Hawaii Real Estate

A federal mortgage interest buy-down program would help spark the housing market, the National Association of Realtors® said in a letter sent today to James B. Lockhart, chairman of the Oversight Board of the Federal Housing Finance Agency. NAR seeks a 4.5 percent mortgage interest rate buy-down program financed through the U.S. Treasury Department’s Troubled Asset Relief Program.

In the letter to FHFA, NAR shared three potential implementation procedures for a federal buy-down plan:

• TARP would fund the payment of points at the individual level.
• The Federal Home Loan Banks would raise funds by selling below-market-rate bonds to the Treasury Department for them to make the 4.5 percent interest rates available to lenders.
• Fannie Mae and Freddie Mac would purchase mortgages at the 4.5 percent interest rate but pay lenders the market rate.

“The buy-down program would complement other initiatives and help stabilize, stimulate and revitalize the housing market,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “We must address the foreclosure crisis and increase housing demand. Lower interest rates and foreclosure mitigation are two sides of the same coin. Together they represent the key ingredients to stabilizing the housing market and preserving communities and homeownership.”

NAR has calculated that a 1 percentage-point decrease in mortgage rates would result in an additional 500,000 home sales.

In addition to suggesting that TARP assets be used to buy-down mortgage interest rates, NAR has recommended other principles that would help create long-term stability by ensuring that safe and affordable mortgages are available throughout the nation:

• The higher loan limits passed in the economic stimulus bill earlier this year should be made permanent.
• The federal government should ensure sufficient capital to support mortgage lending in every type of market.
• The temporary $7,500 tax credit for first-time home buyers should be extended to all home buyers and the repayment requirement eliminated.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

The National Association of Realtors^® is urging the federal government to proceed rapidly to drive down mortgage interest rates and move ahead with housing stimulus action to drive up consumer confidence.

“We are very encouraged that mortgage interest rates are moving in the right direction. However, we will continue to press ahead because rates are not coming down fast enough to impact the housing market,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas. “Many homeowners are struggling to get out of underwater mortgages and many potential buyers are sitting on the fence waiting for still better rates before they act.”

“We implore the Treasury, the Federal Reserve, the incoming Obama administration and Congress to get together and use all available resources, including the Troubled Assets Recovery Program, to quickly put a rate buy-down in place. This will really assist American families facing difficult economic times in the coming holiday season,” said McMillan.

“Housing has always led our economy out of downturns, and lower interest rates coupled with foreclosure mitigation are key ingredients to stabilize the housing markets and preserve homes and communities,” McMillan said.

NAR data show that a 1 percentage point decrease in mortgages interest rates—whether the decrease is brought about by a buy-down or through government purchase of mortgage-backed securities—increases home sales by a half-million. “Without better rates for home buyers, inventory will continue to remain high and home prices can overshoot downward causing consumer spending to fall further and leading to a broader contraction in credit availability. Without home price stabilization, foreclosures will continue to rise sharply and many of the remodified loans will re-default,” said Lawrence Yun, NAR chief economist.

A 4-Point Housing Stimulus Plan put forward by NAR earlier this year urged the government to buy up mortgage-backed securities from banks; the Federal Reserve has announced it is moving ahead with plans to do that. NAR also proposed an interest rate reduction, and the Treasury Department is considering such an action.

Additionally, NAR has asked Congress to make the higher loan limits passed in the economic stimulus bill earlier this year be made permanent. NAR has also been pushing for the $7,500 tax credit for first time homebuyers be extended to all homebuyers and that the repay feature be eliminated.