5:10 pm ET
Sep 22, 2011

Housing policy

Housing Lobby in Rare Defeat on Mortgage Limits

    • Anything higher than the $417,000 limit in most states is just propping up a bubble in certain coastal areas. Why should government guarantees be used on a $729,000 mortgage?

    • Absent from this new found Republican condemnation is the fact that John Boehner was one of the biggest cheerleaders for increasing the loan limits. Please see "All the Devils Are Here" by J. Nocera and B. MacClean.

      Pity the Republicans allowed all of those NON-agency lenders to run riot in the name of "innovation." We've "innovated" a new economy for ourselves- limp and limper.

    • Is the WSJ trying to make opinion saying that all is done and we won't see a last-minute legislation?
      If we see legislation before October 1 deadline, this media group ought to be wiped out.
      We shall see...

    • While maintaining the size of mortgages that can receive government backing would help the real estate market, there are other steps that would cost taxpayers nothing and would help homeowners, and members of the National Association of Realtors, Mortgage Bankers Association and National Association of Home Builders far more. A large share of renters earn enough to buy a home at today’s depressed prices, and a large share of the government’s and banks inventory of foreclosed homes are affordable to many of these renters. In addition while most renters can’t afford new McMansions, they can afford modest new or existing homes in depressed markets, rural areas, and the far exurbs of major cities.

      There are a number of reasons more moderate income renters aren’t buying homes, but one of the important ones is that there is no tax incentive for them to do so. That’s because the federal income tax “standard deduction” is as much or more than they would get by itemizing the mortgage interest on a $135,000 mortgage, an amount that would be affordable to renters with annual incomes of about $35,000. The mortgage interest deduction today is worth the most to the highest income taxpayers, who can deduct interest on mortgages of up to $1,000,000. If policymakers switched from the current mortgage interest deduction formula to a flat mortgage interest tax credit based on the size of the mortgage, it would level the playing field and would very likely jumpstart a housing recovery.

      Set at the appropriate percentage rate, the credit could be tuned so as to have the same aggregate impact on federal tax revenues as the current deduction. However a very large number of moderate income potential home buyers would for the first time have an effective home ownership tax incentive as long as it didn’t affect their standard deduction. A new flat mortgage interest tax credit would then likely contribute substantially to clearing the glut of foreclosed homes in their price range. It would create new business opportunities for home builders, mortgage lenders, and Realtors. While an equalized flat mortgage interest tax credit would of necessity be less generous than current home ownership tax incentives to a much smaller number of wealthier taxpayers, it would likely have a limited effect on that end of the market. Very wealthy people sometimes pay cash for multimillion dollar homes, and in other cases aren’t deterred by the fact that only half the payment on their 2 million dollar mortgage is tax deductible.

      Such a reconfiguration of the current home ownership tax incentive would not affect federal tax revenues, but it would very likely do far more for revitalizing the housing market than dickering over Fannie and Freddie loan guarantee amounts. It would make far more sense for policymakers as well as the National Association of Realtors, Mortgage Bankers Association and National Association of Home Builders to refocus their efforts on this initiative.

      Bruce Hahn
      American Homeowners Grassroots Alliance

    • Why does GOVT think we need these housing agencies?

      No other country in the world has this system of govt(tax-payers) bearing the credit-risk of all home loans for a fee.

      In the absence of these agencies what would happen?

      1) It would force the Banks to perform due-diligence and price the Loan based on the credit risk of the borrower. What's WRONG with that?

      2) Banks still have the freedom of keeping the loans on their books based on their Asset-Liab situation or sell them off bundled to market. What's WRONG with that?

      3) If market thinks that it has to take away this Credit risk from loans before it sell these securities, it will figure out a way of stripping this risk and sell it to private-risk-buyers who could guarantee these loans. What's WRONG with that?

      4) If Banks don't want 30 yr obligation, people have to take these loans on 15-20 yr terms which will force them to save more (or) buy a house with a lesser value. What's WRONG with that?

      5) If a family has to rationalize how much % of their income have to be allocated to mortgage payment vs necessities vs discretionary consumption, rather than creating environment where their mortgage payment is stretched for 30 yrs and there by artificially increasing their monthly discretionary cash to falsely boost consumption of the economy, what's WRONG with that?

    • Operation Fresh Start
      Put the bailout money in the hands of Main street Americans and let them “trickle up”.
      If you want to turn around the economy give the American Americans a bailout instead of feeding more money to the banks. Give Americans a “Fresh Start”. This is the “only” way to turn the economy around.
      Force Banks to write down all upside-down mortgages to current market value & Reduce all interest rates on mortgages to current market rates.
      • This would allow Americans who have not yet defaulted on their mortgages to make them affordable.
      • This would allow Americans who want to sell to do so.
      Cease all foreclosures and give Americans the chance to keep their property at current market rates.
      • Given a realistic playing field with fair loan values most Americans could afford their payments
      • This would allow property to be put on the market at real values so that Americans could afford to buy them.
      Clear all negative credit on credit reports that was created during recession period (since 2006).
      • Millions of Americans had excellent credit until the rug was pulled from beneath them. Now even those with income can not qualify for credit because their credit was damaged as a result of this financial fiasco created by the banks.
      • Giving Americans a fresh start with clear credit histories a chance would allow them to pour billions worth of purchases into the marketplace allowing them to buy homes, cars and other big ticket items again.
      Loosen loan regulations and force banks to lend to consumers and small business. Create a Federal bank to make the loans if banks will not.
      • Americans cannot purchase homes, cars or start new businesses if they cannot obtain financing. Put the bailout money in the hands of Main street Americans and let them trickle up.

    • Any questions now about what's kept the housing 'market' from adjusting??

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