Equal Opportunity – Cultural Diversity Committee Regency Room F Hyatt Regency Hotel Sacramento, California Thursday, June 8, 2006 1:00 PM– 3:00 PMPresiding: Kelvin Wong, Chairperson Robert Aldana, Vice Chairperson Armida Del Campo, Vice Chairperson Heidi Rickerd-Rizzo, Executive Committee Liaison Allen Chiang, NAR Committee RepresentativeStaff Coordinators: Carmen Petrinca, Membership Development Manager Jeff Keller, Public Policy Analyst
I. Call to Order/Introductions - Kelvin Wong
II. Legal Update- Gov Hutchinson, C.A.R. Assistant General Counsel/Staff VP
III. Political Update - Jeff Keller
A. HUD Update
-HUD May Seek Higher FHA Limit: Earlier this year, at the National Association of Homebuilders annual meeting, HUD Assistant Secretary Charles Williams made the first bold statement by a HUD official concerning FHA loan limits. For the first time, he called on organizations to lobby Congress to increase the FHA loan ceiling as well as set a higher national ceiling. He noted that the current ceiling does not represent the current costs of building materials and is not high enough for areas such as California, Florida, and New York. They argued that “the artificially low loan caps keep the FHA out of the mainstream home building market”. The current FHA loan limit for 2006 is $417,000 for a single-family home.
- Internet-based Real Estate and FHA: HUD is continuing to review complaints that some Internet-based real estate postings might be in violation of the federal Fair Housing Act (FHA). Additionally, there are talks about introducing legislation that wouldhelp clarify and expand the FHA guidelines to internet websites that promote real estate advertising. The FHA was enacted before the arrival of the internet, so this is new territory for HUD. FHA does not allow for any published notice to indicate preference based on race, color, religion, sex, handicap, family status, or national origin. Some internet listing sights, such as Homestore.com currently run software that checks their listings for any violations. Others, such as Craigslist, do not perform these checks.
- Downpayment Gift Programs Stripped of their Tax-Exempt Status: On May 4, 2006 the IRS came down with a ruling that organizations that provide seller-funded downpayment assistance 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. The main problem found was programs that factored in the amount of money the seller put into the program to determine how muchthe buyer would received. These programs are blamed for increasing the cost of the housing as well as the risk of default for the buyer.B. Minority Foreclosure Rates Increasing:
In February 2006, a New York Times article reported that the rise in foreclosure rates is hitting minorities hard, especially in black homeownership. While race is not available when looking at foreclosure documents, the New York Times reports that studies which compare foreclosure rates with the racial makeup of neighborhoods is showing the increase in minority foreclosures. Black homeownership fell in 2005 to 48.8%, down from 49.7% in 2004. The article also predicts thatminority foreclosure rates can rise even higher in the future due to rising interest rates and the fact that minorities carry a higher percentage of subprime loans.C. GSE Oversight & High-Cost Conforming Loan Limits:
Recently Congress has reinvigorated its attempt to write Government Sponsored Enterprise (GSE) regulatory reform legislation amid continuing scrutiny of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Proposed GSE reform legislation in the House was used as a vehicle by California legislators, Gary Miller and Brad Sherman, to attach a high-cost conforming loan limit amendment. This amendment would allow a newly created independent GSE regulator to set high-cost conforming loan limits by an area’s median home price, up to 150% of the national conforming loan limit. This would increase the conforming loan limit to $625,500 in California’s highest-cost areas.Legislation, H.R. 1461 passed the House of Representatives on October 26, 2005 by a 331-90 bipartisan vote. An amendment by Representative Garrett (R-NJ) to strip the high-cost conforming loan limit provision from the House bill was easily defeated. In addition to the high-cost provision, H.R. 1461 would reform the GSE in the following way:
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 marketquickly,
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’s after-tax profits.
S. 190, the Senate GSE reform bill, was reported by the Senate Banking Committee along a party line vote, and does not include the high-cost conforming loan limit provision. After the Senate Banking Committee reported S. 190 back in July, the Chairman of the Committee,Senator Shelby (R-AL), stated his hesitation to move S. 190 forward without amendments to garner more bipartisan support. Recently, Senator Shelby stated that GSE reform would be addressed in the Senate prior to the end of this year. D. Freddie Mac and the Mortgage Bankers Association Create "Welcome Home" Program:
The “Welcome Home” program offers free training for bilingual service men and women in an attempt to increase the number of Spanish-speaking professionals in the mortgage industry. Currently approximately 250 men and women, and their families, in the military have enrolled in the program.
