October 2012

Transaction and Regulatory Committee
Housing Committee
Federal Committee

This material is for discussion purposes only and has not been approved by the Transaction and Regulatory Committee, Housing Committee, Federal Committee, Executive Committee or the Board of Directors.

Issue:
Should C.A.R., in conjunction with NAR, “SUPPORT” legislation, regulations, and programs to assist renters who lost their homes through a distressed transaction (short sale, foreclosure, or deed-in-lieu) to qualify for a government backed mortgage prior to the conventional length of time if they lost their home due to circumstances beyond their control and/or did not do a strategic default.

Action: Required
Policy direction is requested at this time so the association may respond to proposed legislation.

Options:

1. Take a “SUPPORT” position

2. Take an “OPPOSE” position

3. Take another position

4. Take no position

Background:
On March 8, 2012, Congressman Joseph Heck (R-NV) introduced H.R. 4172, the Second Chance at Homeownership Act of 2012.  The legislation, would create within FHA a Second Chance at Homeownership Program, which would be intended to offer insured and safe loans to individuals who had been foreclosed upon.  Specifically, the legislation would require participants: 

 • Not have owned a home after January 1, 2011,
 • Not been delinquent on rent for the previous 12 months,
 • Not have done a strategic default in the past 10 years,
 • Receive a 30-year fixed rate loan,
 • Put a five-percent down payment, and
 • Meet other requirements.

While some former homeowners chose to do a strategic default, many lost their homes due to circumstances beyond their control.  Such circumstances include job loss, medical hardship, or other reasons.  Historically, when a homeowner goes through a foreclosure or distressed transaction it may take as long as seven-years before Fannie Mae, Freddie Mac or FHA will offer a mortgage loan to them.  However, in an attempt to assist past homeowners impacted by the recession, both Fannie Mae and Freddie Mac have come out with guidelines that would allow homeowners who went through a distressed transaction due to no fault of their own to receive a loan as early as four-years following such event. 

Potential problems with some of these programs are that while Fannie and Freddie will offer a loan to these individuals, it does not mean the negative effect of the distressed transaction has been removed from their credit record.  This may prevent them from qualifying for the loan.

C.A.R. Policy:
C.A.R. has historically supported proposals that will ease the availability of credit and loan choices for individuals who are qualified to receive a mortgage. 

NAR Policy:
NAR has policy supporting H.R. 4172.

Should C.A.R., in conjunction with NAR, “SUPPORT” legislation, regulations, and programs to assist renters who lost their homes through a distressed transaction (short sale, foreclosure, or deed-in-lieu) to qualify for a government backed mortgage prior to the conventional length of time if they lost their home due to circumstances beyond their control and/or did not do a strategic default.