Federal Committee
Hyatt Grand Champions
Indian Wells Ballroom, Ironwood/Joshua/
Kachina Rooms – Conference Center
Indian Wells, CA
Thursday, February 4, 2010
3 p.m. – 5 p.m.

Presiding:
Kathy Mehringer, Chair
Heath Hilgenberg, Vice-Chair & NAR Committee Representative
Kevin Brown, Executive Liaison

Staff:
Matt Roberts, Federal Government Affairs Manager

I. Welcome and Opening Comments – Kathy Mehringer

Federal Committee Mission Statement
The mission of the committee is to monitor federal legislative and regulatory proposals and actions as they relate to the California's real estate industry and real estate market. It also reviews recommendations of C.A.R.'s four policy committees: Transaction and Regulatory, Land Use and Environmental, Taxation and Government Finance, and Housing to evaluate and coordinate Association policy on federal issues and proposals that have significant implications for the industry in California. The committee assists in advocacy of recommended policies to appropriate N.A.R. Committees and the public, and coordinates California directors' delegation efforts at N.A.R. meetings. It reports to the Executive Committee and the Board of Directors (January 2010)

II. Survey of the Legislative Climate

A. Member Mobilization Report – DeAnn Kerr

B. Second Session of 111th Congress, North v. South – Oral Report from Staff

III. Reports by Committees and Task Forces

A. Transaction & Regulatory Committee – Liz Fitzgerald, Chair

B. Housing Committee – LeFrancis Arnold, Chair
Please See (GSE IBP) (Discrimination IBP)

C. Taxation & Government Finance Committee – Dennis Badagliacco, Chair

D. Land Use & Environmental Committee – Phyllis Carmichael, Chair

IV. Federal First Impression Issues

A. Health Care
The House and Senate have now passed healthcare reform, but their two bills differ greatly. Below is a short description of some of the provision in the House and Senate healthcare bills:

House
For Agents:
• There is an individual coverage mandate.
• There are exceptions to this, including if you make less than $9,350.
• A tax credit will be offered to eligible individuals, (NAR believes over half of REALTORS® will qualify)
• The tax credit is grade by income levels but should top out around $43K.
• The annual penalty for not getting coverage is 2.5% of AGI, capped at the “average national health insurance premium”.

For Brokers
• Businesses with payrolls less than $500,000 would not be required to offer health insurance.
• Businesses required to but not offering health insurance would be fined 8% of their payroll.
• Businesses with less than 25 employees are eligible for a tax credit to offset their cost.  The tax credit increases with the less number of employees.
• The tax credit is also based on the average salary of the employees capped at $80K, but an owner whose is paid wages should not be counted towards this number.

Senate
For Agents:
• There is an individual coverage mandate.
• There are exceptions to this, including the premium exceeds 9 percent of their income.
• A tax credit will be offered to eligible individuals, (NAR believes over half of REALTORS® will qualify)
• The tax credit is grade by income levels but should top out around $43K.
• The annual penalty for not getting coverage is $750 a year or 2% of their income capped at $1,500 for couples, and $2,200 for families.

For Brokers
• Businesses with less than 50 employees are not mandated to offer coverage to their employees.
• Businesses with less than 25 employees are eligible for a tax credit to offset their cost.  The tax credit increases with the less number of employees.
• The tax credit is also based on the average salary of the employees capped at $50K, but an owner whose is paid wages should not be counted towards this number.

State Mandates
• If the state requires more coverage than what is in the bill, the state must cover the difference in the tax credit due to an increase insurance premium.  So if a premium for minimal coverage under this bill was $100 and the tax credit was 50% then the tax credit would be $50.  But if the premium was $110 for minimum coverage in California because California requires more coverage than what is in the bill, the feds would still cover 50% of the $100 ($50) and California would have to cover 50% of the extra $10 ($5 tax credit to come from California).

