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Promoting Homeownership: ICBA Continues Helping Community Banks Expand the American Dream (June 2003)

INDEPENDENT BANKER
JUNE 2003


Promoting Homeownership
ICBA continues helping community banks expand the American dream

by Kenneth A. Guenther

Residential mortgage lending is an important part of community banking. Providing mortgage financing is key to ensuring the financial health of local customers and neighborhoods community banks serve.

For many years, ICBA has worked to help community banks gain access to the programs and tools they need to promote local homeownership opportunities. We established ICBA Mortgage more than a decade ago to provide indirect access to the secondary mortgage market. We have strongly supported community bank access to home loan funding through the Federal Home Loan Bank System. And by forming special partnerships with Fannie Mae and Freddie Mac, we have leveled the playing field for community banks that want to use the secondary market directly.

ICBA also has been working to promote and protect the enormously successful housing finance system that exists in America today. Currently, the overall homeownership level is at a record high of nearly 70 percent. Although our housing finance system is clearly successful, there are groups, including some of the nation’s largest lenders, that have attacked Fannie Mae and Freddie Mac, seeking to privatize them and remove their Government Sponsored Enterprise funding advantage that lowers mortgage costs. At times, the Federal Home Loan Banks get thrown into this debate. The housing GSEs have played an important role in helping lenders provide the mortgage financing opportunities that have made our high homeownership level possible, and ICBA is doing its part to deliver this message.

As part of our efforts to support the current housing finance system, ICBA joined the Homeownership Alliance at its initiation two years ago. The Homeownership Alliance is a broad-based public education organization that promotes the American housing system. It does not lobby Congress or the administration, but concentrates on public advocacy through academic studies, press events and providing resources on its Web site, www.homeownershipalliance.com.

Charter members of the Homeownership Alliance are ICBA, the National Association of Home Builders, Fannie Mae, Freddie Mac and the National Association of Realtors. Representatives of the charter members serve as the Homeownership Alliance’s board of directors. In addition, the alliance has a number of associate members, including the Consumer Federation of America, The Council of Insurance Agents and Brokers, Habitat for Humanity International, Independent Insurance Agents and Brokers of America, National Association of Hispanic Real Estate Professionals, National Bankers Association and the National Council of La Raza. Rick Davis, a well-connected political veteran in Washington, is the Home- ownership Alliance’s president.

Drawing Public Attention

One message of the Homeownership Alliance during 2003 is that homeownership is a vital national priority. A study, entitled “Housing’s Contribution to the GDP,” commissioned by the Homeownership Alliance in late 2002, pointed out that the unprecedented boom in mortgage refinancing that started in 2001 kept the economy moving when other sectors faltered, providing 20 percent of the real growth in the nation’s gross domestic product. According to the study’s author, Mark Zandi, chief economist and co-founder of research firm Economy.com, as fixed mortgage rates fell to a 40-year low and adjustable mortgage rates fell to a record low of just over 4 percent, homeowners who refinanced their mortgages saw more than $274 billion in interest savings.

The Homeownership Alliance also wants to get the word out that homeownership creates value and builds wealth. During 2002, the group commissioned a study by economist Todd Buchholz, entitled “Safe at Home: The New Role of Housing in the U.S. Economy,” that analyzed homeownership trends. He found that wealth gains in housing were more widely distributed than gains in the stock market, and helped consumer confidence remain steady amid a tumbling market. He also pointed out the important role the housing sector recently played in the economy.

Buchholz noted that minorities and baby boomers would be key drivers of economic growth in the housing sector in the coming decade. The studies by Zandi and Buchholz received wide media coverage after their publication, providing the Homeownership Alliance national attention.

More recently, the alliance sponsored a forum comparing the American housing finance system with those of other countries. In January, the chief economists of some alliance members held a Wall Street analysts’ call to discuss current economic conditions and their forecasts for the housing sector in 2003. Plans for the coming year include a study of workforce housing and the problems facing nurses, teachers, police, fire fighters and others on their quest to become homeowners. The Homeownership Alliance also hopes to call attention to the social benefits of home- ownership—the increased stability communities enjoy when residents are owners.

National Homeownership Month

In 2002, reflecting the priority he places on homeowner- ship, President George W. Bush established June as Homeownership Month. Previously, only one week in June had been set aside to call attention to the importance of homeownership on a national level. Last June, the Homeownership Alliance was an active participant in several events developed while working with the White House, Congress and the Department of Housing and Urban Development to highlight homeownership. For the second year, a technology fair was held on Capitol Hill to demonstrate to members of Congress and their staffs the technological developments that have made obtaining a mortgage quicker and less expensive.

At press time, the Homeownership Alliance was planning a series of events to celebrate the 2003 Homeownership Month. A list of events will be published on the group’s Web site. Meanwhile, ICBA will continue to look at ways to help community banks offer the residential mortgage products needed by their customers and the communities they serve. We will also work to support, on a national policy level, the housing finance structure that that has helped America reach the current homeownership level and can raise it further.

Kenneth A. Guenther is ICBA’s president and CEO. Reach him via e-mail at ken.guenther @icba.org.






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