Equal Opportunity – Cultural Diversity Committee Room 308 Convention Center Sacramento, California Thursday, June 7, 2007 1:10 PM –2:50 PMPresiding: Eva Garcia, Chair Janet Houde, Vice Chair Raymond Rodriguez, Vice Chair David Barca, Executive Committee LiaisonStaff Coordinators: Carmen Petrinca, Membership Development Manager Jeff Keller, Public Policy Analyst
A. HUD Update FHA Modernization Urged: In April 2007 HUD Assistant Secretary for Housing, Brain Montgomery testified to the House Financial Services Committee that “the most practical and immediate way to address the needs of a large number of troubled subprime homebuyers” was through the modernization of HUD’s FHA. FHA modernization, H.R. 1852, would include increasing loan limits (which wouldhelp in high-cost areas such as California), create a new risk-based financing, and would add flexibility to their downpayment requirement (currently at 3%). B. Mortgage Assistance With the subprime market becoming a larger political issue, the Congress has started to look at ways to assist homeowners whom are facing foreclosure. There is some debate as to whether these solutions should be left to the private sector or whether government programs are needed. Fannie Mae and Freddie Mac have announced a $20 billion program to help refinance struggling families into fixed rate loans. Some states have already introduced legislation that would sell bonds in order to raise funds that will be used to help those facing foreclosure. In the Senate, Senator Schumer (D-NY), Senator Brown (D-OH), and Senator Casey (D-PA) have proposed federal funds for community organizations that assist in helping families facing foreclosure. C. Fidelity, RE/MAX, and Chase New Multicultural Programs In March 2007 Fidelity National Financial launched four new websites, one in traditional Chinese, one in Korean, one in Spanish, and one in Vietnamese. Each site offers accessible information on real estate, escrow, and title insurance to help those who might understand the detailed material in their native language.
RE/MAX of California and Hawaii have expanded their Hispanic Initiative by further augmenting their program with more tools and informational pamphlets in Spanish as well as recruiting more bilingual associates.
Chase has announced they will sponsor a TV series called “Better Living in USA”, which is aimed at entertaining and educating recent Chinese immigrants about homeownership in America. The program will air in Mandarin and Cantonese dialects on Sky Link TV and will also include Chinese language TV commercials by Chase. D. GSE Oversight & High-Cost Conforming Loan Limits Recently Congress has reinvigorated its attempt to writeGovernment Sponsored Enterprise (GSE) regulatory reform legislation amid continuing scrutiny of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.In March 2007 the House Financial Services Committee passed H.R. 1427,the Federal Housing Finance Reform Act of 2007, by a vote of 45-19. H.R. 1427 included 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.In addition to the high-cost provision, H.R. 1427 would reform the GSE in the following ways:
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 GSEs after-tax profits.
The Senate has yet to introduce any legislation concerning GSEs and high-cost conforming loan limits. C.A.R. and NAR continue to lobby to have a bill introduced in the Senate that includes high-cost conforming loanlimits in any Senate bill.
E. AREAA Amendment to FHA Reform The Asian Real Estate Association of America (AREAA) had an amendment attached to H.R. 1852, the Expanding American Homeownership Act of 2007. H.R. 1852, which deals with FHA reform, now includes an amendment which will allow the Secretary of HUD to create a five-year pilot program that will establish an automated process for providing alternative credit rating information for buyers and prospective buyers who have insufficient credit histories for determining their credit worthiness. Currently the process is done manually and can take an extended time.
Alternative credit rating information may include: rent, utilities, insurance payment histories, and such other information that the Secretary considers appropriate.
F. Foreclosures May Hit Latinos Hard Many of those in the Latino community are being hit hard by foreclosures. Latinos often find themselves in subprime loans, often because they do not have established credit histories. Additionally, some Latinos find it hard to fully understand the terms of their loans, which are laden with technical and legal terms, when the papers are in their second language, English.
With many of the subprime loans now resetting to higher rates (after their teaser period expires) advocates and real estate professionals saythat minority and immigrant populations are suffering disproportionately. Nearly half of the Latinos in California who purchased a home in 2005 did so using loans that were meant for consumers with poor or weak credit, according to theCenter for Responsible Lending. The Center also predicts that one in five of those loans will be facing foreclosure.
