It's Now Obama's Housing Market: Street Whispers

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On the regulation front, the issue of defining "qualified mortgages" is still stalling credit. Dodd Frank requires banks to ensure borrowers have an ability to pay their mortgage. But the CFPB is still in the process of writing the rule. Defining what constitutes a safe mortgage too tightly might constrain credit.

There is also the government's ongoing investigations into banks' mortgage underwriting practice at the height of the boom. New York Attorney General Eric Schneiderman is just getting started as the chair of Obama's mortgage fraud task force set up earlier this year, having recently filed a civil fraud lawsuit against JPMorgan Chase (JPM) over alleged mortgage fraud by its Bear Stearns unit.

But while there is enough demand on Main Street to see Wall Street "crooks" in jail, the truth is ongoing litigation is weighing heavily on banks' willingness to lend.

And well intentioned government programs to reduce principal on loans and protect borrowers from wrongful foreclosures might backfire, as banks and investors may remain conservative if they cannot be confident of protecting their exposure to losses.

That's a long list of issues to tackle.

The housing market may be mending, but it has done so largely through temporary fixes. Hopefully, in his second term, the President will focus on the long-term.

--Written by Shanthi Bharatwaj in New York

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