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Sal Aranda: What’s good for housing market is good for America

Real Estate Talk

Posted: October 27, 2011 1:55 a.m.
Updated: October 27, 2011 1:55 a.m.

Owning a home has had long-standing government support in the U.S. because home ownership benefits individuals and families, strengthens communities and is integral to the nation’s economy.

That view was expressed recently by Moe Veissi, president-elect of the National Association of Realtors, as he outlined the Realtors’ recommendations for housing finance reform before a House Financial Services Subcommittee.

“We must be better stewards of the U.S. housing finance system if it is to thrive and effectively serve American homebuyers and mortgage investors into the future,” Veissi said. “Repairs to our current housing finance structure must be made, but we must be careful that changes to the system do not come at the expense of home ownership opportunities for middle- and lower-income Americans.”

With that goal in mind, NAR supports HR 2413, the “Secondary Market Facility for Residential Mortgage Act of 2011,” introduced by Reps. Gary Miller, R-Calif., and Carolyn McCarthy, D-N.Y.

HR 2413 offers a comprehensive strategy for reforming the secondary mortgage market and gives the federal government a continued role to ensure a consistent flow of mortgage credit in all markets and all economic conditions.

It also supports the use of long-term, fixed-rate mortgage products. NAR believes full privatization of the secondary mortgage market would all but eliminate products like the 30-year, fixed-rate mortgage and that mortgage-interest rates would be unnecessarily higher and unaffordable for many Americans, shutting otherwise qualified buyers out of the market.

“The 30-year fixed-rate mortgage is the bedrock of the U.S. housing finance system, and without government support, there’s no evidence that this type of mortgage would continue to exist,” Veissi said. “Private firms’ business strategies would focus on optimizing their profits, creating mortgage products that are more aligned with the goals of their business than in the best interests of the nation’s housing policy or consumers.”

While the size of the government’s participation in housing finance should decrease if private capital is to return to the market and function properly, the federal government must have a continued role in the secondary mortgage market to avoid losing long-term, fixed-rate mortgage products and keep borrowing costs affordable for consumers.

“Continuing government participation in the secondary mortgage market is critical to ensuring that qualified home buyers can obtain safe and sound mortgage financing products even during market downturns, when private entities have historically pulled back,” Veissi said.

Recent experience confirms that view as FHA has been the primary source of loans over the last several years as private lenders virtually stopped all lending while the economy went into a skid.

Plus, recent reductions to the conforming loan limits by the federal government are already having an impact on mortgage liquidity, according to early data from an NAR survey, which found that prospective home buyers who are now above the new lower conventional conforming loan limit — an estimated 30,000 Californians — are experiencing significantly higher interest rates and the need for substantially larger down payments. Veissi said that the housing and economic recoveries have been too slow and that activities that force economic activity to be constricted further should be resisted.

“For hundreds of years,” he said, “this country has understood the value of home ownership because it helps families build wealth, supports community stability and contributes to our economy. We need to make sure that future housing policies continue to reinforce our long-standing value of home ownership, for the future of our families and our country.”

Sal Aranda is president of the Santa Clarita Valley Division of the Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.


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