Now it begins. The President and the Chairman of the Federal Reserve admitted
on Thursday (whether belatedly or not is for others to determine) that the U.S.
economy is taking a header, and yes something needs to be done about it but,
no, we aren't quite ready yet to announce exactly what.
In remarks at a Congressional hearing on Thursday Federal Reserve Chairman
Ben Bernanke said he would support the idea of a short-term fiscal stimulus
measure perhaps in the vicinity of $100 billion. By Friday morning the White
House and Congress were talking $100 to $150 billion and tax cuts and tax rebates
- perhaps in the vicinity of $800 per person - were being considered as ways
to pump money into the economy.
But, in a preview of what is sure to come, the first special interest group
has already issued its opinion about what any economic stimulus plan must include.
Bernanke's words were hardly out of his mouth before the National Association
of Realtors® (NAR)
posted its list of suggestions on its website
and chief among them is to loosen some of the constraints on the nation's two
government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae.
"We believe that any stimulus package must address housing issues
and increasing the conforming
loan limits for these two GSEs," said NAR President Dick Gaylord. "The increase
in loan limits would not only improve liquidity in the mortgage marketplace,
but also boost homebuyers' confidence levels, resulting in increased sales and
What NAR is seeking is an increase in the dollar limits for loans that can be
sold to Freddie Mac and Fannie Mae from the current $417,000 to $625,000. "This
change will permit more families to enter the housing market by making more
mortgages available with lower interest rates. Increased home sales will lower
inventories and immediately start stabilizing the housing market and the economy,"
The Association sent letters to leaders in Congress in which it estimated that
such an increase in loan limits would serve to lower interest payments for homeowners
who get new "GSE jumbo" loans. Such a change in loan limits, NAR said, would
reduce the number of homes on the market by a one to one and a half month supply,
boost home prices by two to three percent, and increase economic activity by
$42 billion. NAR also claims that higher loan limits might help prevent 140,000
to 210,000 foreclosures and contribute to the sale of an additional 348,000
NAR restated its support of the Federal
Housing Administration Reform bill which, NAR said, "would offer a safe
and affordable alternative to subprime mortgages, which are widely blamed for
the current high rate of foreclosures and credit crunch. FHA reform would not
only ensure we don't find ourselves in this very unfortunate situation again,
but also it can help many families currently facing foreclosure.
"This is the quickest way to help the hurting housing market. As the potential
for an economic recession increases and the fragile housing market continues
to teeter, raising loan limits and reforming FHA would immediately impact the
marketplace without the need for any new, complex federal programs or tax dollars.
We strongly urge Congress to take these actions, in any stimulus
plan, to stabilize the housing market and protect homeowners," Gaylord said.