This is the second half of a two-part article. The first half appeared in the Feb. 3 issue.
The private business reasons to be concerned about the future of government mortgage insurance go on and on.
Banks and thrifts increasingly are relying on Federal Housing Administration loans to meet requirements under the Community Reinvestment Act. The FHA 2O3(k) rehab loan program is the most streamlined, most workable insurance program out there for fixing up older - and especially urban - properties.
Whether the business interests are real estate agents, homebuilders, or lenders, we want to know that there is a safety net in the mortgage insurance market, through good times and bad. Private mortgage insurers, history has shown, are not always there.
The government has its own major business interests at stake. It is basic budget arithmetic that may end up driving policy decisions about federal mortgage insurance, rather than social policy matters. The FHA, even as it exists today, is actuarially sound and makes money for the government.
Recent private analyses by Price Waterhouse and reports from the Government Accounting Office document that the FHA is likely to make more than $300 million per year over the rest of this decade. In other words, the FHA by the year 2000 will add another $2 billion to the federal treasury.
To eliminate the program is to kiss $2 billion goodbye. The money will have to be found somewhere else.
Ginnie Mae makes even more money. If federal mortgage insurance is wiped out, so too over time is Ginnie Mae - and the $500 million per year it brings in. That's without mentioning the illiquidity that would result in the Ginnie Mae market, and the decrease in healthy price competition this would mean throughout the entire residential secondary mortgage market.
Over the past four decades, a myriad of federal welfare support programs have robbed people of responsibility for their fate and squelched initiative and energy. We have hundreds of no-fault social policies - all rights and entitlements, without responsibilities.
But Federal mortgage insurance is different. It doesn't give the borrower something and ask nothing in return. It says: We'll empower you to buy a home, to put your name on the deed - but you have to take care of it, keep working, and pay back the mortgage. And pay an insurance premium for that benefit. It's a partnership.
Federal insurance empowers people to rise into the middle class. Mortgage insurance promotes a sense of responsibility and power over one's own future. Homeownership is an American value - to be nourished, not starved, by public policy.
Federal mortgage insurance is an engine for generating capital for housing for the middle class. It promotes savings and wealth accumulation - a stake in the community and pride of ownership.
Surely the delivery system for mortgage insurance and the shape of the organization can be improved, reengineered. But the product - 100% insurance, loan-by-loan, family by individual family - is still viable and still needed, perhaps now more than ever.
Eliminating federally insured loans as we know them today would assuredly eliminate 200,000 to 300,000 loans a year, resulting in three million or more people by the turn of the century who will never live in a home of their own.
Are we defending a dinosaur? No. We're promoting a principle.
As I said in the first of these articles: If government is to have any role in housing at all, shouldn't it be to foster homeownership - to empower hardworking, responsible, striving members of society to achieve the middle-class dream?
