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Notes from an election year.

Despite the political jockeying displayed at both national political conventions this summer, the subject of housing did not get a lot of play. And questions about the future course of housing policy may not be answered until well after the November election.

It was shortly after the conclusion of the successful Democratic convention and the Clinton ticket was crushing the Bush administration in the polls. A veteran housing industry lobbyist who had just returned from the gathering of the party faithful in the Big Apple was reflecting on how well it all went.

Another housing industry convention-goer remarked: "It's hard to believe that the Democrats in New York acted more like Republicans, in that it was well-orchestrated both in timing and content. There was really no dissension to speak of among the delegates with respect to platforms or credentials or any of those things that have always plagued Democratic conventions."

Excuse me, but what about substance, what about the issues--did the country get a national housing policy, did housing take its rightful spot on the list of the nation's most critical items to attend to? Well, not exactly.

Once again politics has returned to the ephemeral art of packaging form over substance. But there are those who are practiced at reading these tea leaves--the daily bread of those whose livelihood revolves around counting votes in Washington, D.C. before they occur--and they tell us something quite different. Actually, there was a major victory--although a subtle one--that occurred in New York. And here it is:

This wise Washington, D.C. insider declared that it was actually a "big plus" that "in the |Democratic~ platform for the first time, there was a mention of the FHA program." (Actually, FHA made it as a mention in the GOP platform as well.)

This housing industry insider was obviously reading plenty between the lines, but this is the nature of the beast when dealing with platform language, where the "beef" is clearly not present in great quantities. But this old hand at reading the language of politics said "the mere mention of FHA as an agenda item indicates that there's a willingness to take care of the needs of middle Americans." And there you have it. That's the major victory.

However, another senior hand at Washington ways and the subtleties of platform verbiage was not quite so positive about the meaning of a mere mention. Mike Ferrell, legislative counsel for the Mortgage Bankers Association of America (MBA), who attended a political party convention for the first time this year in New York, was asked if there was a mention of another kind at the convention--that of a national housing policy. He replied, "None." Ferrell added that if you really want to call it straight, those seeking major national attention to the issue of housing shouldn't be all that content with what they found in the Democratic platform. "If you look at the platform, it was a fairly bland testimonial to housing, but there's no significant call to action in the platform."

And yet housing is a very difficult issue for policy-makers to contend with when the federal deficit is still huge and not looking to improve any time soon. Such circumstances leave federal housing policy in a real straightjacket. Still, both parties have looked for ways to somehow quietly address the issue of housing with the limited resources that are available, but without being able to attack the problem head on with real federal dollars. The Democrats, if you look at a campaign document being called "The Clinton/Gore Plan" would address housing by expanding the reach of some of the tried-and-true federal housing credit programs, most notably FHA.

This focus on federal credit programs to be a primary agent of housing policy in the absence of other federal funds is one of the few avenues still open to Congress to bring housing affordability to more Americans. And federal housing policy-makers can still build on these mortgage credit programs to reach more people in need, according to Sharon Canavan, MBA deputy legislative counsel. She said, "It is only those areas that result in direct spending where Congress has grave difficulty, because of the size of the budget deficit. So in matters concerning Fannie Mae and Freddie Mac, or the FHA and VA programs, Congress can still make a difference by expanding those programs and targeting them on somewhat different sectors of the population, or trying new things, such as expanding mortgage credit into rural areas or central cities. Taking the programs that work, and training a new eye on them, and now that we've proved they work for plain vanilla mortgages, see if we can push the edge of the envelope and expand the focus of these programs, without exceeding tolerance levels for safety and soundness. That's really the next step. A Congress working in sync with an administration with that purpose in mind, could make a difference in the mortgage credit arena."

Whereas, Republicans, in their platform, package their housing policy in the form of tax policy, as opposed to federal credit policy, to help both would-be homeowners--with a first time buyer tax credit--and current homeowners--with no capital gains on home resales.

As HUD Secretary Jack Kemp said in his address to the GOP convention in Houston: "That's why I'm so proud of our President's platform. It puts our party on the side of lower tax rates on working families, lower tax rates on the formation of capital, lower tax rates on the first-time homebuyer and lower tax rates on poor Americans who want their shot at the American dream."

Nevertheless, the fact that both parties are serving up some approach, however limited, to federal housing policy in these times of scarce resources does not erase the fact that housing has slipped from the pantheon of campaign issues grabbing headlines this election year. Compared to "family values," housing is almost nowhere to be seen.

One sign that housing has fallen on hard times politically, is the fact that not so long ago housing was a great election-year issue--one of the real vote-getters. Accordingly, incumbents couldn't wait to get on a housing bill or extend housing programs in that wild legislative time before a major election. Surely, that couldn't have changed? Guess again.

