GOP Candidates in Foreclosure Capital Say Government Not the Solution to Crisis
Republican presidential aspirants say free market can fix foreclosure mess
Republican presidential candidates, from left, former Penn. Sen. Rick Santorum, Rep. Ron Paul, R-Texas, businessman Herman Cain, former Mass. Gov. Mitt Romney, Texas Gov. Rick Perry, former House Speaker Newt Gingrich and Rep. Michele Bachmann, R-Minn., before a Republican presidential debate in Las Vegas. Isaac Brekken/AP
The Republican candidates debating in the nation’s No. 1 foreclosure state of Nevada Tuesday night offered no specific policy solutions for how to resolve a crisis that has bedeviled millions of homeowners.
Instead, the four candidates who answered a question about foreclosures—which came more than an hour into the debate—promised to grow the economy and let the markets sort the problem out.
“We need to get government out of the way,” said Herman Cain.
“The right course is to let the markets work,” said former Massachussetts Gov. Mitt Romney.
Rep. Michele Bachmann of Minnesota had the most impassioned response, describing the plight of women who through no fault of their own “are at the end of the rope” because “[President] Obama failed you on this issue of housing and foreclosures.”
But her answer otherwise followed suit: “We will turn the economy around,” she said. “We will create jobs. That’s how you hold onto your house.”
Former U.S. Sen. Rick Santorum of Pennsylvania used most of his response to accuse the other candidates of supporting the Troubled Asset Relief Program, which bailed out banks during the financial meltdown.
One of every 44 homes in Nevada has been hit by a foreclosure filing in the third quarter of this year, according to Realty Trac Inc. Nevada’s foreclosures are coming at twice the rate of California, the second-hardest hit state.
Even so, the candidates have not shown a great desire to be heard on the subject thus far in the campaign.
Romney, who has visited North Las Vegas three times this year, has focused his message instead on job creation, which he suggested in one visit would help increase property values and repair foreclosed homes. Government intervention, he said, is not the answer.
The Las Vegas Sun reported that when the Republican presidential field debated economic policy in New Hampshire last week, the word “foreclosure” was mentioned – once. The Sun said, “that lone mention by former Utah Gov. Jon Huntsman accompanied no prescription for the crisis. . . . Rather, Huntsman mentioned it in a description of the pain felt by Americans.”
(Huntsman opted out of Tuesday’s debate, citing Nevada’s decision to move its primary ahead of New Hampshire’s.)
Nevada homeowners are unlikely to see positive equity in their homes for 20 or 30 years without a reduction in their loan principal, according to Diane Thompson, an attorney at the National Consumer Law Center.
"To date, the homeowners have been asked to bear the entire tab for financial crisis caused by irresponsible lending," she said. "We've bailed out the banks, but not ended the crisis, and not helped homeowners."
Nevada’s one-in-44 foreclosure rate from July through September compares to a rate of one in 88 homes in California. Arizona ranked third with one in 93 foreclosures. Nationwide, roughly 5 million homes have been hit with foreclosure actions since the start of 2010, according to RealtyTrac.
Republican leaders have generally blamed the housing crisis on government-chartered mortgage giants Fannie Mae and Freddie Mac, which have been taken over by the government and bailed out by taxpayers.
GOP.gov, the official website for Republicans in the U.S. House of Representatives, has said: “Fannie Mae and Freddie Mac were the main cause of the nation’s current financial turmoil.”
The few GOP candidates who have talked about housing on the campaign trail, such as Newt Gingrich and Rep. Ron Paul of Texas have said Fannie and Freddie were responsible for policies that drove lenders to make loans to people who couldn’t afford them.
A review of loan default data by iWatch News has indicated, however, that Fannie and Freddie contributed to the mortgage meltdown but played a secondary role to Wall Street. Wall Street firms and the mortgage lenders they bankrolled led the growth of the market for subprime loans and other risky mortgages.
Government data show mortgages backed by Wall Street from 2001 to 2008 were 4½ times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.
The candidates have not had great press on the foreclosure issue.
The Boston Globe reported that one of Romney’s top bundlers lobbied Congress on behalf of Lender Processing Services, which was reprimanded in April by the government for “unsound practices related to residential mortgage loan serving and foreclosure processing.’’
An Associated Press investigation found that Perry courted some of the nation’s leading mortgage companies to set up shop in his state, offering $35 million in grants to Countrywide Financial and now-defunct Washington Mutual Inc. and took in tens of thousands of their dollars for his gubernatorial campaign. He also downplayed early warnings of an impending mortgage crisis as alarmist.
An iWatch News investigation has detailed accounts from former Countrywide workers and executives who claim they were demoted or fired for reporting widespread fraud at the lender, which is now owned by Bank of America.
A Congressional investigation found that Washington Mutual executives created a “ mortgage time bomb ” by selling investors subprime loans they knew were likely to go bad.