Legislation on Housing up to Conferees

Major housing legislation could be enacted this year--after a six-year drought of any significant action--if the House-Senate conferees come up with a version of the 1987 housing authorization bill that will have enough bipartisan support to become acceptable to President Reagan--or to overturn a threatened veto.

Both the House and Senate have passed the legislation that would give permanent insuring authority to the Federal Housing Administration--raise the FHA’s mortgage limits from $90,000 to $101,250 in more than 40 high-cost areas, prohibit new or higher user fees on federal mortgage credit programs and also stipulate that closing costs can be included in calculating FHA mortgage amounts.

Both House and Senate housing bills exceed $15.5 billion in total authorization--about $4 billion more than the Administration proposed earlier this year. Kent Colton, top executive of the National Assn. of Home Builders, said that Congress has sought to strengthen the FHA mortgage insurance programs and secondary mortgage market institutions to help young people trying to purchase their first homes. He also said that Congress seeks to rejuvenate housing assistance programs for low-moderate-income households.

The rate of home ownership among Americans 25 to 35 years old has declined about 8% since 1978. Meanwhile, 37% of all renting households now use 35% or more of their total income for rent--up from 25% in 1974.

While efforts are being made to forestall a presidential veto of the housing legislation that is finally approved by House-Senate conference committee members, the housing community in the nation’s capital has mounted a potent campaign to avert the threatened veto.

Warren Lasko, chief executive of the Mortgage Bankers Assn., noted recently that people on both sides of the political fence on Capitol Hill are near agreement on a “fiscally sound, acceptable dollar authorization for 1988.” He added that a presidential veto is likely to be widely and rightly interpreted as “the final firm evidence of this Administration’s opposition to housing as a national priority.”

The House-Senate conferees are expected to complete action following the Labor Day recess and send the completed bill to the White House (for a signature or veto) in late September. NAHB’s Colton describes the bill as being less than a “landmark housing bill” but still a significant step, whereas MBA’s Lasko describes it as a “blue ribbon” that puts the cause of housing at a “threshold.”

Meanwhile, the House Banking Committee is planning to hold hearings this autumn on mortgage servicing and problems with locked-in mortgage rate commitments that have burdened many home buyers in recent years--especially when rates tend to rise.

Also, Rep. David Price (D-N.C.) has introduced a bill that would make home-equity loans subject to the federal Truth-in-Lending Act and require lenders to publish “conspicuous” statements in advertisements as well as to customers making applications for loans.

Popularity of home-equity loans, for which collateral is the borrower’s house, is linked to the 1986 Tax Reform Act, which phases out deductibility of consumer interest payments on all loans other than home mortgages.

There is also some potential help for first-time buyers in a bill introduced by Sen. Dennis DeConcini (D-Ariz.). His SB 1534 would enable potential first-time buyers to put up to $2,000 in savings in a tax-free account each year--and up to a maximum of $20,000. The idea is similar to the Individual Retirement Account (IRA) and savers would be subject to penalties for withdrawals for purposes other than a house purchase. This idea has been proposed before, but it never has caught on.

Finally, a breath of negative good news for homeowners. The House Ways and Means Committee, which is trying to increase Uncle Sam’s income for fiscal 1988, has decided not to change the basic tax advantage of mortgage interest deductibility for homeowners.