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All posts for the day August 8th, 2013
WHAT IS THE PATH ACT:
The PATH Act is a comprehensive restructuring of mortgage markets. The bill has two major goals: 1) dissolve Fannie Mae and Freddie Mac and replace them with a new secondary mortgage market structure that does not include a government guarantee and 2) restructure and limit the FHA Mortgage Insurance Program. There are numerous problematic provisions in the Act that would limit access to mortgage credit, increase the cost of that credit and prevent many credit-worthy and responsible families from purchasing a home. Most significantly, 1) NAR strongly opposes the PATH Act’s elimination of a federal guarantee for the secondary mortgage market which ensures the availability of the 30 year fixed-rate mortgage; and 2) NAR believes that FHA has been making significant changes to address problems and does not need to be restructured in the manner proposed by the Act. The proposed FHA provisions will disenfranchise families by increasing downpayments, lowering loan limits, and limiting the program to low income households or a very narrow definition of first-time homebuyers. Instead, FHA needs the authority to undertake reforms already identified to strengthen its financial footing.
WHY IS THIS IMPORTANT?
Freddie Mac/Fannie Mae: The PATH Act does not include a federal guarantee that ensures the continued availability of a 30-year fixed rate mortgage. A government’s guarantee is needed to provide the capital to fund and ensure a wide range safe, reliable mortgage products for creditworthy consumers. Without the federal government clearly, and explicitly, offering a guarantee of some mortgage instruments, affordable mortgage financing will not be consistently available in all market conditions.
2 SIDES OF FHA:
FHA’s single-family mortgage insurance programs helps preserve private financing options for all credit-worthy homebuyers regardless of local, regional or national economic conditions. Targeting FHA in the manner prescribed by the PATH Act completely changes the role of FHA and will make many borrowers ineligible for FHA financing, regardless of their creditworthiness or the availability of alternative financing. Higher downpayment requirements could make 345,000 borrowers a year ineligible for FHA financing. Lowering FHA loan limits nationwide will limit liquidity and borrower’s access to credit. Without FHA, our nation’s housing recovery would not have been possible. Congress must do no harm to that recovery, nor enact FHA reform legislation that unfairly restricts homebuyer access to safe, affordable mortgage credit.
WHAT IS THE OTHER SIDE OF THE ARGUMENT? Those on the other side of the issue believe that: the federal government needs to “get out of the way” and let the private market function. Current practices have crowded private lenders out of the marketplace, and resulted in loans to individuals who don’t have the resources to be successful at homeownership. Taxpayers shouldn’t be on the hook for a government guarantee, and the role of FHA should be very limited to lower income and first-time homebuyer households
