Indian Wells Ballroom Ironwood/Joshua/Kachina Rooms - Conference Center Hyatt Grand Champions Hotel Indian Wells, CA Thursday, January 19, 2012 3 p.m. – 5 p.m.
Presiding: Mark Peterson, Chair Darnella Barnes, Vice-Chair Terry Wunderlich, Vice-Chair Patricia Bouie-Hinds, Executive Liaison <Pending>, NAR Committee Representative
Staff: Matt Roberts, Federal Government Affairs Manager
I. Welcome and Opening Comments – Mark Peterson
II. Reports by Committees and Task Forces
A. Transaction & Regulatory Committee – Greg Galli, Chair
B. Housing Committee – John Torres, Chair
C. Taxation & Government Finance Committee – Ted Loring, Chair
D. Land Use & Environmental Committee – Shari Setser, Chair
III. Member Mobilization Report – DeAnn Kerr
IV. C.A.R. Federal Priorities in 112th Session
A. Reform of the Government Sponsored Enterprises On July 6, 2011, Representatives Gary Miller (R-CA) and Carolyn McCarthy (D-NY) introduced H.R. 2413, the Secondary Market Facility for Residential Mortgage Act of 2011. The Miller and McCarthy bill is a comprehensive secondary mortgage market reform bill that espouses many of C.A.R.’s and NAR's GSE principals and recommendations. C.A.R. is supportive of this bill because it maintains a government role within the secondary mortgage market, which is required to ensure the viability of long-term mortgage financing for consumers (e.g. 30-yr fixed-rate mortgages).
In addition to H.R. 2413, California Congressman John Campbell introduced H.R. 1859, the Housing Finance Reform Act of 2011, with Democratic member Gary Peters (D-MI). HR 1859 would also comprehensively reform the mortgage finance system, but would set up multiple private companies in the marketplace with the government offering a catastrophic guarantee of their securities.
Fannie Mae and Freddie Mac (Government Sponsored Enterprises or GSE) have now been under the conservatorship of the Federal Housing Finance Agency (FHFA) since September 2008. Reforming these mortgage giants, which guarantee or own roughly 50 percent of all outstanding mortgages, is a top priority for both sides of the isle.
B. Protecting Real Estate Tax Incentives While Congress failed in 2011 to act on any large tax reform or proposals that would overhaul the U.S. Tax Code, or eliminate and/or curtail real estate tax provisions; Congress will be facing in the coming years the expiration of the current income tax rates, other tax rates, implementation of other tax provisions, and a need to increase the debt ceiling. Important tax changes include (compiled by NAR): • Current income tax rates will go up, • Capital gains rate goes up to 20% from 15%, • Estate tax exclusion reverts to a $1 million exclusion from $5 million, • 3.8% tax on investment income—dividends, capital gains, interest, net rents—goes into effect, • An additional debt ceiling increase will be needed during the first quarter of 2013, • End of marriage penalty relief for people who do not itemize, • End of refundable child credit, • Dividends tax rate reverts to ordinary income treatment, • Mortgage cancellation relief expires, • Alternative Minimum Tax (AMT) sweeps in an additional 25 million taxpayers (mostly in states with high income and/or property tax rates or where taxpayers have large families), • 0.9% tax on earned income
C. “Mortgage Tax” Legislation recently signed into law by President Obama taxes housing to pay for the extension of the payroll tax, and maintain Medicare payments and unemployment benefits.
Despite REALTORS® strong opposition to the diversion of housing resources to pay for non-housing uses, increases in Guarantee Fees on Fannie/Freddie mortgages and premium charges for FHA loans are being used to pay for the extensions. These increases will translate into additional costs for homebuyers and will divert fees needed to minimize the loss exposure of the government-sponsored enterprises, investors, and ultimately, the taxpayer.
