Today, the Federal National Mortgage Association (FNMA, Fannie Mae), announced the abandonment of their horribly grotesque "declining market policy."  As reported in Inman News, Fannie Mae will now require a minimum downpayment of 3%.  This ends a several month period of time during which a secret formula was applied to properties, deeming most in a "declining market."

One has to give credit to Charles MacMillan, President-Elect of the National Association of Realtors®,  for his persuasiveness in his visit to FNMA a couple of weeks ago.  He also visited Freddie Mac (FHLMC).  We expect Freddie to issue a similar statement soon, although Freddie was not as bad as Fannie with regard to transparency of policy.  The Colonel and his secret recipe were far less secret than Fannie's guidelines.

As I leave Washington on Saturday, I am excited about the progress we have made in persuading our representatives in Congress of the need to address the housing challenge.  There is massive improvement in the market just over the horizon.

I'm still in D.C. at the National Association of Realtors® Midyear Legislative Meetings.  As Realtors® here prepare for their annual visits to legislators, there are a number of talking points we will be bringing up.

Under the heading of housing stimulus legislation, we Realtors® will be encouraging the enactment of legislation in three areas.  First of all, we are urging the establish of a temporary tax credit or similar tax incentive for home buyers.  A couple of different bills exist, one providing a tax credit of $7500 for anyone who buys a house in foreclosure (passed by Senate, H.R. 3221).  Another version would provide a tax credit of $7500 for the purchase of any home by a first-time buyer (H.R. 5720, in the House).  Either one could provide a welcome stimulus to sluggish markets.

A second area of concern is the need for modernizing the Federal Housing Administration (FHA) single-family programs.  Two bills have been passed, one by the Senate, the other by the House.  The differences in the two bills must get resolved before it can be submitted to the President.  There is another issue with regard to FHA, and that is the risk-based pricing that may be implemented.  Also, the difficulty in purchasing a condominium with FHA financing must be overcome.

Finally, NAR wants Congress to strengthen the safety and soundness of Fannie Mae and Freddie Mac.  There are rumblings that mortgage restrictions will increase soon - hardly a good omen.  However, a House bill (H.R. 1427) was passed in May, permanently increasing the conforming loan limits, but there is no companion bill in the Senate.

As you can see just on the issue of housing stimulus legislation, our work is cut out for us.  Realtors® are working hard to help homeowners and those who want to be homeowners survive current market.

I'll be here all week, folks.  See you tomorrow.

In a Realty Times  article recently Blanche Evans discussed again how the banking industry is attempting to muscle in on real estate.  U.S. Treasury Secretary Paulson is calling for more regulation on banks "including federal and state oversight on mortgage lenders."

Just four years ago the federal overseer of banks, Evans points out, the Comptroller of the Currency promulgated guidelines exempting nationally-chartered financial institutions from state oversight.  There was a rush by banks to apply for federal charters.  Fast forward to 2007, with all the mortgage "issues."  With wild and woolly lending by such institutions having devastated the market and many homeowners, State-chartered mortgage lenders will have a harder time competing in the market if Mr. Paulson gets his way. 

And, as Evans has pointed out in the past, overseeing all the national mortgage lenders may very well be funded by a federal real estate transfer tax.  Let me write that again: A FEDERAL REAL ESTATE TRANSFER TAX.

Equally ugly, but unknown to most borrowers, is the fact that even though New Jersey, for just one example,  does not permit a pre-payment penalty for those paying off their mortgage early, lenders who are federally chartered can in fact charge that fee.  States currently have no control over the federally-chartered lenders.  The nose of the camel is already in the tent.