New Legislation Promises a Holistic Housing Policy

AMA7-13-13The government’s heavy involvement in housing affairs may be coming to an end – at least if a new bill promising a more “holistic” approach to housing policies becomes law. Now in draft form, the new legislation promises to whittle down the government’s presence in home financing and refinancing to make way for greater privatization and tighter lending standards.

According to a new report from Mortgage News Daily, the proposed legislation, sponsored by members of the House Financial Services Committee, would completely phase out government backed lenders Fannie Mae and Freddie Mac, and replace the with a nonprofit securities package. That plan would override current plans to create a third entity out of parts of Fannie and Freddie to handle securities and bonds.

Other provisions in the bill, which is now only in draft form, include planes to pare down the government’s direct involvement in housing finance to loaning only through the Federal Housing Administration (FHA). What’s more, the new plan, which claims to benefit first time and lower income home buyers, would raise the minimum down payment for an FHA loan to 5 percent of a home’s total purchase price.

The housing bill’s sponsors, led by Texas Republican Jeb henserling, who chairs the Finance; Services Cmmittee, call it a “holistic” approach to housing finance that would keep support programs from losing money and break what they see as a virtual federal monopoly on housing support. They cite the troubled history of Fannie Mae and Freddie Mac, which nearly collapsed after the housing crisis of 2008, and losses racked up by the FHA as reasons for revamping the whole system

Critics fear that by raising the minimum down payment required for FHA loans and eliminating some if not all of the government backed financing and refinancing programs, the bill could shut out some potential home buyers and slow down the housing recovery. And, because it also delays implementation of the Qualified Mortgage Rule, which sets fairly stringent standards for mortgage applicants, it could allow more risky loans to slip through.

This housing finance package is still in its infancy, and it’s too early to speculated on its chances for success. But for property investors following Jason Hartman’s

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principles for building wealth in real estate, the result could be tighter mortgage lending standards and new requirements for down payments and other costs associated with a real estate purchase –a holistic approach that affects anybody who’s planning to purchase property. (Top image:Flickr/lgargerich)


Swanson, Jann. “Republicans’ ‘Holistic’ Bill to End Most Government Mortgage Support.” Mortgage News Daily, 12 Jul 2013.

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The Making of a Bubble: Cycles of Boom and Bust

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