Sen. Carper hopeful of using 'brief window' after election to fix housing

Sen. Tom Carper called this week for a comprehensive fix to the troubles plaguing the anemic housing market, but warned that Congress will have to act quickly after the elections to get it done.

"We're going to have a brief window, whether it's President Obama or President Romney," the Delaware Democrat said Wednesday during a lunch in Charlotte hosted by The Hill and sponsored by the National Association of Home Builders (NAHB). "But this is the kind of issue we need to address, and I think we can address.

"We do need comprehensive reform," added Carper, a member of the powerful Senate Finance Committee. "It shouldn't be just a couple pieces of it."

Though the crash of the housing market was a root cause of the recent recession, Congress's recovery efforts focused largely on other areas of the economy. The $700 billion Wall Street bailout, for instance, sought to stabilize the financial system, and lawmakers showered hundreds of billions more to prop up the automakers. Meanwhile, millions of homeowners continue to owe more than their homes are worth — and there are myriad complaints that even responsible borrowers can't access lines of credit — leaving the housing market limping along even years after the other industries have recovered.

The disparity hasn't been overlooked by Realtors, homebuilders and others in the industry, who are lobbying Congress to intervene.

Barry Rutenberg, chairman of the NAHB, told Carper on Wednesday that federal regulations are too onerous and the banks too reluctant to lend. The combination, he said, is an impediment to homeownership.

"I sometimes call it a mortgage inquisition rather than a mortgage application," Rutenberg said.

Ron Phipps, former president of the National Association of Realtors, echoed those concerns. He said tougher barriers to credit — installed after the housing collapse to stem loans to irresponsible borrowers — have "disenfranchised a significant number of people who are creditworthy [and] would be good homeowners."

"When I started in the business, 80 percent of my work was on the search side, 20 percent closing the transaction," Phipps said. "Today, 60 percent of my time is spent after we have an agreement, and that's simply to shepherd through the process."

The industry leaders urged Carper to search for that sweet spot between vigilant underwriting — to prevent loans to those unable to pay them back — and overreaching, which can block loans to responsible borrowers.

Carper agreed, arguing that policymakers need "to use some common sense and make sure the pendulum finds the middle."

Still, the Delaware Democrat warned that the current political environment — particularly the rise of Tea Party Republicans who oppose large federal interventions in private markets — will make it difficult to move any reforms through Congress.

"You've got some people on Capitol Hill, some of the new people in the House, who don't think there's much of a role for government here at all," Carper said. "And you've got others at the other end of the spectrum, mostly in my party, who feel that the government should be very much involved."

Housing issues could surface as part of the congressional push to move comprehensive tax reform, as many lawmakers want to overhaul the tax code to lower marginal rates while eliminating a number of tax credits and deductions.

Such talk is stirring concern among homebuilders and Realtors, who warn that killing tax benefits for homeowners would further threaten the housing market and the economy at large.

Phipps said that 65 percent of those who benefit from the mortgage interest deduction earn less than $100,000 per year.

"It is a middle-class benefit," he said. "Those tools — and the assumption of homeownership — need to be in place going forward."

Much of the discussion will hinge on the future of Fannie Mae and Freddie Mac, the mortgage-finance giants that collapsed in 2008, forcing a taxpayer bailout to the tune of roughly $160 billion.

The debacle has led many lawmakers to call for the dismantling of Fannie and Freddie. But housing industry leaders — while conceding huge mistakes by those public-private entities in the lead-up to the collapse — warned that a stable market will require some federal role.

Rutenberg said "a federal backstop is essential" to keep credit flowing and revitalize the fickle housing market.

Carper noted that he and former Rep. Mike Castle (R-Del.) were able to come together in a bipartisan way to address some of the troubles plaguing the credit and housing markets. The mention of Castle, however, might not lend stakeholders much hope about the possibility of bipartisan cooperation in the near future.

Castle was defeated in his run for the Senate in 2010 by a Tea Party candidate who accused the nine-term Republican of working too closely with Democrats.