Borrowing a page from basic marketing textbooks, the Mortgage Bankers Association has wrapped several of its long-standing but previously unsalable legislative and regulatory goals into an economic stimulus package it says could lead the nation out of the recession at little or no cost to the Treasury.

What's more, the MBA may have found a champion for the initiatives in Housing Secretary Mel Martinez, who called the package "well thought out" and "well crafted" at the organization's annual convention here last week and promised to work the White House to "get it on the front burner."

"I want to make sure housing will be an added impetus for this economy," the HUD secretary told the MBA at its convention in Toronto last week. Martinez, a Cuban immigrant from Florida where he was chairman of Orange County, has only been in Washington since January.

The package calls for, among other things, allowing the Federal Housing Administration to insure hybrid adjustable rate mortgages, making permanent the simplified FHA downpayment formula, repealing the 50% increase in the Ginnie Mae guaranty fee that's scheduled for October 2004, increasing FHA's multi-family loan limits and eliminating the recent 30-basis-point increase in the multi-family insurance premium.

In putting the package on the table only a few weeks before Congress adjourns for the year, the MBA becomes the first housing-related trade group to cue up for a share of the stimulus proposal being considered by lawmakers and the Bush Administration to shore up the sagging economy.

The National Association of Home Builders called for a home buyers' tax credit earlier this year but has not floated the idea lately. And the National Association of Realtors is waiting until the next session convenes in January to offer its agenda.

With housing remaining the only bright spot in the economy, housing interests would appear to be "greedy" and trying to "capitalize on the war" on terrorism if they start asking for self-serving government programs, an NAR official told National Mortgage News.

But Howard Glaser, MBA's senior vice president for government affairs, said his group's proposals should not be seen as a special interest handout. "It goes quite the other way; it's our contribution," he said.

While its true that housing will benefit "from more activity," the "real beneficiary will be people who need housing," the MBA's chief lobbyist also said. "A lot of economic power can be unleashed with no new spending."

Other MBA officials also stressed the no-cost aspect of the initiatives, which they said would pump $11.8 billion into the economy and create 55,000 jobs in the first year alone.

"We're not asking for funds; this is taxpayer neutral," said new MBA Chairman James Murphy.

"The housing sector is still clearly strong, but we think we can do even more," the Boston commercial mortgage banker told reporters during a convention briefing. "The President has asked us all to get the economy moving again and we think we can help. This is something we can give to the economy, and it doesn't require funding."

Glaser said giving permanency to the simplified FHA downpayment formula, an idea that has been around for at least four years, is "a great example of what we're talking about."

According to MBA estimates, this change alone would save first-time buyers $1,500 on average, putting $300 million in cash back in their pockets in the first year and $1.5 billion over five years. The savings, Glaser stressed, is more than twice the $600 rebate granted to taxpayers earlier this year.

By allowing the FHA to back hybrid ARMs, which are now the most popular type of adjustable loan, the MBA says an additional 40,000 families would be able to buy houses. This item, which has been on and off the table for at least a year, would unleash $5.1 billion into the economy in the first year and $25.8 billion over five years, the MBA figures.

And maintaining the Ginnie Mae guaranty fee at its current level would will save borrowers $30 million in the first year and $150 million over five years, according to the MBA.

Said Glaser: "If you want to reduce the tax burden (on consumers), what better place to start" than with the guaranty fee, which the MBA has long held is nothing more than a tax on home ownership.

Together, the three proposals would boost the economic impact of home ownership by generating $5.33 billion of savings or investments in the first year and $26.6 billion over five years, the MBA leadership said all with no new federal spending.

To spur the development of affordable rental housing, the MBA would rollback the recent increase in the FHA's multi-family housing insurance premium, increase the multi-family loan limits and invest in a new production program that partners FHA mortgage insurance with an interest rate subsidy.

The cost of the latter initiative would depend on the source of funding. But the MBA says if a trust fund approach is taken, no new spending would be necessary. But the other two proposals are cost-free.

Together, the MBA says the multi-family initiatives would generate 153,000 new affordable units, 54,600 jobs and $5.3 billion in new investments.

For the commercial sector, the association's no-cost proposals would shorten the recovery period for leasehold improvements and make permanent recent changes to the way brownfield cleanup costs are treated for tax purposes.

It also would lower the tax rate on capital gains resulting from the recapture of depreciation and reduce the over capital gains rate. While these two proposals would result in some cost to the Treasury, the MBA says their economic impact would be "substantial."

The MBA's stimulus plan is part of its larger "21st Century Agenda for Housing and Real Estate Finance," which also includes a number of longer-term legislative and regulatory goals.

For more articles by Lew Sichelman, please press here.

Published: October 22, 2001

Use of this article without permission is a violation of federal copyright laws.