In State of the Union, President (Quietly) Talks Huge Changes to Home Mortgage Program

The President’s State of the Union address included a proposal to address America’s largest category of consumer debt: home mortgages. The proposed lowering of the FHA mortgage insurance premium—from 1.35 percent to 0.85 percent—would be one of the most immediately impactful governance changes emerging from this high-profile speech.  This change represents about $900 dollars in the pocket of every homebuyer who finances, or refinances, with an FHA mortgage in the next year alone—an estimated 800,000 people.  Plus, the reduction in cost will allow an estimated 250,000 additional families to buy a home for the first time during the next three years.

Big news, right?  Imagine the stampede if the President had said, “homebuyers, line up outside for your $900 checks.”  Yet, if you blinked during the SOTU, you missed it; the President simply said “…things like lower mortgage premiums will make a meaningful difference in the lives of millions of families.”  In fact, even if you didn’t blink, you might not have known what he was referencing. 

So if this new policy is so important, why was there so little discussion of it? It has to do, first, with the process of generating the speech, as I saw first-hand in working on two SOTU’s in the White House, in 2009 and 2010 (particularly the latter, when Citizens United and other issues in my government reform portfolio made up approximately a quarter of the content of the speech).  The entire federal government filters ideas up through the White House staff for inclusion in the speech.  As these ideas climb up the pyramid, the competition for space gets tighter and tighter, with the White House policy leads supporting the speechwriters’ winnowing down of ideas. Everyone assists in cutting down the text of the speech to pack as much substance into as little space as possible.  That leads to semaphores, like the one about mortgage premiums.

Moreover, in this case, the mortgage premium cut had already been announced by the White House Press Office on January 7th and at the President’s event in Phoenix on January 8th. So, there was no need to use precious SOTU space to detail it. In our present-day, oversaturated media environment, the White House drives some of the most important SOTU ideas before and after the big speech to give them the space to break through.  The mortgage policy the president was referencing last night will undoubtedly be echoed in the President’s (and other officials’) post-SOTU speeches starting today.

The upshot: you could argue that this idea getting so little play during the speech proves how important it is, because the brief reference was a consequence of the idea being so heavily featured before and after!  OK, while that would be a slight stretch, this change in FHA policy is consequential. Here in Governance Studies, we have been analyzing how government can better serve the middle-class and all Americans, including recently hosting CFPB Director Richard Cordray for a discussion of home mortgages.  This change in mortgage premium rates compliments the new tools the Director announced here last week in helping make mortgages work better for the middle-class and all Americans.