NAR-backed rate buydown gains traction

WASHINGTON – Dec. 5, 2008 – An effort by the National Association of Realtors® to spur home sales through a mortgage-interest rate buydown appears to be gaining traction. Reports in major news media like the Washington Post and Wall Street Journal today quote sources familiar with a meeting between U.S. Treasury officials and NAR in November in which the buydown proposal was discussed.

“Treasury officials told the Realtors that the [buydown] plan could be a more effective way to help homeowners than focusing solely on borrowers who are struggling to meet their monthly payments,” the Washington Post story says.

Under the Treasury plan, lenders would sell newly issued mortgage-backed securities to the government provided the interest-rate on the loans collateralizing the securities was no higher than 4.5 percent. Although NAR supports a buydown, it does not take a position on how low interest rates should go.

To pay for the plan, Treasury would issue bonds at 3 percent, creating a 1.5-percent spread that it could use for buying the securities. Those securities would then be purchased by secondary mortgage market companies Fannie Mae and Freddie Mac, which are under federal conservatorship.

NAR has been calling for a buydown and other measures to help stimulate housing sales as part of a four-point plan it showcased at its annual meeting in Orlando last month. To date, tens of thousands of Realtors have sent letters to their members of Congress asking for quick action to help housing, which is widely considered a crucial first step to a broader economic recovery. Other parts of the four-point plan include: making 2008 high-cost conforming loan limits, which are now $729,750, permanent; improving the homebuyer tax credit by expanding it to all buyers, not just first-timers; and eliminating the repayment requirement.

Some analysts have calculated that an interest-rate buydown could help as many as 2.5 million households.

Source: REALTOR® Magazine Online

© 2008 FLORIDA ASSOCIATION OF REALTORS

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