Friday, September 21, 2007

My letter to Congress on H.R. 1852

Senators Boxer and Feinstein,

I urge you in the strongest terms to vote no on H.R. 1852, which is titled the "Expanding American Homeownership Act of 2007". It would be a bad idea for American homeowners and a disaster for California.

The United States and particularly California are experiencing a housing crisis that is resulting in a number of families losing their homes. Lately, we've been seeing stories on the news of people who have taken a severe financial hit because they cannot pay their mortgages. But the crisis didn't begin this year or last. It started about seven years ago when the cost of buying a house began to rise faster than the income of potential home buyers.

For instance, although my family income is above the median for Los Angeles County, it would cost me well over half of my gross pay to buy the median house in this county. Despite very generous pay increases from my employer and my wife starting a part-time job, home ownership has become increasingly less obtainable for us over the last seven years. Financially and mathematically, it just doesn't make sense.

Now H.R. 1852, which was co-sponsored my own Representative Adam Schiff and recently passed the House, seems a gallant , but ultimately foolish attempt to solve the problem. This bill only addresses the problem of providing financing for expensive houses such as the L.A. County median house, and it does nothing to either lower the cost of buying a house or increase the income of prospective home buyers. That's a bit like trying to fix the Social Security system by issuing lottery tickets instead of checks--some people will be helped out, but most will be worse off.

Ultimately, we got into this mess because lenders made it easier for people to borrow money, so some people took advantage and spent more on houses then they should have. To those folks, I suppose making it easier for new buyers to take those homes off their hands seems like a pretty good deal. However, to those of us who are able to finance the purchase a house, but don't want to wreck our financial futures that way, this bill is slap in the face and an insult to our intelligence.

Thank you,
Jon Ericson


Jon Ericson said...

Well, I got a response from Senator Boxer:

Dear Mr. Ericson:

Thank you for writing to me about H.R.1852, the Expanding American Homeownership Act. I appreciate hearing from you, and I share your support for this important bill.

As you may know, the Federal Housing Authority (FHA) guarantees qualified loans against default so that banks or other private lenders can offer loans with lower down payments and lower interest rates. Unfortunately, due to legislative caps on the size of those loans, FHA-insured loans have become unavailable to Americans who live in areas with high housing costs.

In order to address this problem, H.R.1852 would increase FHA loan limits to 125% of the median home price for high-cost areas and allow the Department of Housing and Urban Development (HUD) to increase that limit by up to $100,0000 based on market conditions or the prices in that area. These increases, along with other changes, would allow many Californians to take advantage of the lower interest rates on loans that meet the standards set by the FHA and open a door to refinancing opportunities for many borrowers currently facing potential foreclosure.

Additionally, H.R.1852 would enable the FHA to use a more flexible risk-based premium pricing structure that would allow the FHA to better serve zero-and-lower-downpayment borrowers, or borrowers with low credit scores.

In addition, H.R.1852 adds new borrower protections, such as increased disclosures and mandatory foreclosure prevention counseling. It also would inflict civil penalties on any party attempting to influence a home appraisal, ensuring that the appraisal process remains fair and unbiased.

I am pleased to report that H.R. 1852 passed the House on September 18, 2007. In the Senate, the Committee on Banking, Housing and Urban Affairs has approved its own version of the bill, the FHA Modernization Act of 2007, which will be taken up for consideration by the full Senate. While this bill makes important changes to the FHA, it does not increase the loan limits as high as in the House version.

Rest assured I support the goals of H.R.1852 and will fight to see that the higher loan limits are included in either the final Senate version or any bill that comes out of Conference.

Again thank you for writing to me.

Barbara Boxer
United States Senator

Now here's what I think happens: all of Senator Boxer's correspondence is sorted by computer into categories: opposed or for such and such a bill or issue. Then a canned response is sent back to the sender based on the category the original mail was sorted into. It's possible an assistant or intern does a quick sanity check on the computer's triage, but that's not likely to be a very thorough reading. So my email got sorted in the wrong bin.

Here's my response that is unlikely to do any good:

Actually, I'm opposed to H.R.1852. Raising FHA loan limits will not solve any problems for ordinary Californians. In fact, delaying the solution to the real problem (high housing costs) will likely make it worse in the long-run.

If you are keeping statics of constituent input, please register my opposition to this bill.

Thank you,
Jon Ericson

Somehow, I don't feel democracy is working very well. I can't imagine there are many lobbyists campaigning for lower house prices at the moment.

Jon Ericson said...

Today I got a response from Senator Feinstein. I edited out what looks like an executive summary of the bill:

Dear Mr. Ericson:

Thank you for writing to me about legislation on home ownership assistance programs. Your correspondence is important to me and I welcome this opportunity to respond.

Like you, I recognize that the Federal Housing Administration (FHA) plays an important role in financing home ownership for those in underserved communities. As the cost of housing in our State is extraordinarily high, such programs are especially necessary. At this time, various bills are pending in Congress relating to this issue.

There are several provisions in the "Expanding American Homeownership Act of 2007" (H.R. 1752), sponsored by Representative Judy Biggert (R-IL) that are intended to modernize the FHA and expand the financing options available to homebuyers. Specifically, this bill would increase the FHA loan limits from 87 to 100 percent in high cost areas and allow FHA to reduce insurance premiums for borrowers who demonstrate a record of timely mortgage payments. This is intended to help more working families benefit from the FHA Mortgage program. H.R. 1752 has been referred to the House of Representatives Committee on Financial Services.

Additionally, the "Expanding American Homeownership Act of 2007" (H.R. 1852), sponsored by Representative Maxine Waters (D-CA) intends to reform the FHA. This bill would restructure FHA to rely less on large down payments and instead rely on the amount collected from annual payments. While the current FHA mortgage insurance premiums are based on the amount a borrower puts down on the mortgage, H.R. 1852 would allow a borrower's credit score to determine their mortgage insurance premium. This bill would also increase the FHA loan limits from 87 to 100 percent in high cost areas and eliminate the current statutory three percent minimum down payment for first time home buyers. H.R. 1852 was reported out of the House of Representatives Committee on Financial Services on June 28, 2007. Please know that I appreciate hearing your thoughts regarding this issue and will keep them in mind should these bills or similar legislation come before the full Senate.

Again, thank you for writing. I truly value your correspondence. Should you have any further questions or comments, please feel free to contact my Washington, D.C. staff at (202) 224-3841. Best regards.

Sincerely yours,

Dianne Feinstein
United States Senator