Flawed housing finance system
LANSING – Michigan’s forests are at the nexus of sustainability and manufacturing, playing a major role in the state’s economy and the quality of life of its citizens.
Our forest products are used every day in a number of industries, including housing construction.
Given this strong relationship, the Michigan Forest Products Council takes great interest in policies impacting home builders.
Of particular importance, is federal legislation recently approved by the Senate Banking Committee that would fix the nation’s flawed housing finance system, breathing new life into the housing sector and in turn, the forestry sector by providing a consistent and affordable supply of mortgage credit for single-family and multifamily housing.
However, U.S. Senators Carl Levin’s, D-Detroit, and Debbie Stabenow’s, D-Lansing, involvement is critical to help secure a vote in the U.S. Senate.
S. 1217, the Housing Finance Reform and Taxpayer Protection Act of 2014, would ensure certainty and stability in the marketplace, expedite the housing recovery, and allow countless creditworthy buyers who are currently unable to access mortgage credit, to obtain home loans. This would be particularly helpful to first-time home buyers and younger households, who are disproportionately hurt by today’s tight credit environment.
History clearly shows that without some type of government backing, it is simply inconceivable that there would be consistent private interest to fund the broad range of middle class home buyers with good credit, steady jobs and an eager interest in homeownership.
During bad times private mortgage credit evaporates, leaving qualified buyers high and dry and the housing market in a free fall. Indeed, in the aftermath of the housing downturn, investors have been reluctant to invest in mortgage securities without government backing.
S. 1217, which passed the Senate Banking Committee with six Democratic votes and the support of seven Republicans, represents a bipartisan approach to fix the nation’s flawed housing finance system. This measure incorporates the best ideas from both political parties, gradually winding down Fannie Mae and Freddie Mac into a private-sector-oriented system, where the federal government’s role is clear, but its exposure is limited.
Providing a federal backstop that would only be triggered under extreme circumstances, this legislation would preserve financial stability, promote investor confidence, provide incentives to firms that buy and sell mortgage securities to manage risk more carefully, and limit taxpayer exposure.
Further, it would ensure that the 30-year mortgage, the primary housing finance tool for most Americans, remains readily accessible and affordable.
By enabling qualified buyers to purchase homes, this legislation will help unleash the economic power of the housing and forestry markets and boost job and economic growth.
Last year, there were less than 13,000 single-family building permits in Michigan.
However, setting the 2000-2003 period as a baseline benchmark for normal housing activity, single-family building permits in the state should be running more than 42,000 per year – more than three times the current rate.
As Michigan moves back up to a normal level of housing production, those added homes can produce 87,600 additional jobs, increase business activity and generate millions of dollars in added tax revenues for local schools, police and firefighters.
Senate Majority Leader Harry Reid has reportedly been reluctant to bring this legislation to the full Senate without additional Democratic backing.
Sens. Levin and Stabenow can take a strong stand for housing, forestry and a robust economy by supporting this important bill and urging prompt action on the Senate floor.