The House and Senate now must reconcile the differences between the bills and then pass final identical bills.  Normally this is done through a conference, but out of fears and promises of delays and numerous amendments, the Democratic leadership has decided to forgo a conference

V. Continued Federal Efforts to Stabilize the Housing Market

Starting in late 2008 and early 2009, Congress and federal regulators have taken numerous actions to stabilize the nation’s housing market.  These actions include:

• The continued conservatorship of Fannie Mae and Freddie Mac
• Treasury’s increase in their cap of how much financial assistance they may provide to the GSEs
• The Federal Reserve’s $1.25 trillion program to purchase mortgage backed securities (MBS)
• The Making Home Affordable program, which includes the Home Affordable Modification Program (HAMP) and the Home Affordable Foreclosure Alternative Program (HAFA)

VI. C.A.R. Federal Priorities & Issues

A. GSE
The GSEs Fannie Mae and Freddie Mac continue to play a vital role in the recovery of California’s and the nation’s housing market by buying or guaranteeing approximately 60 to 70 percent of the mortgages originated; however, they remain under conservatorship and in spite of this large role in stabilizing the housing market their future remains uncertain.  Congress will begin debating these entities’ futures in 2010.

B. FHA Solvency
In response to a continuously dwindling reserve, the FHA in late November and early December announced proposed steps it would take to shore up its financial well being.  These include:

• Raising the cap on the annual insurance premium that the FHA can charge borrowers
• Setting a minimum credit score
• Raising the downpayment requirement
• Making lenders more accountable for loans that the agency insures and
• Limiting the amount of money sellers can provide for closing costs on a home

C. Real Estate Tax Provisions
As the government continues to face both an increasing budget deficit and a growing national debt, many inside the beltway will be looking for ways to raise revenue.  This will include discussions of changing or even eliminating many real estate related tax provisions.  While not every provision is likely to be touched, almost all will at a minimum be discussed and their merits debated.

D. Home Valuation Code of Conduct
Since the HVCC went into effect on May 1, 2009, consumers in California and across the country have seen the cost of appraisals go up, the quality of appraisals be questioned, and real estate transactions encountering greater delays

As part of H.R. 4173, the Wall Street Reform and Consumer Protection Act, there is a provision which would require the creation of a Negotiated Rulemaking Committee that would create requirements for appraisal independence no later than 60 days after enactment of the legislation.  These new rules would officially sunset the HVCC.  H.R. 4173 passed the House on December 11, 2009 by a vote of 223-202.  A Senate version of regulatory reform is still being considered by the Senate Banking, Housing, & Urban Affairs Committee and will now have the added issue of the upcoming retirement of the Committee Chair, Senator Dodd (D-CT).

E. VA Fees
At C.A.R.’s October business meetings in San Jose, C.A.R. took the position to support the elimination of the VA pest certification requirement and the making of all fees negotiable in VA loans.   With multiple offers being the norm in many places, many veterans are finding themselves at a disadvantage when negotiating for the purchase of a home and competing against loans that don’t require pest certification and allow for the negotiation of fees. 

C.A.R. staff has spoken directly with the VA on this issue and is in the process of drafting a comment letter. 

F. Energy & Climate Change
On June 26, 2009 the House passed H.R. 2454, the American Clean Energy and Security Act of 2009, by a vote of 219-212.

What the bill does is provide financial incentives, such as grants, loans, loan guarantees, and/or mortgage interest rate buy-downs, for property owners who voluntarily make energy efficiency improvements.  As these voluntary improvements would be incentivized by federal tax dollars, the energy efficiency of the property would require an audit before and after the improvement.

Similar legislation was introduced in the Senate Environment & Public Works Committee, chaired by Senator Boxer, S. 1733, the Clean Energy Jobs and American Power Act.  The bill quickly stalled when the Committee marked it up with no Republicans present. 

On December 7, 2009 the Environmental Protection Agency (EPA) announced their “Endangerment Finding” concerning green house gas (GHG) emissions.  The finding concluded that “…the current and projected concentrations of the six key well-mixed greenhouse gases…in the atmosphere threaten the public health and welfare of current and future generations.”  This would mean that if the EPA decided to regulate GHG emissions through the Clean Air Act (CAA) that emissions from real property would be included. 

The EPA is not required to use the CAA to regulate emissions and the EPA and administration appear to be using this option as a last resort to prod Congress to pass new energy and climate legislation. 

The House passed legislation, H.R. 2454, included a carve-out for real estate that stated real property emissions could not be regulated under the CAA.  The Senate legislation, S. 1733 currently does not include such language, partly because the bill was passed out of committee without any amendments. 

VII. Other Business

VIII. Adjournment