obama will kick off his new offensive in Las Vegas, ground zero of the housing bust, by promoting new rules for federally guaranteed mortgages so that more homeowners, those with little or no equity in their homes, can refinance and avert foreclosure.

And Wednesday in Denver, the official said, Mr. Obama will announce policy changes to ease college graduates' repayment of federal loans, seeking to alleviate the financial concerns of students considering college at a time when states are raising tuition.

Some experts expect the president's latest housing action to have only modest results. It still only touches a subset of financially stressed homeowners. For instance, homeowners with blemished credit will still find it very difficult if not impossible to get refinanced.

Meanwhile, banks and mortgage investors stand to lose as well. As The Wall Street Journal's Nick Timraos reported (subscription):

Not everyone benefits from encouraging more refinancing, of course. Banks and investors in mortgage-backed securities—including Fannie and Freddie and the Federal Reserve—stand to lose billions if performing loans pay off, leaving investors with cash to reinvest at today's lower rates.

"Somebody's going to get hit. This isn't a free good," says Anthony Sanders, a real-estate finance professor at George Mason University in Fairfax, Va.

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