Saving the housing market: Realtors weigh in

This week, the National Association of Realtors sent a letter to Shaun Donovan, secretary of housing and urban development, Timothy Geithner, secretary of the treasury, and Gene Sperling, director of the National Economic Council.

In the letter, the NAR argued, "Stability in the housing market will lead to a quicker and greater economic recovery." And, then it offered these recommendations:

1. Policies should ensure that qualified borrowers can obtain safe and sound mortgage financing. The nonprofit trade organization called on regulators to revise the unnecessarily high down payment requirements of the Qualified Residential Mortgage (QRM) exemption from risk retention requirements under the Dodd-Frank Act.

In short, NAR believes that if Congress implements a firm requirement that borrowers put down a minimum 20 percent on a conventional mortgage, that would severely limit the number of people who could buy homes. It would tank homebuyer demand, depress home prices further, and cause more foreclosures.

How long does it take someone who earns an average salary to save up 20 percent for a down payment? NAR says up to 14 years. To their point, it's hard to even remember your American dream of homeownership after 14 years.

"Mortgage availability remains a concern, and borrowers continue to find it increasingly difficult to find affordable mortgage options," said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. "Requiring a higher down payment does little to reduce default risk, and only strips homebuyers of their savings and increases the number of borrowers who are unable to purchase a home. We cannot have a viable housing market and economic recovery until creditworthy borrowers are able to obtain mortgage financing."

2. Regulators should reduce the overcorrection in underwriting standards for mortgages from the Federal Housing Administration (FHA) and government-sponsored enterprises (also known as the GSEs)because the now-too-stringent standards are preventing qualified borrowers from getting loans.

Phipps said more regulations and legislation that tighten access to credit and affordable safe mortgages are not the solution to righting the housing market and economy.

3. Mortgage loan limits on FHA, Fannie Mae and Freddie Mac -- which are critical to providing liquidity in today's housing market -- should be extended. Reverting to the statutory limits on October 1 would reduce limits in 669 counties and 42 states and territories -- the average decline in loan limits would be more than $68,000.

NAR has argued that reducing GSE mortgage loan limits to $625,000 in high-cost areas such as San Francisco and New York City would severely limit the ability of people to buy homes in those areas.

4: Congress should pass a long-term reauthorization of the National Flood Insurance Program (NFIP). This program, which ensures access to affordable flood insurance for millions of homeowners, has never had long-term funding. However, with weather conditions and flood plains changing, NAR believes having a full-funded NFIP is essential to a properly functioning real estate market. The current program is set to expire on September 30 for the 10th time in two years. If Congress doesn't extend the program, lenders will be unlikely to close on loans for properties that are in known flood plains.

"A strong housing market recovery is essential to the nation's economic strength," said Phipps. "The housing market is in a fragile recovery, and our goal is to ensure that regulatory or legislative changes help lead the way out of today's economic struggles and not jeopardize the recovery."

(Ilyce R. Glink's latest book is "Buy, Close, Move In!" If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. Contact Ilyce through her Web site, www.thinkglink.com.)

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