The program is an internet-based program designed tohelp members of the armed forces in their post-service careers in numerous phases of residential and commercial lending. After completing all required courses and receiving a professional certificate, the program attempts to find job placement for the servicemen after their military duty is completed.
The “Welcome Home” program is open to all bilingual active duty personnel, reservists and National Guard personnel, and veterans who have receivedan honorable discharge.E. Section 8 Housing:
In April 2005, S. 771 and HR1999 were introduced. Both bills aim to assist low-income families obtain affordable housing by converting the existing section 8housing choice voucher program into a flexible voucher program. These bills would offer block grant vouchers to states for Section 8 public housing and also reward housing authorities for “graduating” tenets from the program. The administration supports this move and recently agreed to keep funding at current levels, instead of the proposed cutting of funding, if these bills are successful. Currently S. 771 has no cosponsors and is in the Committee on Banking, Housing, and Urban Affairs. HR 1999 has 6 cosponsors and is in the House Committee on Financial Services.
Many REALTORS® are involved in the ownership and management of Section 8 housing. There are some concerns that these block grants would add an unnecessary burden to state officials to determine which programs have the most need and also monitor to see if programs are “graduating” tenets. In June of 2004, C.A.R took the follow stance, “That C.A.R., in conjunction with NAR, oppose changes to the section 8 voucher program that create(s) block grants to Public Housing Authorities (PHA).
F. FHA Low/No Downpayment:There are movesto assist certain professional and first time home buyers to acquire a single-family FHA loan without needing a downpayment, or with a large reduction in downpayment. The applicants would still have to meet FHA criteria, but their downpayment and closing costs would be financed into the loan. Some drawbacks are that there would be a higher upfront premium as well as a ¼% higher interest rate than traditional loans.
There are currently two bills in the House dealing concerning Low/No FHA downpayments. HR 3043 was introduced by Rep. Tiberi [R-OH] on June 23, 2005. It currently has 1 cosponsor and is in the Committee on Financial Services. HR 3043 would create a pilot program, which would limit zero-down FHA loans to no more than 10% of the total FHA portfolio. HR 3556 was introduced by Rep. Harris [R-FL] on July 28, 2005. It currently has nocosponsors and is in the Committee on Financial Services. HR 3556 would reduce the FHA downpayment to 1% for teachers, firefighters, police officers, and other public safety workers whom purchase their homes within the communities theyserve.G. Title Insurance Investigations:
In January 2006 Representative Oxley requested that the Government Accounting Office (GAO) look into the title insurance industry. There have been numerous stateinvestigations that have found title insurance companies giving kickbacks for referrals from developers, lenders, and real estate agents. The report did not find that there was a general sense of corruption in the industry. However, it did find that consumers lack the knowledge to comparison shop for title insurance. Therefore title agents promote their products towards the real estate and mortgage agents, relying on them for business. Additionally, while the GAO noted that numerous regulators oversee the title industry, “the extent of involvement and coordination among these entities is not clear”.H. Agents Still Steer Homebuyers Based on Race:
Between 2003 and mid-2005, the National Fair Housing Alliance conducting a study in 12 metropolitan areas using teams of “paired testers”. Each team had one Caucasian couple and either one African American coupleor one Latino couple. In each team, the Latino or African American couple was assigned slightly superior financial qualifications: higher incomes, could afford a higher downpayment, longer employment tenure, and could afford costlier houses. They tested 73 real estate firms in Washington, D.C., New York, Chicago, Philadelphia, San Antonio, Detroit, Atlanta, Austin, Birmingham, Dayton, Mobile, and Pittsburgh.
The results of the tests showed that both blatantand subtle steering by the real estate agents was “the norm” in many of these offices. The study found that steering occurred in 87% of the incidents. The types of steering and discrimination that were exhibited included: Requesting that the minority groups get pre-approval letters before being shown certain houses, Caucasian testers were more frequently offered financial incentives, such as reduced closing costs, minority groups were shown houses below their means in neighborhoods that were primarily of the same minority group while the Caucasian testers were often shown homes at the height or above their means in predominantly white neighborhoods, and school district quality was oftenused as a “proxy” of the racial composition of the neighborhood.
Click here to view the2006 Fair Housing Trends Report.
IV. Fair Housing - Jeff Keller
V. Hope Awards - Kelvin Wong
VI. California Latino Homeownership Initiative Update - Carmen Patrinca
VII. Roundtable Discussion: Fair Lending (Part2- Solutions) - Robert Aldana
VIII. Other Business - Kelvin Wong A. NAR Update - Allen Chiang, NAR Committee Representative