Marquis Ballroom Northeast/Northwest Marriott Hotel Anaheim, CA Thursday, October 7, 2010 3:30 p.m. – 5:15 p.m.
Presiding: Kathy Mehringer, Chair Heath Hilgenberg: Vice-Chair, NAR Liaison Mike Clancy, Vice-Chair Kevin Brown, Executive Liaison
Staff: Matt Roberts, Federal Government Affairs Manager
I. Welcome and Opening Comments – Kathy Mehringer
II. Member Mobilization - DeAnn Kerr
A. NAR Broker Involvement Program - Bob McMillan, Member Mobilization Liaison
III. Reports by Committees and Task Forces
A. Transaction & Regulatory Committee – Liz Fitzgerald, Chair 1. First-Look Program IBP
B. Housing Committee – LeFrancis Arnold, Chair 1. National Down Payment Assistance Program IBP 2. FHA Working Group on Condominium Loan Approval IBP
C. Taxation & Government Finance Committee – Dennis Badagliacco, Chair 1. Property Assessed Clean Energy (PACE) IBP
D. Land Use & Environmental Committee – Phyllis Carmichael, Chair
IV. Special Guest Linda Goold—National Association of REALTORS® Tax Counsel
V. C.A.R. Federal Priorities & 111th Session of Congress Recap
A. Government Sponsored Enterprises (GSEs) Congress held a number of hearings on the fate of Fannie Mae and Freddie Mac during the 111th Session of Congress; however, in the end it was simply too big of an issue to tackle for the Democrats while they tried to move other priorities such as health care, Wall Street reform and climate change. Both Congress and the President seem content on punting this issue to the 112th Session.
Because no action was taken by Congress, the GSEs conservator the Federal Housing Finance Agency (FHFA) for the most part maintained the status-quo for the two mortgage giants. The FHFA even went so far as to hold back on a planned portfolio reduction which assisted the GSEs in meeting the capital demands of the mortgage market.
B. GSE & Federal Housing Administration (FHA) Loan Limits While supporters of higher loan limits made multiple efforts to pass legislation that would have made the current limits permanent, they were unsuccessful. Hurdles they faced in the 111th Session included a majority of Republicans concerned with any extension and/or expansion of the government’s involvement in the housing market. Additionally, there was reluctance by some members on both sides of the isle to address this issue separately from a larger GSE reform bill.
While Congress has not addressed the expiring high-cost loan limits at the time of this posting, Congress is expected to pass a one-year extension of the current loan limits for both the GSEs and FHA.
C. Federal Housing Administration (FHA) Solvency Congress and the FHA took drastic action in 2010 to strengthen the financial position of the FHA following the declining economic outlook of the program at the end of last year when delinquencies were on the rise and the FHA’s reserves had fallen below their Congressionally mandated minimum.
These steps included providing the FHA with the ability to increase both the upfront and the annual mortgage insurance premiums, increasing the downpayment for borrowers with sub 580 FICO scores to 10 percent, hold lenders and mortgage brokers more accountable for poorly performing loans and other steps.
Because the FHA is backed by the full faith and credit of the U.S. taxpayer, Congress will continue to hold hearings and propose legislation impacting the FHA until the program is back on solid financial ground.
D. Real Estate Tax Provisions To date, Congress has done a spectacular and irresponsible job of punting on major tax issues facing the real estate market and the country. This includes:
• The estate tax which expired at the end of 2009, but will revert to 2001 tax levels beginning in 2011, and • The impending expiration of the Bush income and investment tax rates at the end of this year, which will include increasing the capital gains tax rate.
Eventually, Congress will have to address these issues and the ballooning national debt. When they do, all tax provisions in the book for all industries are likely to be reexamined. It may be difficult for the Administration to make the tough choices necessary for real tax reform going into an election cycle, so we may not see this issue addressed until after 2012.
E. National Flood Insurance Program (NFIP) Congress has extended funding for the bankrupt National Flood Insurance Program until September 30, 2011. During the 111th Session of Congress, funding for this program expired on multiple occasions delaying the closing of many real estate transactions with properties located in flood zones.
While efforts were made to pass a permanent NFIP reform bill, these efforts fell short. It is hoped that the one-year extension will provide Congress with the time needed to pass permanent reform and avoid the need for additional temporary funding stop-gaps.
F. Home Valuation Code of Conduct (HVCC) Included in the Dodd-Frank Wall Street Reform bill is a provision that requires regulators to issue new appraisal guidelines. When these guidelines are published the HVCC will officially sunset. While REALTORS® have asked for the elimination of the HVCC, it is doubtful that the new guidelines will make any substantial changes to the current appraisal system the HVCC created. Specifically the significant increase in the use of appraisal management companies.
G. Energy & Climate Change The 111th Session of Congress wrestled with the issue of climate change for almost the full two-year term. While the House was successful at passing a large climate change bill, known as the cap-and-trade bill, the Senate was never able to draft a bill that could garner the 60 votes needed to break a filibuster.
Smaller efforts at passing legislation that would create financial incentives and a loan program for property owners to voluntarily retrofit their properties and make their homes energy efficient have gained traction in light of the realization that a larger bill will not be passed. It is unclear if Congress will be able to get these bills across the finish line, but there is a chance.
H. Federal Housing Adminstration (FHA) 90-Day Flipping Rule C.A.R. worked with NAR to have the FHA create an exception to the FHA 90-day flipping rule. Earlier this year the FHA issued that exception.
I. Home Affordable Foreclosure Alternatives (HAFA) After years of frustration with the lending industry over endless variations in different lenders’ and servicers’ policies and paperwork for short sales, the federal government stepped in with the Home Affordable Foreclosure Alternatives program. Designed to standardize the short sale process, the Treasury created a HAFA program for Fannie Mae, Freddie Mac and non-agency loans.
While there are some early reports of success with the program, there are still many problems in the distressed transaction market that will need to be addressed.