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Don’t support this NAR effort to encourage meddling in mortgage markets

One of my complaints about NAR is that they tend to support efforts that help real estate agents and brokerages, in the short run, at the expense of the long-term economy.  One of the lessons from the recent real estate and mortgage downturn should be that government meddling in the markets… especially by providing implicit (in the case of Fannie Mae and Freddie Mac) or explicit (in the case of FHA, USDA, and similar) loan guarantees.

Keeping interest rates artificially low was also part of the problem.  It helped fuel the bubble.  The guarantees enabled lenders to make bad loans without facing the consequences of their decisions, which also helped fuel the bubble.  The National Association of Realtors (NAR) has always been a big supporter of this government intervention because it makes for an active real estate market which is good for agents.

The latest ask from NAR is support for rural housing loans. Not just having them, but trying to keep RHS from designating areas currently eligible for loan subsidies as being ineligible. Why would they not be eligible?  Because they are no longer considered rural.  NAR wants to push for keeping the designation even when its not justified.  Why?  Because it supports, artificially, home prices (and sales volume) by making loans cheaper than they would be otherwise.  This is great for real estate agents. And to some extent it can be good for an individual buyer or seller, because it can allow them to buy cheaper than they would otherwise, or sell for a higher price than they would otherwise.  But, that happens when someone (the government) puts money in the mix.

I say get the government out of the home loan guarantee business. They should not interfere in the market.  That means no loan guarantees. No bank bailouts when they make bad decisions in making loans.

If you want more information about the RHS program go here: http://www.realtor.org/articles/funding-flowing-for-rural-housing-loans.  You can even support the program if you want.  Or better yet, tell your representatives in Congress and the House to let RHS go ahead and reduce the number of places it helps provide these loans.  Perhaps over the long run, we can get rid of them.

 

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