By Stacey Moncrieff, Editor in Chief, REALTOR® Magazine
In “How Mr. Volcker Would Fix It,” New York Times business writer Gretchen Morgenson examines Paul Volcker’s speech at a Group of Thirty meeting, in which he called for an eventual end to secondary market agencies Fannie Mae and Freddie Mac. (Volcker was the inflation-fighting chairman of the Federal Reserve under Presidents Carter and Reagan and served President Obama for two years as chairman of the President’s Economic Recovery Advisory Board, now the President’s Council on Jobs and Competitiveness.)
In some respects, Volcker’s position parallels that of the NATIONAL ASSOCIATION OF REALTORS®, an organization that nurtured the formation of Fannie Mae during the Great Depression. In 2009, an NAR working group called for an end to the quasi-government status of the secondary market agencies, saying it was clear the agencies’ public mission and private profit motives were incompatible. The NAR called for the creation of a new purely public entity with an explicit government guarantee that would serve as a mortgage market backstop in times of economic uncertainty. (See “NAR Principles for Restructuring the Secondary Mortgage Market.“)
By Robert Freedman, Senior Editor, REALTOR® Magazine
A group of academics writing in a New York Times opinion piece yesterday, “White Picket Fence? Not So Fast” (Aug. 17, 2011), call for a phasing out of Fannie Mae and Freddie Mac and ending the government support of home mortgages that flow through them. To their credit, Viral Acharya, Matthew Richardson, Stijn Van Nieuwerburgh, and Lawrence White say the phase-out should be gradual to “minimize the system-wide shock” that would follow if the secondary mortgage market were closed down overnight.
But the writers use figures and make logical inferences that cry out for more scrutiny.
First, they say the mortgage interest deduction costs the government more than $100 billion a year, and they cite the Congressional Joint Committee on Taxation saying MID costs $700 billion over five years. But as economists and academics will acknowledge, determining how much MID costs the government is as much art as science, because the number you come up with depends on the numbers you put into the calculation. And what those numbers are aren’t widely agreed upon.
John Weicher, FHA commissioner under President George W. Bush and the assistant secretary of policy development and research under the first President Bush, says MID costs are closer to $20 billion a year, and he’s not alone in saying that. Other academics put the number in that range. The reason? They use a calculation that factors in the changes of behavior among households if MID is curtailed or eliminated. The idea goes something like this: as MID shrinks, households put their money into other tax-saving assets. Continue reading »
By Melissa Dittmann Tracey, Contributing Editor, REALTOR® Magazine
Expectant parents eager to buy a home for their growing family may be surprised to find that they’re a credit risk when it comes to obtaining a mortgage to purchase their new home — even if they have jobs to make their payments.
According to a recent New York Times article (Need a Mortgage? Don’t Get Pregnant, by Tara Siegel Bernard), pregnant women increasingly are being denied home loans as lenders factor in the decrease in salary from when they’re away on maternity leave. The same applies to fathers taking paternity leave — even if the parent plans to return to work.
The disability payments that new mothers receive do not count as qualifying income toward the mortgage. So new mothers who plan to return to work may have to wait and reapply for a mortgage to buy the home after they’ve returned to their job.