Housing: Little reform goes long way

By Rep. Bob Lake - 01/09/2006

Bob Lake

Housing prices in Montana, just as in most of the nation, have steadily climbed in recent years.

On the one hand, that’s a sign of economic growth and stability. On the other hand, it poses a problem. Without flexible home financing options, higher housing prices could put the American dream of homeownership out of reach for many Montanans.

According to a state Housing Division report issued last year, in 2003, the average price of a home in Montana increased 19 percent over the previous year. That said, it should be noted that Montana is not, however, suffering the acute housing problems other states are. That is thanks in large part to the vision and actions of Sen. Conrad Burns.

Since he was elected in 1988, Burns has deservedly accrued power and influence in Washington. He serves on the powerful Senate Appropriations Committee, from which he champions Montana’s housing and home construction needs.

In the past four years alone, Burns has helped Montana secure federal grants to address housing for veterans (Montana has the highest number of veterans per capita in the nation), senior citizens and Native Americans, among others, and construction grants for military housing.

And the senator’s commitment continues unabated. He is staunch in his opposition to proposed over zealous housing finance reforms that could destabilize the home construction and mortgage markets.

At issue are heavy-handed reforms now before the Senate that place limitations on governmentchartered housing corporations Fannie Mae and Freddie Mac.

Fannie and Freddie are largely responsible for the numerous and varied low-interest home mortgage vehicles that enable many individuals and families to afford homes, even in the face of rising prices.

Thirty years ago, when Congress created Fannie and Freddie, interest rates were high and mortgages were in short supply.

The two corporations, with their implicit government guarantee, provide now as they did then a safety net for banks and lenders by buying up home mortgages and reselling them on a global secondary market. The result is that the U.S. en oys the highest rate of home ownership in the world.

At the center of that success is the 30-year fixed-rate mortgage, originated by Fannie and Freddie, which makes homeownership broadly affordable. The result is readily apparent: a nation dotted with friendly neighborhoods, active communities and a strong economic cornerstone, the housing sector.

Pillars of the best home financing system in the world, Fannie and Freddie have nonetheless suffered accounting irregularities recently that have caught the Senate’s attention.

Lawmakers are threatening extensive reforms that could undermine the two and thus destabilize the entire home financing industry. Without the backstop Fannie and Freddie provide, banks would be less willing to offer mortgages to many low-income individuals and families, minorities, first-time buyers, veterans and seniors.

The Senate is right to consider new regulatory oversight for Fannie and Freddie, but is overstepping when it proposes privatization and limiting portfolio size and innovation.

Burns, as always, sees the endgame: heavy-handed reform would yield higher interest rates, fewer home financing options, and housing and home construction sectors — if not an entire economy — in recession.

In the face of the Senate’s aggressive approach to reform, Burns has vowed to protect Montana’s housing and home construction sectors. Our nation needs the full stabilizing effects of Fannie and Freddie.

Any reform done to the two should be done carefully — nay, surgically. Just a little reform will go a long way.

— Bob Lake is a Montana state representative, House District 88, and a real estate agent in the Bitterroot Valley.