Do No Harm To Housing
“Do No Harm To Housing” is the message that thousands of REALTORS®, including representatives from ECAR, will deliver to Congress. REALTORS® will be descending on Washington, D.C. the week of May 12 to participate in The Midyear Legislative Meetings. These meetings are an important opportunity for REALTORS® to meet with their U.S. Senators and Representatives and communicate the issues critical to their businesses, communities and the consumers they represent.
The major talking points include:
- Preserve the Mission and Purpose of the FHA Program
- Preserve Homeownership Tax Policies
- Restructure Fannie Mae & Freddie Mac and Encourage the Return of Private Capital
Here’s what REALTORS® will be saying to the Congressmen and Senators:
Preserve the Mission and Purpose of the FHA Program
FHA, like every other holder of mortgage risk, has incurred financial losses as a result of high foreclosure rates. FHA has taken a number of steps to recoup its financial stability. These include increasing premiums five times in the last two years, increasing down payments on some borrowers, and increasing risk management. Congress should NOT impose any additional cost or qualification burdens on consumers. Further mandated increases to premiums or down payments will disenfranchise American families and hurt our nation’s housing and economic recovery.
Provide FHA With Tools but Don’t Disqualify Potential Homeowners.
NAR supports H.R. 1145, a bill identical to bipartisan legislation that passed the House of Representatives last year by a vote of 402-7. This legislation provides FHA with flexibility to make necessary changes to the program, provides taxpayer protections against lenders who make errors of material fact, and improves program oversight.
Preserve Homeownership Tax Policies
Both the House and Senate are considering different plans to reform the federal tax code. As a result, “everything is on the table” including various real estate tax benefits. While no formal comprehensive tax
reform legislation has been introduced, it is important Congress understands the vital role these provisions play in our nation’s economy.
Real Estate Related Provisions Must Be Preserved
• More than 75% of homeowners utilize the mortgage interest deduction over the period they own their home.
• For many homeowners, property taxes are their largest tax deduction, one that continues even after a mortgage is paid off.
• The value of both mortgage interest and property tax deductions is capitalized into house prices. Eliminating the mortgage interest deduction, for example, would cause on average a 15% decline in value of homes. Decreasing the deductions, even for a limited group, compresses the value of all homes.
• Further declines in home values will harm housing markets, and stymie our nascent housing recovery.
• Reducing the capital gains exclusion thresholds would harm household retirement savings and reduce financial flexibility
Restructure Fannie Mae & Freddie Mac and Encourage the Return of Private Capital
Fannie Mae and Freddie Mac were created to ensure that creditworthy borrowers had access to affordable mortgage capital no matter where they lived in the United States. For over 70 years, the system worked well, combining government support and private capital to bring the necessary funding to consumers in support of their homeownership needs. The system faltered during the housing collapse, and since 2008, Fannie Mae and Freddie Mac have been in conservatorship under the supervision of the Federal Housing Finance Agency (FHFA). FHFA placed Fannie Mae and Freddie Mac into conservatorship “to help restore confidence in Fannie Mae and Freddie Mac, enhance their capacity to fulfill their [housing] mission, and mitigate the systemic risk that has contributed directly to the instability in the current market.” During the last two sessions of Congress, there was a lot of discussion regarding the causes of the housing collapse, and the role that Fannie Mae and Freddie Mac played. There were also a large number of bills introduced, which attempt to resolve the conservatorship; however, there has been no significant effort to move any of these bills.
An Efficient and Adequately Regulated Secondary Market is Essential to Providing Affordable Mortgages to Consumers
The secondary market, where mortgages are securitized, is an important and reliable source of capital for lenders, large and small, and therefore for consumers. Without a secondary market, mortgage interest rates would be unnecessarily higher, and unaffordable for many Americans. In addition, a poorly functioning secondary market will impede both recovery in housing sector and the overall economy.
The Federal Government Must Clearly, and Explicitly, Offer a Guarantee of Some Mortgage Instruments
A federal guarantee is essential to ensure borrowers have access to affordable mortgage credit. Without government backing, creditworthy consumers will pay much higher mortgage interest rates and mortgages may at times not be readily available — as has happened in jumbo and commercial real estate loan markets.
The Government’s Guarantee Should Ensure a Wide Range of Safe, Reliable Mortgage Products for Creditworthy Consumers
These mortgage products should include 15-year and 30-year fixedrate loans, traditional adjustable-rate mortgages (ARMs), and other loan products that have stood the test of time and for which American homeowners have demonstrated a strong “ability to repay.”