NAR and CAR Respond
First let me say that last week’s article caused a flurry of responses asking for more information. So if you will indulge me, I will expand on the topic. And, add a couple of divergent opinions in an attempt to draw even more of you into the debate.
First, on February 11, 2011 in response to the White House’s floating the idea of dissolving Freddie and Fannie over the next few years, the California Association of Realtors (CAR) had the following response.
“The elimination of government involvement would raise borrowing cost for home buyers. And, severely restrict a safe and affordable flow of financing, further impeding the still fragile housing market recovery”.
“A reduced government presence in the mortgage market will raise the cost of homeownership and make mortgages less available,” according to CAR President Beth Peerce. She goes on to say “Congress needs to understand that during economic downturns, the housing market needs government involvement to ensure capital stability”.
CAR and NAR (National Association of REALTORS®), believes that Fannie Mae and Freddie Mac government sponsored enterprises (GSEs) should be converted into government chartered non-profit corporations. According to CAR and NAR in a joint statement “such an entity would ensure government’s role in a stable real estate finance system, while eliminating the conflict created by the GSE’s current charter allowing for a private profit and loss structure”. They go on to surmise that such an arrangement accompanied by an expressed government guarantee would insure continued low interest rates and foster investor confidence.
The White House has also proposed taking the maximum loan amount (for a conforming loan) back to six hundred and twenty five thousand dollars. In most of California’s higher priced neighborhoods.
This is important because California is the Jumbo Loan leader and any such reduction would severely hamper our housing and economic recovery according to CAR.
I should explain that the conforming rate is the maximum rate that Fannie or Freddie can purchase and/or guarantee.
By CAR’s estimates the home buyers of San Francisco, Santa Clara County, Orange County, and San Diego County would see and average of approximately seven percent of their homes rendered ineligible for GSE financing, and nearly thirteen and a half percent of the same homes would no longer qualify for FHA financing.
It should be noted that nationally the maximum home rate for Fannie and Freddie is four hundred seventeen thousand. And the higher rates only apply to areas of the country where the median sales price exceeds that amount.
According to CAR, an efficient and properly regulated secondary market is a vital key to providing affordable mortgages to consumers. Without a secondary market CAR goes on to say, “interest rates would be unnecessarily higher and unaffordable for many Americans”. And, the lack of a viable secondary market would impede the overall economic recovery.
Representative Paul Kanjorski (D-Penn) I believe would agree with many of the positions which CAR and NAR have taken. In a recent interview with Jennifer Schonberger was quoted as saying the following “ My judgment is that we do need something that will continue to stimulate housing and take the valleys and hills out of the problem…Fannie and Freddie existed for a good number of years and were very successful in gaining a constant growth and prosperity in the residential real estate field”.
He went on to say “Can they survive now”? And, answered his own question by saying “they probably could be rehabilitated, but that would be expensive and take a long time”
The final decision will be made in Washington. But the ramifications of this situation and any possible “cure” will most certainly be paid for on Main Street. Any modification of our current system will most certainly affect the interest rates paid on the mortgages of tomorrow.
And that truth will determine who in this country will be able to sell or buy in the real estate market of the future.
Your opportunity is now. I truly hope that you recognize that fact and seize moment and opportunity of today.