Take for example, a simple thing like extending the mortgage revenue bond program. The legislation to simply extend this program enjoys a huge majority of support in both legislative bodies of Congress. And yet, so far this session Congress has been unable to pass the "extender" bill, which also covers another popular housing tax item--the low-income housing tax credit. So, what gives here? Well, for starters, when you're talking taxes, you're never talking anything simple--there is no such thing as a one title tax bill--tax bills are like rabbits--the technical insider term is a "Christmas tree," because for every simple tax bill that could serve as a moving target, there are so many legislators with their own little "must-get" item to hang on that simple little straightforward tax bill. So, quite understandably the leadership on the tax committees don't want to open up the prospect of a Pandora's box even though a special targeted urban aid tax package is now still going through the Congress and it's possible that the extenders will go though with that legislation.

Housing legislation

But, even more to the point, as of late August major national housing reauthorization bills had passed the House and almost passed the Senate but were not being viewed as top priority items. Clearly, the leadership in Congress has not put these bills on the fast track--or showcased them in any way as powerful accomplishments to please their voting constituents. Admittedly, these bills are not overly aggressive in terms of spending levels or the scope of the programs being sought. But why has housing lost so much status as a gravy issue that is pro-consumer in an election year? Well, the huge federal deficit is no doubt a constraint, but another factor also has to figure in here. The GOP is poised to jump all over any evidence of big spending with which to pummel the Democrats as the party of tax-and-spend politics.

Because housing is such a pro-consumer issue and, in the past, a sure vote-getter, we asked Ferrell why housing policy has failed to be a beneficiary of this attitude in the current election cycle. His reply was: "You would think it would be. And you would think the Democrats would drive home the point that the Reagan and Bush administrations have done damage to the traditional Democratic housing programs. And yet, I must say, the Democrats really haven't taken that bold step and forced onto the administration a prescription for the nation's housing problems.

Whether they are caught by budget limitations or practical political limitations, it's hard to say. But you would think that the Democrats would really be out there banging away on these traditional housing programs and they haven't been. There's been a real absence of leadership, if you will, on innovative housing legislation this year."

But even if housing has suffered a bit of a decline in recent times, in terms of the primary issues that are campaigned on, the fact remains that whoever wins the election--Clinton or Bush--will be conducting some kind of housing policy. And the key question is what will that policy look like? There are two ways to investigate what the two presidential contenders will offer in terms of housing policy. One is to look at each candidate's record, while in government, in the area of housing. The other is to look at the official position papers on housing that both campaigns package and distribute to shed the best possible light on their candidate.

Bush's housing policy

It's enlightening to look at what each campaign is distributing as their candidate's "record" on housing. It's even more enlightening to examine how both parties are packaging their candidate and compare that against the reality of what people in the industry know to be that politician's housing record. This reality-checking becomes important particularly if you read what the GOP is packaging as the "Administration's Housing Accomplishments" on the topic of FHA--the second to the last item on their list.

Under the general heading of "Establishing regional mortgage limits and low down payments for FHA mortgages," the document appears to imply that the FHA loan limit adjustment for high-cost areas was a policy change ushered in for the first time with the Bush administration. The high-cost area adjustment to the base FHA loan limit actually came about in 1980. (HUD Mortgagee Letter 91-1 gives a precise account of what actually occurred with the FHA high-cost loan limits under the 1990 housing act. Under the Cranston-Gonzalez National Affordable Housing Act, the "basic statutory limit of $67,500 remains unchanged. The 1990 act provides permanent authority to ensure mortgages in high-cost areas up to 185 percent |$124,875~ of the basic limit."

But the Bush/Quayle housing accomplishments document, released by the campaign's "Issues Office," simply states: "The mortgage limit of $67,500 for a single-family residence, set in 1980, was increased to $124,875. The document goes on to state, in the only mention of middle-income persons benefitting from Bush housing policy cited in the document, that: "The FHA commissioner has the authority to raise the limit in high-cost areas where moderate- and middle-income persons have limited housing opportunities due to high prevailing sales prices."

Furthermore, the heading seems to imply that the Omnibus Budget Reconciliation Act of 1990, which brought new maximum loan-to-value ratios that were higher than previously required, somehow was responsible for bringing low down payments for FHA loans. Furthermore, this small blurb on the Bush housing record neglects to mention that the administration was also responsible for initiating a brand-new annual risk-based mortgage premium for FHA loans and for restricting the financing of FHA closing costs significantly.

