Lawmakers Cautious on Tampering With Homeownership
December 6, 2016
Homeownership will be in the spotlight next year in Washington as lawmakers in the new Congress look at federal taxes and what to do about the two secondary mortgage market companies, Fannie Mae and Freddie Mac. This is according to two members of Congress today at a housing policy conference hosted by NAR and S&P Global.
|NAR President Bill Brown greets Rep. Brad Sherman (D-Calif.) at a conference NAR and S&P Global hosted to look at economic and political issues impacting homeownership.|
First on the agenda in Congress will be repealing and replacing the Affordable Care Act in some fashion, said Rep. Frank Lucas (R-Okla). But once that’s done, lawmakers will turn to tax reform and also reforming Fannie Mae and Freddie Mac.
Lucas and Rep. Brad Sherman (D-Calif.), both senior members of the House Financial Services Committee, said groups like NAR must stay engaged over the next two years to help shape how these big-ticket items get worked out. “We can’t afford to make a mistake,” Lucas said.
The lawmakers said the House could pass legislation that could radically change how Fannie and Freddie operate as part of reforms to take them out from under federal conservatorship. But because of the crucial role they play in homeownership, and thus the broader economy, the final legislation that gets passed by the full Congress could leave key protections in place. “I wouldn’t be surprised if the change is rather modest,” said Sherman.
The reason for that, both lawmakers said, is because radical change could result in an acceleration of interest rate hikes and a reduction in home values, which would deal a blow to a vital part of the economy.
Read more: Yun: Homeownership Still Matters
NAR and S&P Global hosted the conference to look at the economic and political issues that stand in the way of increased homeownership, which is at a 50-year low even though interest rates are historically low and home appreciation is strong.
A panel of economists said tight underwriting and high prices caused in part by a gap in affordable homes available for sale, along with demographic trends, are keeping young households out of the market, which in turn is widening the wealth gap between them and older households.
NAR Chief Economist Lawrence Yun said Congress must be careful how it restructures Fannie and Freddie, because it’s unlikely lenders would offer 30-year fixed-rate loans—the bedrock of the housing market—in all types of market conditions if the federal government didn’t remain in the market as an insurer of mortgage-backed securities. “The market for 90 percent of loans would collapse,” he said.
NAR President Bill Brown, who opened the conference, said the mortgage interest deduction and other crucial incentives for home ownership are “not negotiable” and that’s a message REALTORS® will make sure lawmakers in Congress hear as they develop legislation over the next two years.
—By REALTOR® Magazine
Updated: June 18, 2018