Guest opinion

Don't kill the goose that laid the housing egg

June is National Homeownership Month, and housing is playing a huge role in Montana's growing economy. It's easy to scoff when you're cruising I-90 or visiting Glacier National Park, but it is the truth—Montana is booming. All over the country people are talking about the "soaring housing market," and Montana is leading the pack with a booming industry where the sky is the limit. Or so we thought. The healthy market and potential we're all hoping for might change in the near future. One of the best allies the housing industry has is under intense scrutiny and in danger of being hobbled.

The housing industry has been responsible for almost half of all the new jobs in the U.S. since the start of 2001. Homeownership rates nationwide stand at an all-time high of 69 percent. Montana's homeownership statistics are even more impressive, surpassing the national average at 72.4 percent. Unemployment is also down nationwide, standing at 4.7 percent in April, and Montana was once again bettering that at 3.4 percent. Even more optimistic is the fact that Montana is now the third fastest growing economy in the United States.

These successes in all of these areas are in large part due to a strong and thriving housing industry. Two cornerstones of that industry are Freddie Mac and Fannie Mae, the Government-Sponsored Enterprises (GSEs) that allow low- and middle-income homeowners to receive lower interest home loans. After Freddie and Fannie's chartering more than 30 years ago, literally millions of families were finally able to afford their own homes.

I've been lucky enough to lead the state's largest privately owned mortgage banking firm during this boom, and I've seen the good that Fannie and Freddie can do. So I have real concerns about a highly questionable "reform" bill in the Senate, called the Federal Housing Enterprise Regulatory Reform Act. While I fully support greater financial oversight and increased guidance, the Senate bill would in fact penalize the GSEs for their outstanding results. The consequences of such penalties would be felt all across the state, for businesses, homeowners and all those who hope to one day join the ranks of homeownership.

In my opinion this bill, commonly known as SB 190, would hobble Freddie and Fannie by not only shrinking their available mortgage portfolios to a mere fraction of what they currently are, but also by severely limiting the mortgage capital they currently bring to the market. In addition, this bill further restricts the GSE's ability to innovate, and bring new products and services to the marketplace. To a very large degree, it is that innovation that has spurred the very high homeownership rates by making capital available to more people than ever before.

Since the 70s the GSEs have brought stability, innovation, capital, and predictability to mortgage financing. To this day, Americans enjoy the lowest cost mortgage financing of any nation in the world, and it is that low cost and availability that is largely responsible for our record homeownership rates. By severely limiting the amount of capital the GSEs can make available for purchasing lower cost mortgages, this bill will reduce the effectiveness and the stability and innovation they bring to the market. This provision is an attack that would punish not only the GSEs, but Montanans as well; and would have an indelible effect on the housing industry that will reach every corner of our state and every person who dreams of someday owning a home. Minority families, seniors, low-income households, small banks, mortgage brokers and bankers, real estate agents, homebuilders, etc. will all feel the effects if this bill passes.

Admittedly, there have been some accounting abuses at the GSEs, and appropriate reform is not only important, it is essential, not only to maintain the safety and viability of these agencies, but also to protect the taxpayer. These agencies were created by Congress to make mortgage capital not only readily available, but inexpensive, thereby making homeownership available to more people. They have succeeded greatly in that mission.

So let's be careful not to punish those people who will benefit from that mission. Let's bring in a strong regulator who will ensure that they meet their Congressional mandate, while protecting the American taxpayer.

Montana's citizens are depending on their leaders in Washington to give them a continued opportunity for homeownership. I hope Washington remembers that before they cut the legs out from underneath Freddie and Fannie.

Steve Redinger is the president and CEO of Intermountain Mortgage in Billings, Montana's largest privately-owned mortgage banking firm.

References: Montana unemployment figures are from www.dli.mt.gov; US unemployment figures are from www.bls.gov/cps/; Homeownership figures taken from the banking & home buying guide on http://moneycentral.msn.com; Figures on Montana's rate of economic growth are from a Missoulian interview with Governor Schweitzer on May 8, 2006.