Presidential Candidates
Differ on Housing Issues

Sens. Hillary Clinton and Barack Obama sparred over housing policy yesterday, revealing some differences in their approaches to economic policy, with Mrs. Clinton more willing to embrace direct government intervention on some issues.

As the Democratic presidential candidates look to the March 4 primaries, when voters go to the polls in Ohio, a state hit hard by housing-market declines, Mr. Obama called his colleague's plan to freeze mortgage rates "disastrous."

Mr. Obama proposes tough penalties on lenders that steered homeowners into subprime mortgages, and tax credits for struggling homeowners to cover mortgage interest payments, but he hasn't advocated direct intervention to slow or block foreclosures.

Mrs. Clinton has taken a tack designed to give borrowers more time to settle problems with lenders, proposing a 90-day halt on foreclosures for homeowners with subprime mortgages. Her plan also calls for freezing interest rates on adjustable-rate mortgages for at least five years. The proposal wouldn't apply to mortgages on second homes or investment properties.

Mr. Obama said the proposal was shortsighted because it would make lenders less willing to approve new loans or modify existing ones. "A blanket freeze ... will drive rates through the roof," he said during a campaign stop in San Antonio.

While the candidates generally agree on economic policy, there are differences. On health care, for example, Mrs. Clinton would require everyone to purchase insurance. Mr. Obama's universal-coverage proposal doesn't go that far.

On the housing front, both candidates have put forward proposals that would put at least some added burden on taxpayers. Mr. Obama has advocated the creation of a $10 billion fund to help borrowers avoid foreclosure or buy first homes, while Mrs. Clinton wants to allow more people who can't afford higher payments to refinance their loans into more-affordable government-sponsored mortgages.

Mrs. Clinton said her opponent's proposed fund was one-third the size of what she would offer. A Clinton campaign spokesman said Mr. Obama had "positioned himself to the right of George Bush" on the issue.

While a three-month freeze on foreclosures would give lenders and borrowers a last-ditch opportunity to modify loans about to enter foreclosure, most lenders have criticized the plan because it would force them to swallow losses in interest. That could exacerbate the credit crunch by making lenders less willing to make loans.

In addition, in regions of the country such as Ohio, where home prices are still declining, delaying foreclosure could force banks to watch home values drop further before they can seize homes.

"Lenders are not going to recover their costs if it's in an area of declining value or high unemployment," said Bud Carter, vice president of Potomac Partners, a consulting concern that advises lenders. That could put further pressure on home values, experts say.

Ohio had the third-highest number of properties in foreclosure last year. The state's foreclosure filings increased 88% from the 2006 figure. Some 1.8% of the state's households entered foreclosure last year, the sixth-highest rate in the nation, according to RealtyTrac, a company that monitors housing.

In recent days, both campaigns have taken on a more populist bent in an appeal to Ohio's blue-collar voters. The candidates have promised to put the brakes on free-trade deals, and they have sharpened their attacks on executives who profited from the subprime-mortgage boom.

Ohio could provide early clues about how candidates will fare in states that have a manufacturing-based economy and strong union membership, such as Pennsylvania, which votes April 22, and Indiana, May 6.

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