Housing Keeps Low Profile In Denver

Aftermath Of Mortgage Crisis Raises Concerns Of What Political Clout Fannie And Freddie May Have

by Bill Swindell

Tuesday, Aug. 26, 2008


The confab that housing-industry groups are slated to hold tonight at the Grand Hyatt Hotel should be a celebration for a sector that had successfully fought for passage of the most significant homebuyer and mortgage legislation in a generation.

But the mood will be subdued for the groups holding court. With expected Democratic presidential nominee Sen. Barack Obama of Illinois railing against the influence of lobbyists, the specter of K Street influence out in force in the Mile High City is as welcome here as a meeting of the Oakland Raiders fan club.

Additionally, some groups in the mortgage and homebuilding business have had their members downsize or go out of business, forcing them to rein in costs.

Finally, critics hold some of these groups as a key factor in the collapse of the mortgage market by pushing too many Americans into homes they could not afford, only to be rescued by the federal government in a bid to help prop up a sector that represents about 10 percent of the gross domestic product.

"Hindsight being 20/20, I would have pulled the plug on it," confided one financial services lobbyist of his association's involvement at both conventions.

Example A is Fannie Mae and Freddie Mac. The two mortgage-finance giants were supposed to sponsor the Denver housing event, along with one for the GOP in the Twin Cities, along with groups such as the National Association of Home Builders, the National Association of Realtors and the Independent Community Bankers of America.

But Fannie and Freddie pulled out last month after they came under mounting criticism from some lawmakers who protested that the housing package would open up an unlimited line of Treasury credit for the two to help calm fears that they were undercapitalized.

Further adding insult, Sen. Jim DeMint, R-S.C., made an unsuccessful last-minute attempt to attach to the bill his amendment to ban Fannie or Freddie from providing political contributions or lobbying.

"It wasn't a hard or fast decision. As a result of current market conditions and financial considerations, we have decided to withdraw from participating at both conventions," said Doug Duvall, Freddie Mac spokesman. The two said they would fulfill their financial obligations to the conventions even though they pulled out.

Even with such skittishness, the real estate industry still plays a major role in political giving, shuttling $90 million to federal candidates this campaign cycle, ranking fourth among all sectors, according to the Center for Responsive Politics. Contributions run evenly on a percentage basis to both parties.

Still, there is some pullback. Fannie and Freddie have both scaled back their lobbying and giving efforts compared to earlier this decade when the two significantly ramped up congressional outreach just as accounting scandals emerged at both firms, which are chartered by the federal government but publicly traded.

Officials at both companies privately grumble that perceptions of their influence are based more on the past, not their current legislative and political outreach.

Freddie and its employees have given $449,167 so far this year, which is considerably down from $4.1 million in 2002. Fannie and its employees have contributed $963,700, but the firm has curtailed its lobbying spending to just less than $3 million so far this year, compared to the $10 million it spent annually in 2005 and 2006.

Resistance is not only political but also financial. The Mortgage Bankers Association's membership declined from 3,000 to 2,500 in the last 18 months as a result of the downturn in the housing market, where many lenders downsized and some were forced out of business, such as Countrywide Financial Corp., which was bought by Bank of America.

"We are going to both of them. We will be meeting with all the usual contacts we have. We will have a relatively low-profile given the fact budgets are tight, the new [lobbying] rules are hard to define and hard to understand," said Erick Gustafson, senior vice president for legislative and political affairs for the MBA.

The NAHB also felt the frustration as it members, especially its big builders, faced a glut of unsold homes and were forced to pare payrolls. The group took a drastic step earlier this year to withhold campaign contributions from federal candidates until Congress was on the verge of passing the housing measure with some tax breaks to spur homebuying -- a move that was criticized by some in the lobbying community.

Since resuming its donations, the group has given $451,000 to candidates for an overall total of $1.3 million, with 47 percent going toward Democrats.

Even with the downturn, at least one perennial big-giver is not slowing down. The National Association of Realtors ranks second among all PACs this cycle in terms of giving, with $2.3 million going to candidates, and 59 percent to Democrats.

"We're coming off a pretty couple of rough housing years, but our members are still giving. We are on target to exceed last year in donations," said Mary Trupo, spokeswoman for the Realtors. "They continue to give regardless of their circumstances because they know what the impact is of legislation."

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