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Will Homeownership in America Become Out of Reach?

outreachAccording to recent studies, it is widely perceived that we Boomers will be the first generation in this country to pass on a less prosperous and bright future for our children. I’ve just returned from a week in Sacramento followed by a week in Washington, D.C. and nowhere is that prophecy more clearly demonstrated than by the current attack on the future of housing in our country.

As National Association of Realtors (NAR) Chief Lobbyist Jerry Giovaniello phrased it, “We are facing a perfect storm which, if brought to fruition, will bring a future in which only a certain class of people will be able to afford homes.”

How so? Well, as you read this Congress is debating several key issues, none of which they know anything about. First and foremost is the future of your homeownership tax benefits, you mortgage interest and property tax deductions. This breaks into three areas – your primary residence, and/or any home worth more than $1 million dollars, and/or any second home or investment property.

The 2nd & 3rd options are more easily salable at this time because, as we all know, only ‘THE RICH’ have homes worth more than $1 million or have a 2nd home. If they can get that program sold, they’ll come after your primary residence somewhere down the line, you can bet on that. Home ownership strengthens our country and homeownership tax benefits have been a cornerstone of that strength for over 100 years.

Second, the future of the affordable 30-year fixed mortgage is on the line. Our President has proposed not a sensible restructuring of our Government Sponsored Enterprises (GSE’s) Fannie Mae & Freddie Mac, but their wholesale elimination. Fannie & Freddie represent secondary market liquidity. They currently hold about 60% of the loans made in this country – and the President wants to dump all that back into the private sector.

Folks, the private sector would not have made a single loan since 2007 if not for the guaranteed liquidity provided by Fannie & Freddie. Have you tried to get a loan on a home over $700,000 lately? Yeah, you can’t. Because those so-called ‘jumbo’ or non-conforming loans aren’t covered by Fannie & Freddie and private banks won’t touch them. The promise of, and nostalgia for, private lending is a myth. The value of Fannie & Freddie should be judged on the first 76 years of their performance, not the last 4 when they were under legislative pressure to ‘outperform’ private lenders in the race to see who could fund the most & worst loans.

Third, the current debate arising out of last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act is fierce. At over 2,300 pages, this bill is the most comprehensive financial reform act ever attempted and nobody knows what the hell is says. It’s an attempt to compensate or overcompensate for recent excesses and as such represents an attempt at risk management which could be more accurately defined as ‘cover your ass-ets’.

But one problematic area (among many) arising from Dodd-Frank is the issue of the Qualified Residential Mortgage (QRM). Because so many lenders made bad loans they could simply sell off to others with no recourse or consequence, Dodd-Frank wants everybody from now on to have ‘skin in the game.’ If a lender wants to make a home loan it must meet QRM regulations or that lender must retain 5% of the value on his own books.

Sounds good, right? Except to meet QRM a borrower must put at least 20% down, have 760 or higher FICO scores and meet a variety of other criteria. That means millions of prospective good solid buyers will be bumped out of qualifying or be forced into prohibitively expensive loan programs that only the big 4 banks can offer – because smaller lenders simply cannot afford to retain loan portfolios of 5%.

I’ll close by quoting former New Orleans Mayor and current CEO of the National Urban League, Marc Morial. “We are a growing nation that needs to be housed. We cannot allow ourselves to lose sight of that and go backwards. We must maintain the primacy and value of homeownership as the centerpiece of the American Dream.” Remind your Congressman of that if they’ll listen to you. And thank your Realtor® for keeping the fight alive on Capitol Hill for your rights as a homeowner in this country. We’re doing everything we can to make sure you’re not the next endangered species.

Gene Wunderlich is the Government Affairs Director for Southwest Riverside County Association of Realtors.