While these numbers can be stark, many note that the recent trend in promoting Latino homeownership has opened the doors for many Latinos and minorities who just 10 or 15 years ago would have been immediately rejected.
G.Latinos Less Likely to be Online On March 14, 2007 the Pew Hispanic Center and the Pew Internet & American Life Project reported that Latinos are not going online as much as non-Hispanic whites and blacks, even at younger ages where Internet use is far greater.
Only 56% of adult Latinos use the Internet, compared to 70% of whites and about 60% of blacks. The Internet use of U.S. born Latinos was comparable to that of whites, but about two-thirds of adult Latinos in the U.S. were born elsewhere. The study also found that one in three Spanish dominant Latinos use the Internet and that Latinos online tend to primarily be English speakers or bilingual.
Additionally, the study found that less than one-third of Latino adults have broadband, more than 50% have a cellphone and send and receive text messages.
H. Mortgage Cancellation In today's market, some individuals are "upside down" on theirmortgages (i.e., they owe more on the mortgage than the fair market value of the property). If they should sell the property and be unable to repay the full amount of any outstanding mortgage debt, the lender may forgive some or the entire shortfall. (This is known as a "short sale.") Similarly, in foreclosures a borrower might be forgiven some portion of a mortgage debt if the lender is not able to satisfy the mortgage liability from the sale proceeds. When some portion of a debt is forgiven, income taxis imposed on any amount that a lender forgives.Under current law, if a mortgage lender forgives or cancels a debt, the taxpayer/borrower is required to recognize income and pay tax on the amount of the canceled debt. Exceptions are providedto this rule in the case of bankrupt or insolvent taxpayers. Rules are also provided that defer taxation for relief of debt on loans for commercial and investment property, but the tax laws have never extended relief to an individual who sells a personal residence for an amount that is less than the outstanding debt on the property.
Example: Assume that an individual purchased a home for $450,000. At the time of a subsequent sale, the outstanding mortgage balance might be $435,000. If thehome sells for $400,000, the individual has incurred a non-recognizable capital loss of $35,000 and is short $15,000 to pay off the outstanding mortgage. If the lender forgives this $15,000 debt, then the homeowner must recognize the $15,000 as ordinary income and pay tax on it.
Legislation is needed to assure that mortgage debt that is canceled or forgiven is not treated as income and taxed on primary residences. The House has introduced H.R. 1876, the Mortgage CancellationRelief Act of 2007, which would allow for residential mortgage debt relief to be excluded from gross income. At the time when a family is suffering from the loss of their home it is unfair to further punish them by forcing them to pay income tax on proceeds that were never realized.
I.Visitability Housing Visitability Housing (also known as Accessible Housing) is designed and built to allow guests with mobility impairments to visit someone in their home without architectural barriers impeding their ability to move in and out of the home or use facilities a guest,such as for dinner, would need. Such housing also makes it easier for residents to adapt their house as they age and develop mobility impairments. A significant number of local governments have required or encouraged new housing to be built with accessible features. There are some national voices calling for greater inclusion of accessible features in new homes as well.
Housing which is accessible may be more attractive to buyers who have friends and relatives with mobility impairments. The costs associated with adding basic accessibility features, such as no-threshold steps, wider doors, and larger guest bathrooms, add little to the cost of housing at the time of construction. Such housing could be marketed as accessible to buyers. At the May NAR meetings there was a motion “That NAR support, in concept, housing visitability features which allow family members and guests with mobility impairments to visit a home through an accessible entry, one accessible room, and an accessible bathroom”.
However, the concept and application of visitability housing was still vague. Would this be for all new housing or would it include previously built housing? What would the impact be on affordable housing? Because of these questions, the NAR Executive Committee recommended that committees’ further study the issue and that NAR form a formal working group on the issue. The working group is being formed and may report back as early as the November NAR meetings. C.A.R will keep you informed of the issue.IV. REALTOR® Panel: “Working With Diverse Cultures”– Eva Garcia Monica A. Harris Patrick Lieuw Pauline Martinez Diana Perparos
V.Other Business –Eva Garcia
A.NAR Update – Allen Chiang, NAR Committee Representative
B.SCCAOR DVD Motion Update – Jim Liptak, Treasurer
C.Ethnic Real Estate Industry Associations Leadership Summit Debriefing – Eva Garcia