What Paul Ryan meant with that one comment on housing

Republican vice presidential candidate Paul Ryan fired a quiet shot across the bow, bringing the nation’s housing crisis into his convention speech Wednesday … even if only for a split second.

“It began with a housing crisis they alone didn’t cause; it ends with a housing crisis they didn’t correct,” Ryan is quoted as saying during his rollout speech at the GOP Convention in Tampa.

This punchy point may lack further elaboration right now, but Ed Pinto with the American Enterprise Institute, who is on the floor at the GOP Convention, says it looks as if Republicans are beginning to show a willingness to flesh out the nation’s housing issues, making the subject a part of the Romney/Ryan campaign.

In fact, Pinto – who wrote a white paper about the causes and possible cures of the housing crisis – says much of the strategy he is hearing among GOP lawmakers is in line with his own recommendations.

“I would expect them to put more flesh on the bones,” he said when asked how much detail the GOP candidates will put into housing statements. “But I would not expect it at this point to become a full blown issue.”

Pinto believes the platform from the GOP incorporates the four principles he also suggests for housing reform. Those principles include some type of assurance that the housing finance system can function without direct financial support from the government; ensuring mortgage quality and adequate capital behind mortgage risk; making sure programs for low-income families are on budget while limiting their risks to homeowners and taxpayers; and establishing that the GSEs should be gradually eliminated.”

Pinto says the GOP platform recommends returning to a mortgage finance system that is fueled by private capital and backed by private mortgage insurance.

He added that the GOP’s suggested reforms should include clear underwriting standards and  a safe harbor to ensure litigation isn’t fueled unnecessarily. The party platform also calls for the wind down of the GSEs.

The Obama administration, which released a white paper in 2011 on how to wind down Fannie and Freddie, also suggested in varying degrees a move towards a private-capital backed market and away from reliance on government insurance.  Still, to date, no comprehensive plan has been finalized or accepted.

Pinto says Ryan’s one-liner on housing also could be part of a larger campaign indictment of big, centralized government programs that impede into the private sector.

The idea of the government stimulating lending is a potential turn-off to Gen X and Y voters who never benefitted from rising home prices before the economic meltdown.

“When you start allowing all of the lending (spurred by government’s implicit guarantees) to push prices up, it makes things more expensive,” Pinto said from the convention. “The marginal buyer is who sets the price … if you lower down payments, raise debt-to-income ratios and bring in more buyers, it drives up the price.”

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