Congress weighs home-loan limits

November 9, 2011

The debate over setting new limits on government support for the housing industry is facing a crucial test in Congress this week as lawmakers decide whether to extend federal guarantees for home loans up to $729,750.

The National Association of Realtors has been pushing hard for the extension and managed to gather 60 votes for an amendment that would accomplish it, sponsored by Sen. Johnny Isakson (R-Ga.).

The Realtors, perhaps not coincidentally, have been Isakson’s biggest benefactor, spending $604,000 last year on his reelection and a total of $1.3 million, including for his first run for office in 2004.

The support for Isakson is part of an unusual strategy by the trade association to spend large amounts not directly in donations to candidates but rather on independent campaign advertising. The strategy is one that other large trade associations may start to adopt in the wake of the Supreme Court’s Citizens United decision last year, which freed corporate and union spending on campaign advertising.

The Realtors have always had a large political action committee fueled by donations from thousands of members. The donations are capped at $5,000 under federal law, allowing the association to spend $6 million last year helping 11 friendly lawmakers.

Those efforts got an extra boost last year with an additional $1.1 million that the association transferred from its general treasury to a super PAC created under the new election rules.

Isakson said he pushed to restore the higher limits that expired Sept. 30 because he thinks it is premature to withdraw government support from the recovering housing market.

“I was in the single-family housing business for 30 years before I came to Congress,” Isakson said. “I was proud to be a Realtor. I’m proud to have their support.”

The fate of the amendment will be decided in the coming days as a House-Senate conference committee attempts to resolve differences in spending bills passed by the two chambers. The measure never got traction in the House, where Republicans argue that it’s time to let the free market take a bigger share of risk on housing.

The provision would increase the maximum size of loans guaranteed by the Federal Housing Administration and the government-controlled mortgage giants Fannie Mae and Freddie Mac.

The government limits home loans it supports to 125 percent of the median home price in a region, up to $625,000. The higher limit of $729,750 was first passed in 2008 and had been extended several times until this year.

Advocates for low-income home buyers say that keeping the loan limit at the higher level will reduce the ability of the government to help the people who need it most.

“If you expand these loan limits, what’s going to happen to the people at the bottom rung?” said John Taylor, president of the National Community Reinvestment Coalition. The FHA’s limited resources “need to be for those who have no alternative but a government guarantee to become homeowners,” he said.

Because homes are more expensive in places such as New York and California, the expiration has had a greater impact in those regions.

Rep. Ken Calvert (Calif.) is one of the few Republican lawmakers who signed on to a bill supporting higher loan limits. He’s also one of the biggest recipients of advertising spending by the Realtors association, receiving $606,000 in help during his 2010 campaign.

The goal of that spending is “basically helping our friends and making sure the folks who are good on our issues are getting elected and reelected,” said Jamie Gregory, the deputy chief lobbyist for the Realtors association.

Calvert said he has had a consistent record on the issue.

“Many people in California are precluded from qualifying for a [government] loan simply because of the high housing prices in many areas, including in my congressional district,” Calvert said.

Under federal law, spending by the Realtors or other interest groups cannot be coordinated with candidates or their campaigns.

Another top recipient is Rep. Dennis Cardoza (D-Calif.), who received $526,000 in assistance. In a recent speech announcing his retirement, Cardoza excoriated the Obama administration for its housing policies, saying, “The administration’s inaction is infuriating.”

Several other top recipients of the Realtors’ spending are members of the powerful House tax-writing committee. Realtors have recently been fighting proposals to cap or eliminate the income tax deduction for mortgage interest.

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