The bulk of the Bush administration "accomplishments" making the official list suggest something significant about the way this administration feels about the appropriate role of government in the area of housing. It suggests that, under President Bush, housing policy has been directed almost exclusively at the indigent and that's where the administration believes it has made headway of the kind it wants to promote in its official packaged list of "accomplishments."

This attitude that the GOP's commitment to housing policy is to serve the housing needs of the poor and homeless was hammered home with real vigor in the GOP platform. "For low-income families, the Republican Party stands for a revolution in housing by converting public housing into homes owned by low-income Americans. President Bush is eager to work closely with the states to fight and win a new conservative war on poverty. The truest measure of our success will not be how many families we add to housing assistance rolls but, rather, how many families move to the ranks of homeownership."

By contrast, when it comes to the real workhorse housing programs of the federal government--the FHA, VA and GNMA--the GOP platform only offers up the blandest mention. "We support the FHA mortgage insurance program, the Government National Mortgage Association, the VA guarantee program and other programs that enhance housing choices for all."

This underscores the basic difference between Bush administration housing policy and basic Democratic housing policy. This administration believes direct government involvement in housing should be kept to an absolute minimum and targeted to help only the very needy--the private sector should handle the rest. The GOP platform probably best describes the essence of the Bush administration's housing policy. It states: "The best housing policy is a non-inflationary, growing economy that has produced low mortgage rates and has made housing more affordable."

But what do the housing industry veterans in Washington, D.C. expect from a second Bush administration, should the GOP ticket manage to pull off a win in November? "I'd expect a major change in personnel at HUD, whether early on or sometime later," says Robert O'Toole, MBA senior staff vice president for residential finance/government agency relations. O'Toole adds, "I also think there will be a realization that real estate and housing issues are important to the economy, and should be addressed in a specific sense, rather than just in a macro sense."

On specific housing issues, he says, "I think even in a Bush 2 |Administration~, the failure of the FHA reforms will be recognized and a mid-course correction will be proposed." On the issue of federal government involvement with multifamily housing programs, O'Toole says, "I really believe that regardless of who's in power, the lack of multifamily activity will be addressed. We're simply not producing enough units for moderate-income renters to live in and HUD has to take the lead in correcting that situation."

Finally, O'Toole predicted that one, long-awaited, housing policy move will take place before the end of the current administration. "I see RESPA |the Real Estate Settlement Procedures Act~ being resolved before the election." He expects regulations to be issued on the controversial RESPA issues of referral fees, controlled business arrangements and escrows.

The official GOP platform calls for a $5,000 tax credit for first-time home buyers, an extension of mortgage revenue bonds and the low-income housing tax credit, no capital gains tax on the sale of a primary residence, supports deductions for losses on personal residences and preserving mortgage interest deductions.

Clinton's record

As far as Governor Clinton's record on housing, the details are more elusive. The packaged record being distributed by the Little Rock campaign headquarters cites only two specific housing efforts that it credits to Clinton. As Governor, Clinton created the Arkansas Development Finance Authority in 1985, the campaign document states. The ADFA has "made possible the purchase of thousands of homes for low- and moderate-income Arkansans" and issued bonds that helped preserve 46,000 low-income housing units. Governor Clinton also founded the Arkansas Interagency Council for the Homeless to "prepare a plan to address homelessness in Arkansas." That's it, as far as the packaged record is concerned.

But O'Toole says, "I'm not sure the Arkansas record is that important. I'm not familiar with what the Arkansas record is, but I'm not sure that it's relevant. Housing policy tends to be national."

But O'Toole points to the fact that Clinton went on record, in his first major national policy speech at Georgetown University last November, saying that the FHA loan limits needed to be raised further. O'Toole also noted that Clinton's top housing adviser, Marc Weiss of Columbia University, traveled with the candidate on the first high-profile campaign bus trek after the convention, which he says testifies to the point that Clinton puts a high priority on housing issues. Furthermore, O'Toole says, "From what we understand, housing policy is at the center of Clinton's economic policy."

The MBA official says Clinton's housing adviser has indicated that the Democratic candidate wants "FHA to be back in the business of providing assistance to low-, moderate- and middle-income families to buy houses. He doesn't see it as a pure low-income program." Also, O'Toole says, "We understand that one of the things that will be addressed by a Clinton Administration is an effort to find some way to revitalize the VA program."

O'Toole doesn't believe that housing was quite as invisible an issue at the Democratic convention as it may have seemed. He says it was mentioned in some important speeches, notably in New York Governor Mario Cuomo's. He also points out that there were between 800 and 1000 convention participants present at a Housing Caucus reception hosted by House Majority Leader Richard Gephardt (D-MO).

