The PATH Act AND Housing Finance Reform and Taxpayer Act

At present, there are several legislations being proposed in both houses of Congress that will greatly affect the ability of potential buyers to achieve their dream of owning a home. 

Protecting American Taxpayers and Homeowners (PATH) Act

My position:  Against

H.R. 2767, which is more commonly known as the PATH Act, was introduced by House Financial Services Committee Chairman Jeb Hensarling (R-TX).  After a July 23^rd hearing, the bill, not surprisingly, passed through with the aide of an almost party-line vote of 30-27 (30 Republicans voted “yes,” 25 Democrats and 2 Republicans voted “no”).  

With its 2 major goals of 1) eliminating housing mortgage giants Fannie Mae and Freddie Mac, and 2) restructuring and imposing limits on the FHA Mortgage Insurance Program, the PATH Act aims to enact a comprehensive restructuring of US mortgage markets. 

Sadly, the desired comprehensive restructuring would do much to prevent credit-worthy and responsible families from purchasing a home, as it would both limit access to mortgage credit and increase the cost of that credit.  The suggested restructuring of the secondary mortgage market would no longer ensure the availability of the 30-year fixed-rate mortgage, increase down payment amounts, lower loan limits, and restrict lifelines to low-income households.

These “improvements” pose a serious threat to moderate- and low-income buyers.  Without the lower monthly payment offered through a 30-year-fixed, homeownership will be well out of reach.  Ironically, this product will still be available to those who need it least:  high-income earners with a sparkling credit history and enough assets for a considerable down payment.

Housing Finance Reform and Taxpayer Act

My position:  Hold Hearings

While the home lending industry certainly needs reform, the proposals put forth by the PATH Act are far too draconian.  The Chairman of the Senate Banking Committee should hold hearings on the much more sensible Housing Finance Reform and Taxpayer Act, officially known as S. 1217.

This bipartisan bill was introduced by Senators Bob Corker (R-TN) and Mark Warner (D-VA), along with the help of 6 other co-sponsors from both parties.  Unfortunately, no hearings are currently scheduled.  But it is imperative that the heart of this bill remain intact, as it provides a necessary safety net to American families in the form of a catastrophic government guarantee.

The argument against a government guarantee is nothing new.  Opponents claim that the government is meddling too much, and that the private sector will always meet demand at an affordable price if such a demand exists. 

However, the most recent downturn of 2007 showed us just how willing private lenders were to provide very-much-in-demand loans:  not at all.  Thankfully, the “meddling” government was able to step in through continued support of Fannie Mae, Freddie Mac, and FHA, and continue to purchase or insure private loans.  Without this continued supply of credit to aspiring homeowners, the economic contractions could have been much worse.

FHA Solvency Act of 2013

My position:  Hold Hearings

Also worth considering is S. 1376, the FHA Solvency Act of 2013.  This proposal includes very common sense reforms to ensure the financial solvency of the HL Mortgage Insurance Program.  To dissolve this program would seriously disenfranchise millions of American families.

Introduced by Senators Johnson (D-SD) and Crapo (R-ID), the Senate Banking Committee has already held a hearing on the FHA Solvency Act of 2013.  While it does call for a much needed increase in oversight and enforcement, the bill keeps the FHA largely intact, which is a huge plus for qualified borrowers.  

In conclusion, I am concerned that I do not hear the voice of the people from our representatives who are supposed to be the voice of the American people.  Homeownership is not the Republican dream or the Democratic dream.  It is the American Dream.   When you see legislation like this you wonder who is representing who representing the working class?  Who is being served when you limit access to mortgage credit and increase the cost of credit?  The American people or the special interest?    Who is being serve by eliminating the government guarantee that would ensure mortgage credit is available to the working poor and middle class to achieve the American Dream.  The American People or the special interest?   Who is being served by dissolving FHA and disenfranchising millions of Americans families?  The American people or the special interest? 

The issue for American families today is not just the bad legislation written by some well-meaning legislators designed to push middle class and the poor further down the economic latter.   It is the representatives that we choose that forget who they serve and whose voice they represent. We must become more politically engage with our representatives and show them the threat of our vote when they adopt policies that do not represent the best interest of the American people but of special interest.