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Help for new homebuyers a good idea

• Published February 13, 2009

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One sure-fire way to help boost the economy is to get more first-time homebuyers into the market. The key, of course, is to ensure that they are well screened, have their financial house in order and are able to meet their monthly mortgage obligations.

To that end, state lawmakers have been asked to boost the debt limit of the Housing Finance Commission from $5 billion to $7 billion so the state-created entity can help more first-time homebuyers get into the housing market. It's the right thing to do, in large part because it's not a financial hit to the state treasury.

The HFC, created by the Legislature in 1983, is not a state agency because it does not receive or lend state funds. The commission simply acts as the conduit for federal loans for housing, nonprofit facilities, and beginning farmers and ranchers. As noted by a staff report in the House of Representatives, the commission "issues both tax-exempt and taxable bonds to provide below-market-rate financing to nonprofit and for-profit housing developers who set aside a certain percentage of their units for low-income individuals and families." The commission also issues tax-exempt bonds for nonhousing nonprofit facilities and to get new farmers and ranchers started.

The finance commission has a solid record. At the end of January, the commission had financed 61,291 housing units and provided 40,621 loans. The default rate has hovered near 0.5 percent, according to Kim Herman, executive director. In December, with the economy worsening and more people losing their jobs, the commission's default rate climbed to 1 percent, but that's still far better than the statewide average of 4 percent, Herman notes.

When created in 1983, the HFC's statutory debt limit — the maximum outstanding debt — was $1 billion. The Legislature has raised the limit on four separate occasions — including raising it to $5 billion last year. Current debt is about $4 billion, so the commission is asking for the bump to $7 billion.

Joining Herman in testifying in support of the increase were Donald Burton of Washington Mortgage Lenders, Nick Federici of Washington Low Income Housing Alliance and Phil Harlan of the Washington Association of Realtors.

They said bringing more first-time homebuyers into the market helps stimulate the economy as sellers purchase more-expensive homes.

Supporters of the higher debt limit also note the funding authorization will allow them to leverage money from the Housing Trust Fund, Seattle levy funds, and other public and private funds used to finance affordable housing.

According to Herman, the commission's down payment program helps about 1,000 to 1,400 first-time buyers annually. By raising the debt ceiling, the commission hopes to serve 6,000 to 8,000 first-time buyers a year.

The average down payment loan to first-time buyers is $5,800, but they can borrow up to $10,000 based on their needs, Herman said. One requirement for participants is that they take a five-hour class on buying a first home.

Herman acknowledged that borrowing up to $10,000 for a down payment might add an additional $45 a month to an overall mortgage payment, but it speeds the process of getting into a new home, he said.

Over a two-year period with the higher debt limit, the commission could put 12,000 residents into new homes, create 8,500 jobs, generate $130 million in tax revenue and boost wages in Washington by $340 million.

That's an economic stimulus proposal that state lawmakers should embrace.