Senator Frantz Raises Concerns About Expanding State-Backed Mortgage Program [Connecticut Post]

May 7, 2013

Article as it appeared in the Connecticut Post on May 7, 2013

Bill would make more state-backed mortgages available

By Ken Dixon

HARTFORD — About 2,000 home buyers who are able to plunk down 20 percent of a purchase price could get Connecticut Housing Finance Authority mortgages under a bill approved Monday in the legislative Finance Committee.

Republicans who opposed the legislation warned that with the lingering recession in the state, the housing authority could be setting itself up for big losses. But majority Democrats said that CHFA’s AAA bond rating indicates that problems with mortgage defaults are unlikely, and that making mortgages more accessible will help the state’s economic recovery.

The bill would increase the maximum amount of uninsured mortgages that CHFA can make to $2.25 billion, from the current $1.5 billion. The agency currently holds about $3.8 billion in loans, of which about 26 percent are uninsured mortgages. Buyers who are able to put down 20 percent of a home’s purchase price are not required to buy mortgage insurance.

The bill was approved 36-14 and heads to the Senate floor.

Sen. L. Scott Frantz, R-Greenwich, ranking member of the Finance Committee, said CHFA could be asking for trouble.

“I do tend to worry about the full faith and credit of the state of Connecticut these days and that directly relates to what this bill is trying to do here,” said Frantz, a private banker. “I don’t think the state should be in the business of purchasing uninsured anything. I think there’s a more safe, a more secure way to do this.”

The recession retains a grip on the state, Sen. Michael A. McLachlan, R-Danbury, said

“I’m still sensing we have a foreclosure problem in Connecticut, but I’m not seeing that worry here in this discussion,” said McLachlan, who voted against the bill.

Rep. Patricia Widlitz, D-Guilford, co-chairman of the committee, noted that CHFA also has $640 million in their reserve fund, giving them more than adequate support to expand their loans.

“I don’t think it’s a risky thing at all and it does allow single-family homeowners to access (CHFA mortgages), when they have 20 percent down,” she said. “I think especially given the difficulty people are having in this economy, I think it’s a good way to expand affordability of housing and they do have the reserve funds to back this up.”

Sen. Antonietta Boucher, R-Wilton, who also opposed the legislation, said that whether it’s a good program is irrelevant.

“I am concerned that the state may be setting up a situation with a mortgage bubble, which could be very detrimental to the state,” she said.

But Rep. Larry Butler, D-Waterbury, a committee member who is also co-chairman of the legislative Housing Committee, said the legislation is important.

“I think this is one of the more significant bills we can take action on to address our economic recovery,” he said, adding that the last time lawmakers agreed to raise the CHFA cap was 2008. “This is an economic stimulus initiative. Those are people we want to encourage to get into the housing market.”