The Democratic ticket is clearly not running against government involvement in housing, if you examine the candidates' position paper titled "The Clinton/Gore Plan." The list of items is lengthy and it supports the general characterization of the Clinton/Gore ticket as candidates who believe in government. The plan supports raising the ceiling on FHA mortgages to 95 percent of the median home price in each metropolitan area, maintaining the mortgage revenue bond program and permanently extending the low-income housing tax credit, aggressively enforcing fair housing laws, ensuring adequate funding for maintenance of public housing in the HUD budget, passing a "more progressive Community Reinvestment Act to prevent 'redlining,'" and a variety of steps to help the homeless--including holding a Housing and Homelessness Summit.

Sharon Canavan, MBA deputy legislative counsel, believes a Clinton/Gore administration would restore a housing policy that is not hostile to middle-income Americans. She perceives real pluses from such a point of view: "FHA is a moderate-to-middle income program. And to see it once again strengthened to serve that sector of the population, rather than as the administration has successfully done--basically narrowed the purposes of the FHA to serve low- and moderate-income people. It was never a program designed to do that. It was always a program designed to serve the middle class. And so the so-called reforms have simply served to focus the program downward. And indeed |MBA's~ concern has always been that will eliminate the risk-sharing properties of the program and set it up for its death knell."

As Canavan describes it during the last 12 years of a GOP-controlled White House, the idea that the nation's mortgage credit programs "could be created for and serve the middle class has been anathema. All of the rhetoric has been that these programs have to be focused on the lower- and moderate-income families. That's simply never been the purpose for which they were originally created. They were created with the middle class in mind. Middle class is not a dirty word."

As to where the Democratic ticket stands on the merits of government in attacking the problems of the nation, Canavan says this: "I don't think that they are running against the concept of government. Indeed, I think that their commitment to America is based on a deep feeling that government works."

So, while the GOP appears to be honing down a housing policy to serve the underclass of America in a more vigorous way, the Democratic party appears to have staked out the middle-class as its exclusive territory. If this sounds like a major political role reversal to you, then you are not alone.

Perhaps, this move to the center by the Democrats and move to a more liberal focus--targeted to help the poor and the poor only--by the Republicans, is all a part of the change that has become the watchword of this election year.

Change of course

There are many other questions about the future course of housing policy that won't be answered until well after the election returns are in. One of the key questions is whether a reformist Congress full of zealous freshmen acting as independent agents of change will be able to act effectively as a unit, or will only set a willfully stubborn course that results in no major legislation being passed.

Ferrell says, assuming Clinton wins, "The real unknown at this point is whether they will work together or whether we're going to have a lot of splinter actions. My own sense is that I think it's going to be difficult, not withstanding that they will come as agents of change. No one will come in on Clinton's coattails necessarily and vice versa. They will view themselves as individual winners rather than party winners. Therefore, I think there will be a lot of individualized efforts to make things 'right.' I think that's the real danger that lurks out there."

And if it's a second term for Bush, and a more moderate to conservative Congress is elected, Ferrell says, "if they can elect a moderate to conservative Congress, it makes no difference whether it's Democrats or Republicans. Reagan has proven that you can attract conservative boll weevil Democrats and have a functional majority with the Republicans. So, I think that he might stand a little better chance |in getting his programs through~. But if anything, I think the Democrats are going to come in and while they may be more individual in their pursuits, they, I think, will be Democrats first and foremost, and, therefore, are going to be somewhat reluctant to give George Bush a lot of help and support."

So, after all this discussion of housing policy, let's get down to the odds on who will win in November? Ferrell says for the Democrats to win they must break "the stranglehold" that the Republicans have had on the so-called Reagan Democrats. He says the Clinton/Gore ticket has to "come out strong out of the South--and that includes Texas and Florida...they've got to win one of those states in order to win. Then, he adds, the Democratic ticket has to take California, as well, to have a real shot at the White House.

Going back to the mood in Madison Square Garden, Ferrell says it was the news that Ross Perot had quit the race that really ignited the party faithful about this year's prospects for the Democratic ticket. He summed up the importance of that one piece of news for the party that has been locked out of the Oval Office for 12 long years: "|Perot's~ getting out probably potentially puts Bill Clinton in the White House, is what it does.

"And the reason is very fundamental--people are fed up."

Janet Reilley Hewitt is editor in chief of Mortgage Banking magazine.
COPYRIGHT 1992 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:1992 national political conventions' lack of focus on a future housing policy
Author:Hewitt, Janet Reilly
Publication:Mortgage Banking
Article Type:Cover Story
Date:Sep 1, 1992
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Next Article:Appraisal reform: who will call the shots?

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