There are three main issues at the heart of the REALTOR® agenda in Washington, D.C., and recently Illinois REALTORS® prepped for them—in advance of the May 11-12 visits with lawmakers on Capitol Hill. The prep sessions were held via video conference connecting Springfield, Peoria, the Metro East region, the city of Chicago, western Chicago suburban region.
The main issues focus on improving liquidity in the lending market so people who want to buy a home and have the financial ability to do so are not locked out due to loan limits, lack of access to affordable financing and rejection by the private lending market which, to date, has not stepped up to the plate to improve the situation. Access to home loans remains severely restricted, particularly in the urban Chicago market which has the double burden of being under a GSE (government sponsored enterprise) loan limit of $417,000.
1) Preserve the Mortgage Interest Deduction
As IAR pointed to in a Jan. 6 letter to the editor in the Chicago Tribune, changing the mortgage interest deduction will have a long-range ripple effect on everyone, including the nation’s 75 million homeowners, with the most immediate impact on the 47 million homeowners who currently take the deduction. In 2008, more than 1.7 million taxpayers in Illinois claimed a deduction for mortgage interest on their federal taxes at roughly $11,593 for the average taxpayer who had a mortgage. This should not be a target in deficit reduction conversations as it would hurt middle-class families right in their pocketbooks; current IRS data shows 65 percent of the taxpayers who have claimed the deduction made less than $100,000.
2) Increase GSE loan limits in the Chicago region
Many qualified would-be buyers in the Chicago region are either sitting on the sidelines or are simply left out of the market due to restricted liquidity in the private jumbo lending markets. This scarce liquidity has made money more expensive resulting in higher interest rates and very restrictive underwriting requirements such as 70% LTVs and higher reserve requirements to name a few. This restricted liquidity can be partially alleviated by increasing the conforming loan limit above $417,000 in the region giving banks the ability to sell these healthy mortgages to Fannie Mae and Freddie Mac. While foreclosure risk has been a stated reason for not wanting to address this at the Federal Housing Finance Agency and with members of congress we wanted to verify this perceived risk and commissioned a study on the the risk of foreclosure in the jumbo non-conforming price range. The fine points are outlined in a study released March 15 but essentially the results show that higher priced loans have no more risk than a conforming loan. This brings much missed opportunity to bring back the housing market and the overall economy. We intend to carry a positive message while in DC to encourage those in Washington to remove an unnecessary barrier that is contributing to the restrictive liquidity.
3) Preserve the role of Fannie Mae and Freddie Mac in the home loan marketplace
While REALTORS® support restructuring the secondary mortgage market, elimination of Freddie Mac and Fannie Mae cannot be an option because banks are not lending as they should due to the uncertainty in the mortgage financing market. Homebuyers need a steady, reliable and affordable flow of mortgage funding; eliminating the federal role would harm the economic recovery and put the housing market at a greater risk at a time when it is struggling to recover.