"There is not question that the economy took a serious downturn following the tragic events of September 11th, and we expect overall fourth quarter results to be rather dismal," said Lyle Gramley, MBA consulting economist. Gramley added, "The economy is clearly in a recession at the present time. However, we are very encouraged by the fiscal and monetary policy initiatives recently implemented by the administration, Congress and the Federal Reserve." MBA points to lower mortgage interest rates as a key component keeping the US economy afloat. MBA also has taken aim at the stimulus package being proposed in Washington right now. The association noted that the tax cuts and spending increases might add up to about $75 billion. That, combined with permanent tax cuts passed earlier, the $40 billion in additional budget outlays for reconstruction and increased security, would add up to a stimulus package amounting to about 2% of Gross Domestic Product, a sizable amount, MBA experts said.

The association also laid out public policy agenda related to the mortgage finance industry, which it believes would help the economy going forward. Many of the proposals relate to home ownership and residential mortgage financing. However, MBA has several proposals related to the commercial side of the business.

Among its public policy ideas is to increase development of affordable rental housing to spur economic development by:

• Eliminating the multifamily housing insurance premium increase that adds unnecessary costs to building affordable rental units
• Increase multifamily loan limits to stimulate the production of new affordable housing in high cost areas
• Invest in a new production program that partners FHA mortgage insurance with an interest rate subsidy to encourage private production of rental housing for working families

These ideas, MBA said, could generate 153,000 affordable rental units, create 54,590 new jobs and generate $5 billion, including $309 million in new investments, over a five-year period.MBA also laid out ideas about how to spur increased commercial investment by:

• Shortening the recovery period for leasehold improvements to ten years or less
• Make the recent reforms to the tax treatment of brownfields cleanup costs permanent
• The capital gains tax rate, on gains associated with depreciation recapture for real estate, should be lowered so it is the same as the rate for all other assets

The association said these ideas could help spur $5.3 billion of new investment over the next five years.