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Obama Re-Election - No Major Housing Change?

The re-election of President Barack Obama may lead to some type of metamorphosis on the housing-mortgage finance front. However, experts don't expect this to happen any time soon.

Analysts at Compass Point Research & Trading say don't bet on Ed DeMarco, acting head of the Federal Housing Finance Agency, leaving his post anytime soon. At this point, changing what may be considered the most important post in mortgage finance could prove unnecessarily disruptive. ...Compass Point expects Obama to punt on DeMarco in the short term...

..."Over the next couple of years the US economy will remain saddled with an uncomfortably high unemployment rate and will struggle to grow by more than 2% a year. And at some point, some combination tax hikes and spending cuts will be needed to prevent Federal government debt from spiraling towards 100% of GDP."

In housing, lawmakers on both sides of the aisle may be willing to push forward with the Responsible Homeowner Refinancing Act of 2012, which is known as the Menendez-Boxer Bill. The bill would expand refinancing options – a deal that could prove a boon to lawmakers on both sides of the aisle who want to aid 3 million homeowners and claim the stimulative effects of $2,500 in savings for families through refinancings.

The Menendez-Boxer bill would take away reps and warrants risk for new servicers, eliminate up-front refinancing fees and appraisal costs and would be covered by a 10-basis points surcharge on refinanced home loans, Compass Point said.

"We believe this proposal is still unlikely to gain traction, especially given what we expect to be a disappointing actuarial report from the FHA on Nov. 16 which will likely be followed by a request for a backstop from the Treasury Department," Compass Point explained. "While the president’s proposal would not use the FHA’s primary fund – the Mutual Mortgage Insurance Fund – it is our view that the FHA’s need for a backstop from Treasury will make expanding its mandate politically difficult."

But everything going forward on the housing front is masked in a high degree of uncertainty. The future of the government-sponsored enterprises is still undecided. And banks and financial firms reaction to the roll out and implementation of final Dodd-Frank rules in 2013 is something that the markets have been worrying about for two years now. What's still unknown is whether the CFPB will grant a safe-harbor provision to the qualified mortgage rule, so lenders know exactly what requirements they must follow when issuing new loans to avoid liability.

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