C.A.R. recently sent comments letters to the California Congressional Delegation expression opposition to this new law. Read the letter
D. Short Sales a. H.R. 1498 On April 12, 2011, Representatives Tom Rooney (R-FL) and Robert Andrews (D-NJ) introduced H.R. 1498, the "Prompt Decision for Qualification of Short Sale Act of 2011". This legislation makes it mandatory for mortgage servicers to reply to a short sale application within 45 days of submission. If the servicer fails to provide a decision to the short sale applicant within that time period, the application is deemed approved.
b. H.R. 3164 On October 12, 2011, California Congresswoman Susan Davis, along with Congresswoman Jackie Speier and Congressman Mike Honda introduced H.R. 3164, the “Short Sale Transparency Act of 2011.” The legislation would require when a short sale for a Fannie Mae or Freddie Mac property is denied based on the offer price not being sufficient, the GSE would have to inform the prospective buyer how much more is need to approve the transaction.
E. Government Sponsored Enterprises Loan Limits REALTORS® have successfully extended the current FHA and GSE loan limits on an annual basis since 2008. Congress again extended the FHA loan limits for two-years during the last session of Congress in 2011. However, unlike prior years when the loan limits for the both the FHA and the GSE were extended, Congress did not extend the loan limits Fannie Mae and Freddie Mac. This marks the first time that FHA loan limits have been above GSE loan limits.
C.A.R. will continue to ask that Congress recognize California as a “high-cost” state and be given loan limits on par with other high-cost areas such as Alaska, Hawaii, Guam and the U.S. Virgin Islands.
F. Disposition of the Federal Housing Administration’s and Government Sponsored Enterprises’ REOs In August 2010, the Federal Housing Finance Agency (FHFA), the U.S. Department of the Treasury, and the Department of Housing and Urban Development (HUD) published a Request For Information (RFI), seeking input on new options for selling single-family real estate owned (REO) properties held by Fannie Mae and Freddie Mac (GSEs), and the Federal Housing Administration (FHA).
The FHFA, Treasury and HUD requested input on what was essentially a proposal to expedite the disposition of the REO inventory currently on their books, as well as their expected future REOs. The RFI was extremely vague on any details and was asking for the industry and interested parties to submit what they believe the bulk sale process should look like.
Recently, the regulatory agencies released a response to the comments submitted to the original RFI. While still lacking in many details, it is now clear a pilot program will be implemented within the coming months, possibly by the time of the C.A.R. Winter Business Meetings. While the response lacked details of what the pilot program will look like, it does appear that a rental requirement will be part of the program.
G. Easing the Federal Housing Administration’s Condo Rules In July of 2011, the FHA released
Mortgagee Letter 2011-22: Condominium Approval Process for Single Family Housing - Consolidation and Update of Approval Requirements. The Mortgagee Letter was released along with an
implementation schedule and the
Project Approval and Processing Guide in an effort to clarify, expand, consolidate and update existing guidance. The new guidance provides increased flexibility for FHA to address individual circumstances so that the agency can be more effective at the neighborhood level.
In the new guidance, FHA made permanent the temporary measures from Mortgagee Letter 2011-03. The concentration limit is 50 percent but Homeownership Centers (HOC) may grant exceptions to go beyond 50 percent. FHA requires that 50 percent of units be owner-occupied but FHA will reduce this to 30 percent for new construction. At least 30 percent of units must be sold prior to endorsement of any mortgage by FHA. This pre-sale requirement is not applicable to existing projects or non-gut rehabilitation projects.
One of the more notable changes is in the calculation of delinquent homeownership association (HOA) dues. Previously, FHA permitted no more than 15 percent of units to be in arrears but this did not include bank-owned foreclosures. The new guidance states that the calculation includes all units - occupied, investor, bank-owned, and vacant). FHA did not increase the maximum permitted investor ownership of units or commercial space requirements.
H. Easing the Veteran Affairs Home Loan Guarantee Program Rules While the VA Home Loan Guarantee Program has seen an increase in its usage over the past years, there are still hurdles that place it at a disadvantage to other loan programs. These disadvantages can make VA buyers a less attractive alternative when they are competing in multiple bidding situations. These disadvantages include pest inspection requirements and appraisal difficulties.