Housing Bubble

Bill would act as 'Tax on housing' says NAHB

May 16, 2003

The "Secondary Mortgage Market Fair Competition Act," legislation introduced today by Rep. Pete Stark (D-Calif.), could harm the nation’s housing finance system at a time when the housing sector is helping to prop up the economy and there are concerted efforts under way to expand homeownership opportunities, according to the National Association of Home Builders (NAHB).

"Rep. Stark’s legislation eliminating Fannie Mae’s and Freddie Mac’s exemption from state taxes could end up acting as a tax on housing and homeownership by driving mortgage interest rates higher," said Jerry Howard, executive vice president and CEO of NAHB. "Fannie and Freddie are the lynchpin of the nation’s mortgage finance market, and this bill threatens to weaken the housing finance system."

Requiring Fannie Mae and Freddie Mac to pay hundreds of millions of dollars annually in taxes on business it performs throughout the nation could adversely impact not only the housing financial market, but the entire housing industry, said Howard. "Ultimately, these expenses would be passed on to consumers in the form of higher mortgage rates. And this would harm home buyers and home builders alike."

Congress provided Fannie Mae and Freddie Mac a special charter to allow them to extend affordable mortgage financing for home buyers. Changing their tax status would impair their ability to meet this charge.

"By putting upward pressure on mortgage interest rates, this bill could greatly impede efforts spearheaded by the Bush Administration to expand homeownership opportunities to more than 5 million minority households over the next decade," said Howard.

Source: National Association of Home Builders