President Obama's approach to the housing crisis has been ‘the poorest part of the administration's response’ to the economy, according to Henry Cisneros, who was secretary of the U.S. Department of Housing and Urban Development (HUD) under President Bill Clinton.
In an interview with Bloomberg, Cisneros faulted the Treasury Department with putting the needs of the financial services industry ahead of the difficulties faced by homeowners.
‘Treasury was running the response, and housing was not top of mind – the banks were,’ Cisneros said. ‘And there's a little bit of a conflict when you're asking the banks to play the role they needed to play on housing, including some principal forgiveness. It was not the right question to raise with the banks when they were trying to hang on by the skin of their teeth.’
Cisneros recommended a policy shift that would pressure lenders to lower the principal owed on mortgages, adding that this would reduce foreclosure rates and give homeowners more money. He also advocates allowing investors to buy foreclosed homes and manage them as rental properties.
‘Investors can at least take it out of inventory so it's not the competition for the private builders,’ Cisneros said. ‘We need to be doing this on a massive scale – hundreds of thousands, even millions of units.’
Cisneros served as HUD secretary from 1993 to 1997 and is now chairman of CityView, an institutional investment firm focused on urban real estate.