Loaned Out

by Doug Love

Dear Doug,

We just helped our daughter buy a house. We also co-signed on her purchase loan. Boy, have things changed since we last got a home loan. It was rough going! It took longer and we had to provide a lot more personal information than we remember from before. Our loan officer assured us that it was nothing personal, that loans are just tougher these days. Here’s our question: In light of the economic times, shouldn’t the government be making it easier rather than harder to get loans?

                                                                                                                                                                                    –Loaned Out

Dear Loaned Out,

We feel your pain. It’s caused by the backlash resulting from the loose lending practices of the last decade, when the only qualification for many a loan was proof of a pulse. Not only are loan qualifications stricter now, but Congress is looking to make it even harder by tearing down the financing system as we know it. Congress wants to get rid of government-backed loans, by assassinating Fannie Mae and Freddie Mac, the historic gatekeepers of affordable loans. We can understand Congress’ zeal to nail somebody for causing hard economic times, but the demise of Fannie and Freddie would only make things worse.

Here’s what Beth Peerce, President of the California Association of Realtors (C.A.R.) has to say about it:

“Eliminate Fannie Mae and Freddie Mac. Do away with the mortgage interest deduction. Reduce the conforming loan limits. Everyone has an answer for solving U.S. economic woes today, but as a real estate industry veteran and the president of C.A.R., I know restructuring the nation’s mortgage finance system is not that easy.

The U.S. government has long been a strong advocate of homeownership, but as the economy continues to stumble, government officials are looking for ways to reduce government spending. Scaling back (and eventually eliminating) the government-sponsored enterprises Fannie Mae and Freddie Mac is just one of the possibilities on its agenda. At C.A.R., we know the extreme importance of Fannie and Freddie, and are making it a top priority to fight to save these mortgage market mainstays.

As C.A.R. Chief Executive Officer Joel Singer explains, ‘Fundamentally, this debate is about three things: Maintaining the flow of mortgage funds under any market conditions, ensuring that affordable mortgages are available, and preserving a range of mortgage products to serve the marketplace.’

We are urging Congress to provide homeowners and home buyers with affordable financing and help stabilize local housing markets.

It’s a complicated issue that I know we will be hearing more about in the months ahead, and C.A.R. will continue to keep you informed on the latest developments.”

So, Loaned Out, let’s hope C.A.R. and N.A.R. can lobby Congress to back off of their move toward killing government-backed loans. If Fannie and Freddie go down, a typical home purchase loan will require a down payment of at least twenty per cent. Terms like that would put the brakes on a dragging economy.

The road to recovery needs to be paved, not abandoned.