WASHINGTON — An army of Realtors got their marching orders this morning at a federal priority issues briefing at the National Association of Realtors’ Midyear Legislative Meetings and Trade Expo.

Three issues topped the trade group’s agenda: preserve real estate-related tax deductions in the face of calls for tax reform; leave the Federal Housing Administration alone to recover; and restructure Fannie Mae and Freddie Mac in a way that encourages the return of private capital to the secondary mortgage market.

Both chambers of Congress have seen double-digit turnover rates in recent years. Thus, Realtors will need to educate members of Congress about why housing is important and turn members’ attention to what homeownership does for communities, said Jerry Giovaniello, NAR’s government affairs senior vice president.

“The path to recovery runs through our front door,” he said.

In contrast to prior years, this year Realtors are not pushing Congress to support particular legislation, Giovaniello said. Rather, “this year we have to deliver the message ‘we’re watching.'”

Real estate tax deductions

Many members of Congress believe lower tax rates are the “holy grail” of economic growth, forgetting that many of their constituents could hurt from losing their major deductions, said Evan Liddiard, NAR’s tax counsel.

He told attendees to urge members to continue to support three main real estate tax provisions: the mortgage interest deduction, the property tax deduction, and the capital gains exclusion for the sale of a principal residence.

No formal comprehensive tax legislation has yet been introduced, but “everything is on the table,” NAR said.

“We’re very much in a defensive posture unfortunately,” Liddiard said.

Giovaniello warned Realtors that Congress members will ask questions to “get you off track,” such as “Who would you tax (instead)?”

“That’s not your job,” he said.

“Our expertise is what these changes would do to the economy and your neighborhood. Don’t go down that other (path),” he added.

Another question might be, “Don’t you want to pay lower tax rates?”

Giovaniello’s response: “Fine, if the rates stay low, but in five years they’re going to go up,” he said.

“You’re never going to get something back that they take away,” he added, referring to eliminating tax deductions.


FHA has gotten a bad rap on Capitol Hill, according to NAR staffers. Some members of Congress blame the federal mortgage insurer for the foreclosure crisis, despite the agency’s role in keeping the housing market afloat when private lenders fled during the downturn.

“If you lend in a declining market, your risks are going to go up, said NAR policy staffer Megan Booth.

“The problem is if FHA hadn’t been lending between 2007 and 2010, who would have been lending? Nobody. They were the only game in town. If nobody’s lending, housing prices cannot recover.

“So FHA really saved the market during the housing crisis.”

Because of those loans made during the crisis, this year the agency is at risk of needing its first taxpayer bailout in its 79-year history. Although there are currently no bills to radically reform FHA in Congress, some proposals have suggested raising down payment requirements for borrowers, increasing premiums further, boosting credit score requirements, or instituting income limits.

NAR supports none of these proposals. Higher down payments, in particular, would “kill the housing market,” Booth said.

Congress is “completely overreacting” about the possibility of an FHA bailout, she added.

“They (FHA) are doing everything they can do to recoup their financial position. What do (members of Congress) need to do? Absolutely nothing,” she said.

GSE reform

As with FHA, Realtors need to stress the role that government-sponsored enterprises Fannie and Freddie have played in shoring up the housing market, Giovaniello said.

Without Fannie and Freddie to buy up mortgages, there would be no lending, said NAR senior policy staffer Anthony Hutchinson.

Hutchinson does not expect GSE reform to happen this year or next year, but he thinks the issue “is absolutely top of mind” on Capitol Hill.

“They feel like they need to do something. What they need to do, they don’t know, but they feel they need to do something,” Hutchinson said.

What should lobbying Realtors say if members of Congress ask them what to do?

“We need the federal government to have some role in this, explicitly, not implicitly. That’ll make investors feel good and bring more money back into the market. If there’s money in the market, that’ll make consumers feel good,” he said.

The Obama administration has said it supports minimizing the role of government in the secondary mortgage market in order to encourage the return of private capital. But NAR maintains that a government guarantee is crucial to affordable mortgage credit.

“This whole idea that private capital is the only game in town is nuts. There is not enough private capital” to support the housing market, Hutchinson said.

And if mortgages were backed only by private capital, the 30-year fixed-rate mortgage would probably go away, he added.

“Nobody wants to keep a product on their balance sheet for 30 years” — that’s why lenders sell mortgages to Fannie and Freddie, he said.

“Thirty-year fixed-rate mortgages make consumers comfortable. They understand it. They feel good about it,” Hutchinson said.

“If they have to sit there and readjust it every five years or every seven years, that can cause problems — has caused problems — with very exotic (mortgages).”

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