Missing pieces of a house and housing marketThis week, the National Association of Realtors (NAR) sent a letter to Shaun Donovan, secretary of Housing and Urban Development, Timothy Geithner, secretary of the Treasury, and Gene Sperling, director of the National Economic Council.

In the letter, the Realtors put forth their belief that “Stability in the housing market will lead to a quicker and greater economic recovery. And, then NAR offered its recommendations to help stabilize and revitalize the housing industry and economy:

Proposal #1: NAR urged support for policies that ensure qualified borrowers can obtain safe and sound mortgage financing. The non-profit trade organization called on regulators to revise the unnecessarily high down payment requirements of the Qualified Residential Mortgage (QRM) exemption from risk retention requirements under the Dodd-Frank Act.

In short, NAR believes that if Congress implements a firm requirement that you have to have a minimum 20 percent to put down on a conventional mortgage, that requirement would severely limit the number of people who could buy homes. That would tank home buyer demand, depress home prices further, and cause more foreclosures.

How long does it take someone who earns an average salary to save up 20 percent for a down payment? NAR says up to 14 years. To their point, it’s hard to even remember your American dream of homeownership after 14 years.

“Mortgage availability remains a concern, and borrowers continue to find it increasingly difficult to find affordable mortgage options. Requiring a higher down payment does little to reduce default risk, and only strips home buyers of their savings and increases the number of borrowers who are unable to purchase a home,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “We cannot have a viable housing market and economic recovery until creditworthy borrowers are able to obtain mortgage financing.”

Proposal #2: NAR also asked regulators to reduce the overcorrection in underwriting standards for mortgages from the Federal Housing Administration (FHA) and government-sponsored enterprises because the now-too-stringent standards are preventing qualified borrowers from getting loans.

Phipps said more regulations and legislation that tighten access to credit and affordable safe mortgages are not the solution to righting the housing market and economy.

Proposal #3: NAR also recommends extending the FHA, Fannie Mae and Freddie Mac (also known as the GSEs) mortgage loan limits, which are critical to providing liquidity in today’s housing market. Reverting to the statutory limits on October 1 would reduce limits in 669 counties and 42 states and territories – the average decline in loan limits will be more than $68,000.

NAR has argued that reducing the GSEs mortgage loan limits to $625,000 in high cost areas like San Francisco and New York, would severely limit the ability of people to buy homes in those area.

Proposal #4: In its letter, NAR suggested Congress pass a long-term reauthorization of the National Flood Insurance Program. This program, which ensures access to affordable flood insurance for millions of homeowners has never had long-term funding, but with weather conditions and flood plains changing, NAR believes having a full-funded NFIP is essential to a properly functioning real estate market. The current program is set to expire on September 30 for the tenth time in two years. If Congress doesn’t extend the program, lenders will be unlikely to close on loans for properties that are in known flood plains.

“As the nation’s leading advocate for homeownership and housing issues, NAR understands how integral homeownership is to the nation’s economy. A strong housing market recovery is essential to the nation’s economic strength,” said Phipps. “The housing market is in a fragile recovery, and our goal is to ensure that regulatory or legislative changes help lead the way out of today’s economic struggles and not jeopardize the recovery.