Surviving the housing collapse

In his first inaugural speech four years ago, President Barack Obama acknowledged that the nation was facing a moment of economic crisis that hit many Americans where they live.

In the ensuing four years, millions of homeowners around the country learned painfully and firsthand the meaning of “foreclosure” and “loan modification” and other terms describing the housing mess. They also learned about the abuses in mortgage lending that created the housing crisis.

On Monday, Obama did not make so much as a passing reference to housing or lost homes in his second inaugural, signaling that the worst of the crisis is behind us.

But few consumer advocates give the president high marks for devising effective solutions, nor should they. To the extent that the market is recovering, it is largely because of the broader improvement in the economy rather than specific programs put forth by Obama and his appointees.

In the past few weeks and months, however, a series of actions by the federal government have sought to put closure on the housing crisis through a variety of actions we would describe as good and not so good.

The good. Last September, the Fed announced a new program to buy large quantities of mortgage bonds each month. This welcome shift in policy has done more than any other initiative to aid housing.

Last week, in another win for homeowners and buyers, the administration’s new Consumer Financial Protection Bureau issued new rules for mortgage servicers. It will require them to deal fairly with struggling borrowers and offer clear information about costs.

One week earlier, the CFPB issued new mortgage standards that should rid the market of “toxic mortgages” and thus remove a major obstacle keeping banks from making home loans.

All of these moves will benefit borrowers as well as home sellers.

Not so good: The government announced an $8.5 billion settlement this month with 10 giant banks for mortgage abuses such as robo-signing and improper foreclosure tactics.

Ostensibly, this is a win for consumers – $3.3 billion will go directly to borrowers who faced foreclosure, and $5.2 billion for loan modification and reduced interest payments.

But where’s the accountability for all the misdeeds? No one is being punished. And what about making the benefit fit the level of wrongdoing? Borrowers will receive a check based on the type of error the banks made, but many will be undercompensated, and some people receiving a check suffered little or no harm.

Going forward, consumers and their advocates – and lawmakers – must ensure that the rules are applied fairly, with an emphasis on helping consumers.

The federal government will follow up on the $8.5 billion settlement by spelling out enforcement actions, which must benefit consumers. Those who suffered the most wrong deserve to receive the greatest benefit.