Though all the media attention this week is on the presidential and congressional elections, behind the scenes in Washington there are huge pressures building on Congressional Democrats and on the lame duck Bush administration to pull together a second economic stimulus package -- quickly.

Governors, mayors and business leaders want Congress to come back to town later this month to do more legislative work, rather than calling it quits for the year.

Whether or not Congressional leaders or the White House agree to do so, and they haven't yet, could have huge significance for housing and the rest of the economy.

New York governor David A. Paterson and New Jersey governor John Corzine -- both influential Democrats -- ratcheted up the pressure on their congressional colleagues by demanding a post-election session focused on stimulating job growth, increasing expenditures on state and local infrastructure -- especially transportation-related projects that create large numbers of jobs -- plus financial assistance to states allowing them to maintain service levels and avoid increases in real property and income taxes.

Paterson and Corzine joined a growing movement of mayors and other officials faced with recession-level budget deficits and falling tax revenues. They complain that Congress came up with $700 billion to bail out private banks, but hasn't dealt with the economic plights of local and state governments.

Reduced levels of public services, plus higher taxes on home owners and businesses, are a recipe for severe economic problems, they argue, and have the potential to retard any emerging turnaround in housing.

Industry groups also are readying plans for a post-election stimulus session. For example, the National Association of Realtors has put together a "lame duck" proposal designed to short-circuit the scheduled expiration of higher mortgage limits December 31.

The higher limits, authorized last February in the first economic stimulus package, increased loan-purchase ceilings for Fannie Mae, Freddie Mac and the FHA to $729,750 in dozens of high-cost areas of California and parts of the East Coast. High limits in expensive real estate markets allow home buyers to qualify for lower "conforming" interest rates instead of paying must costlier "jumbo" rates.

Without intervention by Congress in a post-election session, the conforming limits could decrease January 1 to around $625,500.

The Realtors also are calling on a lame duck Congress to force the Treasury to spend more of its $700 billion bailout money on buying up mortgage-backed securities, which they say would help free up liquidity for new home loans -- and to change the current home buyer tax credit program to make credits non-repayable.

Published: November 3, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.