DAVID WLUKA: ‘Different’ economies
About 75 Bay State Realtors will head to Capitol Hill next month, urging legislators to permanently increase the limits on government-backed loans.
As part of the economic stimulus package passed earlier this year, the limit for loans insured by the Federal Housing Administration was temporarily boosted to $523,750 in the Boston area and up to $729,750 in other high-cost areas.
The increase, which expires at the end of the year, was intended to pump some life into the sagging housing market by enabling more people to purchase homes or refinance existing loans at low interest rates. Realtors say the federal government should permanently raise the limits.
“The loan limits have to recognize that the economies are very different from state to state, and housing costs are very different,” said David Wluka, a Sharon Realtor who will be in Washington, D.C., the week of May 12 for the National Association of Realtors’ midyear legislative meetings.
In addition, Realtors will be pushing legislators to take a look at Fannie Mae and Freddie Mac policies that they say have made it tougher for people to purchase homes. The economic stimulus package included a provision that enabled Fannie and Freddie to increase the limit on purchasing jumbo loans to $729,750 from $417,000.
The change decreased the cost of borrowing in areas with high housing costs, including Boston. But Realtors argue policies adopted by the government-sponsored enterprises, including higher fees and tighter underwriting standards, have made it more difficult for borrowers to secure loans.
“It’s really putting the squeeze on people at a time we should be increasing the ability of people to get mortgage financing,” said Dennis Page, president of the Northeast Association of Realtors.
One of the policies requires borrowers to put up 5 percent more for down payments on loans that Fannie and Freddie purchases in so-called declining markets. But Realtors argue that entire metropolitan areas have been tagged as declining regardless of actual values in local neighborhoods.
“They’re stigmatizing whole ZIP codes,” said Page, an agent with RE/MAX Prestige in Tyngsboro. “We would like them to clarify that policy so they look at each property individually instead of saying that a whole ZIP code is a declining market.”
Penny L. Hamel, a senior loan officer of JP Morgan Chase’s Danvers branch, has seen borrowers struggle to come with bigger down payments for homes in areas classified as declining markets.
In one case, a buyer who wanted to buy a Methuen house for $502,000 and had a credit score of close to 800 had to increase his down payment from 10 percent to 15 percent.
“He made it just barely,” she said. “It’s never a good idea [for borrowers] to empty their bank account when they buy a home. There are always unexpected things that come up, so [the borrower] didn’t have any reserves once it was done.”
‘Going Overboard’
Hamel also is trying to help a couple that wants to purchase a $790,000 home in Bedford. The couple has enough money for a 10 percent down payment but needs to make a 20 percent down payment. Both the husband and wife have good stable jobs, Hamel said, but have been unable to afford the larger down payment because they’ve been trying to pay off student loans.
“I just really think that they are going overboard with the rules. Changes were definitely needed because a lot of the [no-document loan] programs and stated-income programs that were allowed in the past – there were a lot of unscrupulous people who took advantage of the programs. But now it’s gone so far in the other direction that it’s starting to affect qualified people who can’t purchase what they want,” she said.
Judy Moore, a Lexington agent and regional vice president for the National Association of Realtors, said some buyers are being discouraged. “The perception out there with a lot of the buyers is that it’s so difficult to get a mortgage that they’re just giving up in some cases,” she said.
Realtors also will press lawmakers to pass a law that would enable self-employed workers and small-business employees to join forces through an industry group to negotiate lower health insurance costs. The National Association of Realtors has been aggressively campaigning for the law. But it’s faced stiff opposition from health-issues advocacy groups and Democrats who want universal health care coverage.
The issue resonates with Bay State Realtors because all residents are required to have health insurance. Most real estate agents have to pay for their own insurance, as real estate companies generally don’t offer coverage to their associates.
