01/25/2012 09:01 am ET Updated Mar 26, 2012

State of the Union: Small Missing Pieces in the Messy Housing Puzzle

You might have missed it among the long, long to-do list Obama gave last night, but the president announced two new housing proposals: more refinancing, and more investigations of banks. Neither is a breakthrough: they fill in some of the missing pieces in the messy jigsaw puzzle of Obama's housing policy. Here's what he proposed:

1) Letting more borrowers refinance. Obama proposed that "every responsible homeowner" be able to refinance. The existing refinancing program (HARP) lets borrowers who are current on their mortgages refinance even if they're way underwater -- but only if their loans are guaranteed by Fannie Mae or Freddie Mac. Obama's proposal would extend refinancing to borrowers who are current but whose loans AREN'T guaranteed by Fannie or Freddie -- which the New York Times reports could be two or three million borrowers. It sounds like Obama will ask Congress to let the Federal Housing Administration (FHA) guarantee refinancings by underwater borrowers and charge big banks a fee to cover the costs. If Congress is involved and banks are asked to pay ... well, let's just say it's not a done deal. Obama doesn't always get his way with Congress or with the banks.

And if this happens? It won't save the housing market. Letting borrowers refinance only if they're current on payments won't help people on the verge of losing their homes. And, refinancing won't reduce principal, so underwater borrowers stay underwater. Refinancing is economic stimulus: it gives homeowners with mortgages more spending money. (I said the same thing last October about the expansion of HARP.)

2) Investigating mortgage lending and securitization. Again, this proposal fills in missing pieces. That big robo-signing settlement -- which Obama didn't mention tonight but could come soon -- would punish banks only for their foreclosure practices. The new, proposed investigation would have those same states' attorneys-general plus the feds go after risky lending and securitization practices. It's great politics to punish banks, and maybe they deserve it. But remember, the robo-signing controversy has gummed up the foreclosure process as banks wait for the settlement to set clear rules on foreclosures. What if this new investigation gums up lending and securitization? That could make mortgages scarcer and more expensive.

The only real housing fireworks was the swipe Obama took at Republican candidate Mitt Romney. The president said "responsible homeowners shouldn't have to sit and wait for the housing market to hit bottom," a direct hit at Romney's comments in Nevada last October that the foreclosure process should "run its course and hit the bottom." If Romney gets to face Obama in the presidential election, you can bet Obama will be tossing that quote back in Romney's face again and again. Here's to 2012!