Mortgage Bankers Make Recommendation for Increasing Loan Limits

The Mortgage Bankers Association (MBA), in its annual State of the Industry press briefing, released their 2009 Advocacy Agenda, which included the following recommendations:

• Permanently Increasing the Government Loan Limits to help unfreeze the housing finance system:   “MBA requests Congress to help make mortgage credit more available and affordable by setting the Fannie Mae, Freddie Mac and Federal Housing Administration standard, nationwide loan limits to $625,500, and up to $729,750 in high-cost areas on a permanent basis.” In the Washington, D.C. area, this would mean a permanent return to the $729,750 loan limit which went into effect on a temporary basis for part of 2008, but which was reduced to the $625,500 limit beginning in 2009. The additional $100k+ would be extremely beneficial in our market.

• Using Tax Stimuli to Encourage Home Buying:   “Congress should consider expanding the existing new homebuyer credit to all homebuyers and improving credit by increasing the amount, making it non-repayable, and making it immediately available to homebuyers at closing. Congress should also allow a home mortgage interest deduction for those who otherwise use a standard deduction. Further, Congress should consider a temporary accelerated depreciation for single family rental properties, extend the net operating loss carryback period to five years, and establish regionally targeted business incentives and new job credits.” There is currently a “credit” of up to $7500 for first time homebuyers, but there is a repayment requirement. This proposal would extend the credit to all homebuyers (up to a certain income limit), increase the amount of the credit to up to 10% of the median housing price for the buyer’s market area, delete the repayment requirement (with certain limitations), and have the credit “due” at settlement (instead of at tax filing). In addition, taxpayers who claim only a standard deduction would have an opportunity to also claim a home mortgage deduction, sellers of vacant properties would be incentivized to rent them through an accelerated depreciation program and corporations would have an opportunity to extend their net operating loss over a longer period of time.

• Immediately Implementing a Government Refinance Program to Help Borrowers Keep Their Homes:   “The federal government should establish a refinance program to help reach more troubled borrowers, especially those who do not have other options available to them.” Because many homeowners bought at the “height” of the market, using adjustable rate mortgages and limited down payments; and because many loan servicers have not been able to modify repayment plans (many because of investor contracts), the MBA feels that the government needs to step in to create a refi program. Borrowers would only be eligible if they don’t qualify for a loan modification with their current servicer and there would be a targeted monthly payment to assure affordability by the homeowner.

• Increasing Resources to FHA and Ginnie Mae:  “To help the Federal Housing Administration (FHA) and Ginnie Mae manage the increased demand for FHA-insured mortgage products at a critical time for consumers and lenders, Congress should provide to both FHA and Ginnie Mae additional resources for staff and technology, and flexibility to maintain the pace of new business.” In the past year and a half, the percentage of loans being handled by FHA (which is supported by Ginnie Mae) has increased from about 3 percent of single family originations to close to 20 percent. This rapid increase in demand for these government backed loans has not been matched by an increase in staff and other support. The MBA argues that both organizations need more employees, more technology and increased operating funds in order to keep pace with the current market.

These are just some of the recommendations made by the Mortgage Bankers Association, but ones that I felt would have an immediate impact on home buyers and sellers throughout the country.

Contributing Blogger - Gretchen Koitz