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Analysts see vague housing direction from Obama administration

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Moody's Analytics Chief Economist Mark Zandi said President Obama's jobs plan has the potential to "stabilize confidence" in the economy, but is missing one critical element: a focus on housing. "The president's plan is large, but in some key respects it is not complete," Zandi said. "Most notably, it does not directly address the foreclosure crisis and housing slump, save for some added funding for neighborhood stabilization," he said. "The president did mention in his speech that he would be working with the FHFA to facilitate more mortgage refinancing; this would be a significant plus for housing and the broader economy if he is able to break the logjam in refinancing activity." Economists started sounding the alarm six months ago, saying a failure to add jobs and stimulate the housing sector would lead to a sustained economic lull. The real estate and mortgage finance segments have been caught in a four-year cycle of falling home prices, fewer home purchases and an inability for many borrowers to refinance existing mortgages. Analysts with Keefe, Bruyette & Woods made a similar observation. "One of the most interesting parts of the speech was among the shortest — housing," the research firm said in a note Friday. "After several weeks of news stories about a possible blanket refi program, the president included a short and vague section in his speech regarding refis. The sentence wasn't even a proposal but a concept — that the administration would work with federal housing agencies to help more borrowers refinance." Zandi and KBW analysts had the same gut reaction to the speech, saying some of the proposals could pass Congress, while others will face political gridlock. The price tag of the plan is in the $450 billion range, KBW said Friday, with Obama proposing $250 billion in tax cuts and $200 billion in spending increases. Zandi said the plan could have a short-term benefit. "If fully implemented, the Obama jobs plan would increase real GDP growth in 2012 by two percentage points, add 1.9 million jobs, and reduce the unemployment rate by a full percentage point, compared with current fiscal policy," he said. The refinancing issue, while getting a brief mention in the president's speech, remains a point of uncertainty. For example questions remain as to whether or not any refinancing initiative with be limited to revamping the Home Affordable Refinance Program or launched as a massive, nationwide program. FHFA Director Edward DeMarco said Friday his agency is reevaluating HARP to see if there are ways to offer refinancings to more borrowers. "FHFA is carefully reviewing the mechanics of the HARP program to identify possible enhancements that would reduce barriers for borrowers already otherwise eligible to refinance using HARP," DeMarco said. "If there are frictions associated with the origination of HARP loans that can be eased while still achieving the program's intent of assisting borrowers and reducing credit risk for the Eenterprises, we will seek to do so." Barclays Capital said even with HARP changes on the table, "the agency MBS market will likely remain in a state of limbo absent further details." Ajay Rajadhyaksha with Barclays concluded "agency MBS continued to be weighed down by government refi fears, even as non-agencies remained stable." Write to: Kerri Panchuk.

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