HOUSE IS RIGHT ABOUT HOME OWNERSHIP.

Byline: Gregory J. Wilcox

Anyone in the market for a house in California or any other expensive market might want to keep tabs on HR 1461.

That's the Housing Finance Reform Act of 2005, and if it passes with a key provision in place, it could save home buyers money when it comes to getting loans for properties meeting Freddie Mac and Fannie Mae conforming loan limits. This is the House of Representatives' version of sweeping legislation that would overhaul federal oversight of the two mortgage giants.

The California Association of Mortgage Brokers thinks it's a good idea and recently attended a hearing in Sacramento to voice support for Assemblyman Mark Ridley-Thomas' AJR 47.

This is a joint resolution of the state Assembly and Senate that urges the president and Congress to recognize the high cost of buying a home in California.

Ridley-Thomas, in an interview Friday, notes that California lags the national average in homeownership so something needs to be done.

"If we want more people to experience homeownership, we need to take the steps that are practical to facilitate that outcome," he said.

He's right.

For years, California residents have been shortchanged when it comes to obtaining mortgages guaranteed by Fannie Mae and Freddie Mac.

Each year the two mortgage companies set their conforming loan limits based on the October-to-October changes in the average home price computed by the Federal Housing Finance Board.

This year it is $417,000.

In February, the median single-family home price in California was $535,470. In Los Angeles County, it was $565,600, according to the California Association of Realtors. Only five of 22 major markets tracked by the group were under the new loan limit.

Fannie Mae, in a new release last year, said its average loan size for single-family properties in the first three quarters of 2005 was about $172,000.

That seems to put the Golden State at a disadvantage.

Borrow money from a Fannie or Freddie affiliated lender up to that the conforming amount and you get a pretty good interest rate. If you have to stretch above that in places where homes are expensive you may need a jumbo loan, which cost more.

Jumbo's typically carry a quarter to a half point more in interest that a traditional loan.

"I can tell you it comes at a very high cost to the people of this state, somewhere between $500 (million) and $700 million annually in higher mortgage payments and interest costs," Ridley-Thomas said said of the disparity between the conforming loan limits and California prices.

"It's completely avoidable and that's why I feel it's imperative that Congress and the president give us the appropriate relief in this regard."

Michael Faust, chairman of the government affairs committee for the California Association of Mortgage Brokers and vice president of American Pacific Brokers in Roseville, agrees that California residents are getting a raw deal.

For example, if someone used a jumbo loan to buy a $470,000 home late last week, the monthly mortgage payment would be about about $155 more a month than if a traditional loan were used.

"Some people say its only $155 a month. The reality is that's a lot of money," Faust said late last week. "This is really important to the people of California.

The irritating part of this is that there are exceptions for some designated high-cost areas where the limit is 50 percent higher. Those areas are Alaska, Hawaii, Guam and the U.S. Virgin Islands.

Go figure.

HR 1461 would change this. Section 123 of the bill, sponsored by Richard H. Baker, R-La., brings price in the equation for determining a high cost area.

That would give place like Los Angeles, San Jose, San Francisco, Ventura and San Diego a better shake. Same for places like New York City, Miami and Washington, D.C.

Of course there is a competing bill from the U.S. Senate.

It does nothing to address the housing cost inequity.

Ridley-Thomas thinks this is an oversight.

And ironic.

"We boast of being the sixth most powerful economy in the world and we lag behind the national average in terms of home ownership, which is a fairly fundamental feature of a robust economy," he said.

Lag probably isn't the best choice of words in this case. California is next to last in homeownership.

And it remains to be seen whether the politicians in the nation's capital care.

greg.wilcox(at)dailynews.com

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