Ensuring Home Ownership for Future Generations

---

Our country has found itself in the midst of a lasting recession, mounting debt, wide-spread unemployment and a fragile housing market. As the nation's leading advocate for home ownership and housing issues, the National Association of Realtors believes that to restore the nation's economy, we must look toward home ownership.

Home ownership has been the cornerstone of the American Dream since this country's founding, and with good reason. Americans aspire to home ownership because it's where we make memories, build our futures, and feel comfortable and secure. Owning a home has had long-standing government support throughout history because it benefits not only individuals and families, but also strengthens communities and is vital to our nation's economy.

Housing accounts for more than 15 percent of the U.S. Gross Domestic Product, and home sales in this country generate more than 2.5 million private-sector jobs in an average year. Because a healthy and stable housing market will lead to a quicker and greater economic recovery, housing must remain first on the nation's public policy agenda and any regulatory or legislative changes must be focused on that recovery.

For example, any changes to home owner tax benefits could threaten stabilization and critically erode home prices and values. This includes benefits like the mortgage interest deduction.  In a recent survey, more than two-thirds of Americans believed eliminating the MID could have a negative impact on the housing market as well as the overall economy. Last year the average family saved over $3,000 in taxes by claiming the MID.  In today's tough economy, that's money people can put toward savings, college tuition, retirement, or just paying down other bills. The MID clearly makes a real difference to middle-class families, and reducing or eliminating it could shut many hard-working people out of home ownership.

Mortgage availability also remains a top concern. Despite record affordability conditions that haven't been seen since 1970, many buyers who want to become home owners are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy individuals. We cannot have a viable housing market until creditworthy buyers can obtain mortgage finance, and Realtors® are urging Congress not to consider any legislation that tightens access to credit and affordable, safe mortgages.

On a related note, many consumers may need to come up with a 20 percent down payment to purchase a house - this could potentially impact one-third of all home buyers. NAR has called on these regulators to revise their proposal for unnecessarily high down payment requirements as part of the Qualified Residential Mortgage exemption under the Dodd-Frank Act. Higher down payments do little to reduce default risk and strip buyers of their savings, and the data show that strong underwriting and home buyer education have a much stronger impact on reducing default risk.

Defining the QRM rule is important because it will determine the types of mortgage that will be available to borrowers in the future. We believe that a broad QRM definition will encourage sound lending and reduce future defaults without delaying or denying home ownership to millions of creditworthy borrowers.

Providing liquidity in the housing market is another important goal, and toward that end, extending the Federal Housing Administration and government-sponsored enterprises current mortgage loan limits is also another crucial step toward recovery. Current limits are set to expire on September 30 and revert to formulas based on 115 percent of a county's median home price. This wouldn't just affect home buyers in high-cost areas; reverting to the statutory limits would reduce loan limits in 669 counties and 42 states and territories, and the average loan reduction would be more than $68,000.

This would drastically affect first-time home buyers, many of whom rely on FHA-insured loans to purchase a home. In fact, one-third of recent buyers purchased their homes with an FHA-insured mortgage. Changing the loan limits would restrict the availability of mortgage loans all over the country and would have an even greater impact on mortgage liquidity.

September 30 is also the date that the National Flood Insurance Program is set to expire. The NFIP ensures access to affordable flood insurance for 5.6 million homes and business owners in more than 21,000 communities across the country, and a long-term reauthorization of the program is essential to a properly functioning real estate market. When the NFIP was allowed to expire temporarily in June 2010, 47,000 home sales were either delayed or cancelled. The current uncertainty surrounding the program is already hurting affected housing markets. The U.S. House of Representatives has already passed a five-year reauthorization, and we are urging the Senate to do the same.

This isn't the first time Americans have faced economic hardship, but a review of our nation's history shows that eight of the last 10 recessions have ended as a result of robust housing markets. The choice is clear; America needs a healthy housing market to thrive. We can achieve this by supporting tax benefits that encourage home ownership; advocating greater access to affordable, safe mortgage options; and supporting policies that allow creditworthy buyers to enter the market. The actions we take today can move our nation one step closer to stability and prosperity while ensuring home ownership remains a part of the American Dream for generations to come.

Ronald Phipps is the 2011 President of the National Association of Realtors (NAR).

---