mortgage-bankers

By Dawn Kopecki Oct. 20 (Bloomberg) — The $8,000 homebuyer tax-credit should be extended beyond next month’s expiration and expanded to more borrowers to buoy housing sales, Senate Banking Committee Chairman Christopher Dodd said. Dodd, a Connecticut Democrat, and Senator Johnny Isakson , a Georgia Republican and former Realtor, urged colleagues to extend the credit through next June and to expand it to all couples earning $300,000 or less. The Obama administration’s tax credit for first-time buyers helped stabilize sales this year after the worst housing slump since the Great Depression, Realtors and mortgage bankers said. Lawmakers are struggling to find ways to fuel real estate demand amid rising unemployment and a jump in foreclosures that may add to inventories of unsold homes. “The work of stabilizing the housing market won’t be done” when the credit expires next month, Dodd said at a hearing of his panel today. “We still need to use every tool at our disposal to fix this problem.” Purchases of existing homes in August were up 3.4 percent compared with a year earlier, the National Association of Realtors said. New home sales were up 30 percent from January’s record low, government figures show. The Washington-based Mortgage Bankers Association projects that foreclosure rates already at a record will climb through late next year, peaking only after the U.S. unemployment rate reaches 10.2 percent in the second quarter. An estimated 3.9 million houses for sale, and as many more homes with mortgage payments that are at least 90 days past due make up a “shadow” foreclosure inventory, according to Mortgage Bankers data. $17 billion Cost “With numbers of that magnitude, it is clear that recovery in the housing market will occur when the number of jobs in the economy begins to expand, thus creating the economic demand needed to absorb some of this excess inventory,” Mortgage Bankers Chief Economist Jay Brinkmann told the panel in written testimony. The Mortgage Bankers, National Association of Realtors and National Association of Homebuilders all backed the extension, saying it has helped home sales. About 2 million people this year have used the credit, which expires Nov. 30 and is available to individuals who earn less than $75,000, or $150,000 for couples. Isakson estimates that extending it through June 30 and expanding to more borrowers will cost the federal government less than $17 billion. Inflated Home Prices Alabama Senator Richard Shelby , the committee’s ranking Republican, cautioned lawmakers against continuing policies that artificially inflated home prices and exacerbated the run-up in real estate values that caused the bubble. “We must recognize and understand that much of the decrease in home values was simply a deflation of the bubble created in part by our own housing policies,” Shelby said. “If we don’t do something, we’re damned and if we do something, we’re damned.” Shaun Donovan, secretary of the Housing and Urban Development Department, called the tax credit a “positive force” in the housing market. “The end of the tax credit would have some negative affect in the market,” he said. He said he doesn’t think it would cause a “catastrophic decline” in home prices. To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net .