• Increasing the FHA loan limits to 100% of the conforming loan limit,
• Insuring zero down mortgages, and
• Insuring 40 year mortgages.

Also included in H.R. 4973 is a provision to phase in actuarial rates for subsidized vacation homes,second homes, and non-residential properties.  Currently, all properties prior to 1975 and are required to have flood insurance are subsidized with low premiums.  NAR has policy opposing a blanket imposition of higher insurance premiums on vacation homes and rental properties.On May 25, 2006, Senator Shelby (R-AL) introduced and held mark-up hearings in the Senate Banking, Housing, and Urban Affairs Committee for the Senate’s NFIP reformbill.  The Committee marked-up the bill by a 20-0 vote.6. Predatory & Subprime Lending. A number of bills have been introduced in the 109^th Congress that addresses the issue of predatory and subprime lending.  One of the bills that has been mentioned as a vehicle for this issue should Congress decide to address it is H.R. 1295, the Responsible Lending Act.  Introduced by Representatives Bob Ney (R-OH) and PaulKanjorski (D-PA), this bill, also known as the Ney-Kanjorski bill, has gained the support and backing of lenders throughout the country because of its preemption of state laws addressing subprime and predatory loans. 

At the C.A.R. September 2005 business meetings, C.A.R. took the following position: “that C.A.R. ‘OPPOSE,’ and seek the support of NAR to ‘OPPOSE,’ H.R. 1295 because it includes:

-- A federal preemption of California’s subprime lending law;
-- Federal requirements for a uniform mortgage broker license and
-- A hard numerical threshold on debt to income ratio for borrowers;”At NAR’s October business meetings, C.A.R. asked the Conventional Finance Committee to consider C.A.R.’s policy.  The Committee referred the motion to the NAR Subprime Lending Working Group for consideration. H.R. 1295 has 38 cosponsors and has been referred to the Subcommittee on Housing and Community Opportunity.7. IRS Ruling on Down Payment Assistance Organizations. On May 4, 2006 the IRS came down with a ruling that organizations that provide seller-funded downpaymentassistance to buyers cannot qualify as tax-exempt organizations.  Programs that provide downpayment assistance can still qualify for tax-exempt status, but the IRS ruling sets stronger rules for which programs can, and cannot qualify.  In order to qualify the programs must be properly structured and operated under the rules the IRS has set for not-for-profit organizations.  The main problem found was programs that factored in the amount of money the seller put into the program to determine how much the buyer would received.  These programs are blamed for increasing the cost of the housing as well as the risk of default for the buyer. 8. Alternative Mortgage Products & Proposed Federal Guidelines. In an effort to ensure that “lenders should not encourage or accept applications from borrowers who clearly cannot afford the dramatically increased payments that are likely to result atthe end” of an initial low-payment period for alternative mortgage products, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), Office of Thrift Supervision (OTS), and National Credit Union Administration (NCUA) have proposed guidelines on development, underwriting, compliance, and risk management for lenders who offer these products.  Areas that the agencies are requesting comment on are (again these are only to apply to nontraditional loans, not conventional loans):

• When should stated income be allowed for underwriting?
• Should futureincome be taken into consideration? And if so, how can this be done?  If this is the case should other future events be taken into consideration, such as higher interest rates?

• Appropriate borrower repayment analysis;
• Potential for collateral-dependent loans;
• Below market introductory rate;
• Lending to subprime borrowers; and
• Loans secured by non-owner-occupied properties.

• Maintaining performance measures and management reporting systems that provide warning of potential or increasing risks;
• Maintaining an allowance for loan and lease losses at a level appropriate for portfolio credit quality and conditions affecting collectibility;
• Maintaining capital levels that reflect nontraditional mortgage portfolio-characteristics and the effect of stressed economic conditions on collectibility; and
• Applying sound practices in valuing the mortgage-servicing rights ofnontraditional mortgages

• It would create a new independent regulator with broad authority to direct the activities of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks,
• It does not set statutory limits on the retained portfolio of the GSE, nor limit what may be held,
• It would create a streamlined approval process to bring new programs to the market quickly,
• It would require the new regulator to define mortgage origination and the secondary market, prohibiting the GSE from participating in activity not considered a secondary market activity (The bill does exempt existing automated underwriting, consumer education, and counseling programs from this definition), and
• It would create an affordable housing fund using 5% of the GSE’safter-tax profits.

• First, management’s accounting practices in virtually all of the areas that were reviewed were not consistent with GAAP (Generally Accepted Accounting Principles), and, in many instances, management was aware of the departures from GAAP.
• Second, except for one instance in connection with the 1998 financial statements, the report did not find evidence supporting the conclusion that management’s departures from GAAP were motivated by a desire to maximize bonuses in a given period.
• Third, employees who occupied critical accounting, financial reporting, and audit functions at the Company were either unqualified for their positions, did not understand their roles, or failed to carry out their roles properly.
• Fourth, the information that management provided to the Board of Directors with respect to accounting, financial reporting, and internal audit issues generally was incomplete and, at times, misleading.
• Fifth, the Company’s accounting systems were “grossly inadequate.”
• Finally, the report concluded that Howard, the Former CFO, and Leanne Spencer, the former Controller, were primarily responsible for adopting or implementing accounting practices that departed from GAAP, and that they put undue emphasis on avoiding earnings volatility and meeting EPS targets and growth expectations.