Realtors Take to Capitol Hill to Fight For Homeowners

This article is from Rick Turley, the President of the SF Bay Region of Coldwell Banker, our boss.

Bay Area home buyers, sellers and real estate agents better get familiar with a few acronyms – MID, QRM and GSE – because they’re likely to hear a lot about them in the months ahead. These are the equivalent of WMD to the housing market. And what happens to them could have a very real impact on local home values and the health of our market.

As a Director at NAR, I represent Coldwell Banker in a committee consisting of leaders of large brokerage firms across the country, assembled to give guidance and feedback to the NAR executive team. The NAR legislative meetings held last week in Washington DC, also offers the opportunity each year for Realtors to meet with Congressional leaders on Capitol Hill. Along with hundreds of other NAR committee members from all 50 states, including some of our very own Bay Area CB Realtors, we called upon our respective elected officials to discuss our fragile housing recovery. Congressional leaders are looking at anything and everything during this time of historic national debt, and they need to understand the devastating impact that some proposed changes in housing policy could have on our local market.

Lawmakers are considering a variety of policy revisions, including reducing or even eliminating the mortgage interest deduction (MID); tightening Qualified Residential Mortgage (QRM) rules for borrowers, and eliminating Government Sponsored Enterprises (GSE) Fannie Mae and Freddie Mac, which are critical to keeping mortgage money readily available.

We met with Senator Diane Feinstein, and Representatives Speier, Honda, and Eshoo about the importance of maintaining the mortgage interest deduction, especially here in the Bay Area. The deduction is something all of us take for granted as we file our annual tax returns. It’s one of the foundations of homeownership in this country and helps bring housing within reach of millions of Americans.

If lawmakers lower the maximum loan amount to $500,000 – one of the plans under consideration – it may not have a big impact in places like the Midwest or South, where homes typically sell for $200,000 to $300,000. But it would have a huge impact for high-priced markets like ours in the Bay Area.

Members of Congress don’t consider the high cost of living in areas like ours when they propose changes like this. Most assume $800,000 will buy a mansion for the wealthy. But those of us who live here understand that it may just get you a modest starter home. I doubt that first-time buyers in many Bay Area cities who are using both of the couple’s income to qualify for a $750,000 to $800,000 home feel very wealthy.

“Tax incentives for home ownership have been a part of our tax system for decades and are deeply woven into our economic fabric,” a local Realtor Association president told lawmakers. “Reducing or eliminating the MID is a de facto tax increase on home owners, who already pay 80 to 90 percent of U.S. federal income tax.”

Changes to QRM rules would require significantly higher down payments for both homebuyers as well as those trying to refinance their mortgage. Buyers would face a minimum of 20 percent down, while those refinancing mortgages would be required to have 25-30 percent equity in their properties in order to get a loan.

We understand Congress’ interest in trying to reduce the default rate among borrowers, but this isn’t the answer. As the Mortgage Bankers Association pointed out in a white paper, high down payment and equity requirements will not have a meaningful impact on default rates. But they will require millions of consumers, who are at low risk of default, to either put off buying a home or pay unnecessarily higher interest rates.

Finally, a number of bills making their way through Congress have provisions that would significantly reduce or eliminate Freddie Mac and Fannie Mae within the next few years. Since both GSEs purchase mortgage loans and repackage pooled loans that are sold on the secondary market, this could have a significant impact on the availability of home loan financing.

Realtors urged lawmakers to tread very carefully in reforming Fannie and Freddie. Without a secondary market, mortgage interest rates would be unnecessarily higher and outright unaffordable for many Bay Area buyers. While GSE reform is necessary, the federal government must have a continued key role in the secondary mortgage market to ensure capital and liquidity in the market.

This is not the time for Congress to consider radical housing policy changes. Just as we are seeing a gradual recovery in the housing market, any one of these legislative changes could halt the progress we’ve made. All three could be catastrophic. I urge you to join me in contacting your local representatives in Congress to urge them to take these facts into consideration as they look at any changes to our nation’s housing policy.

That’s it for now. Have a good week!
Rick

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage