Hyatt Grand Champions Hotel Desert Vista Ballroom Bighorn - Conference Room Indian Wells, CA Thursday, January 24, 2008 3:00 PM – 5:00 PMPresiding: J. Michael Roberts, Chair Anthony Agurs, Vice-Chair Barbara Palmer, Vice-Chair Malcolm Bennett, Executive Committee Liaison Vince Malta, NAR Committee Representative George Mozingo, GAD Liaison
C.A.R. Staff: Matt Roberts, Federal Governmental Affairs Manager Jeff Keller, Public Policy AnalystI. Opening Comments: J. Michael Roberts
II. Report from Troubled Mortgage/Foreclosure Task Force
III. Guest Speakers: Jeff Lischer, Manager, NAR Financial ServicesIV. Report of Action Items from Reporting CommitteesA. Real Estate Finance B. Taxation C.Land Use and Environment D. Equal Opportunity – Cultural Diversity E. Housing Opportunity F. Commercial InvestmentV. First Impression Issues
A.Discussion/Reporting Items1.Terrorism Risk Insurance In response to the attacks of September 11, 2001, the Terrorism Risk Insurance Act (TRIA) became law and the Terrorism Risk Insurance Program was established under the U.S. Treasury Department. Due to theterrorist attacks, it became extremely difficult (if not impossible) for owners of commercial properties at risk to obtain insurance; many insurance companies even began to insert terrorism exclusions into their insurance policies. The creation of this program meant that terrorism exclusions on existing insurance policies were removed and all policyholders had the ability to secure coverage for terrorism risk.On September 19, 2007 the House passed H.R. 2761, the Terrorism Risk InsuranceRevision Extension Act, by a vote of 312-110. H.R 2761 extends the provisions found in the original TRIA for 15-years and creates coverage for nuclear, biological, chemical and radiological (NBCR) attacks. Additionally, H.R. 2761 reduces the threshold for triggering the reinsurance backstop from $100 million to $50 million and also reduces the deductible for terrorist attacks over $1 billion.The Senate amended H.R. 2761 and passed their version on November 16, 2007 by unanimous consent. The Senate version of TRIA renews the program for seven years, does not include NBCR coverage, and would leave the trigger for the reinsurance backstop at $100 million.The House attempted to find a compromise by accepting the Senate version, but still included a reduced reinsurance backstop trigger and group life insurance, but the Senate Republicans refused to accept these changes and President Bush threatened a veto ifthese changes were included. In the end, the House accepted the Senate version because they feared that any further attempts to add provisions would lead to the expiration of the current TRIA coverage, which would have ended on December31, 2007.2. Bankruptcy Laws The issue of including mortgages in bankruptcy proceedings was last strongly broached in the early 1990’s. At this time, NAR and C.A.R. were against the concept, specifically the cramdown provisions. However, in the early 1990’s, loans were predominantly fixed rate mortgages and ALT-A loans with exploding ARMS were not predominant on the market.Currently, mortgageson primary residences cannot be included in Chapter 13 bankruptcy proceedings. However, mortgages on second homes and investment homes are allowed to be included.On September 20, 2007, Congressman Miller (D-NC) introduced H.R. 3609, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007. On December 13, 2007 a compromise version of H.R. 3609 was passed by the House Judiciary Committee. The compromise version of H.R. 3609 would still allow for a judge to reduce interest rates, prepayment penalties, and set aside other fees. Additionally, H.R. 3609 would still allow for cramdowns, but now only on existing nontraditional and subprime mortgages originatedafter January 1, 2000.The concept of modifying the principle of the loan is known as a cramdown. A cramdown is used when the value of a home is less than the outstanding principle of the loan. The overall mortgage is not eliminated; however, the judge can reduce the principle of the loan to what the market value of the house is currently at. The amount reduced on the original principle then becomes unsecured, which is a lower priorityin bankruptcy courts, and would likely be dischargedIn the Senate, two different bankruptcy bills have been introduced. On October 3, 2007 Sen. Durbin (D-IL) introduced S. 2136. S. 2136 is currently in the Senate Judiciary Committee with nine (9) cosponsors. S. 2136 is similar to the original version of H.R. 3609 and would amend bankruptcy laws on Chapter 13 and allows for judges to cramdown loans.Also on October 3, 2007 Sen. Specter (R-PA) introduced S. 2133. S. 2133 is currently in the Senate Judiciary Committee with one (1) cosponsor. S. 2133 would amend bankruptcy laws and allow mortgages to be included in Chapter 13 filings, but would not allow for cramdowns. However, S. 2133 would allow for a bankruptcy judge to stop or delay an interest rate increase, roll back interest rates, and eliminate early prepayment or prepayment penalties. No date has been set yet for the Senate Judiciary Committee to hear either bill.3. Retirement Visas At the June 2007 C.A.R. meetings, the Federal Issues Committee decided to maintain their current policy, “That C.A.R. recommendsto NAR that NAR continue to explore the issue of creating a new U.S. retirement visa designation.”, as NAR continues to consider whether or not to take further action in seeking a special “Silver Card” visa designation.At the November 2007 NAR meetings, NAR’s PAG recommendations were passed and a working group was created to further pursue these recommendations. The recommendations included:a. We believe NAR should be involved in immigration issues to the extent necessary to support stable, prosperous, thriving and secure communities and to enhance the United States as a destination of choice for those seeking to own, transact, lease and use real property.
b. We support a timely federal resolution of illegal immigration that includes (A) securing U.S. borders to prevent illegal entry, (B) allowing for the flow of labor to accommodate the needs of the U.S. economy, and (C) settling the status of illegal immigrants in a way that acknowledges the reality of their presence, their role in the economy and their historic contributions to U.S. society.
c. We support the rights of foreign citizens to acquire, own and sell U.S. real property and the right of U.S.citizens to acquire property outside the U.S. We also support the free flow of international capital for real estate and oppose laws and regulations that impede that flow.
d. We believe all resident owners of U.S. real estate should be subjectto the same set of rules under the U.S tax system. In addition, any unique reporting and disclosure requirements regarding foreign buyers and/or their agents should be kept to a minimum.e. We recommend that NAR further research the feasibility of pursuing the adoption of a Silver Card Visa program with the stipulation that participants and domestic residents receive equal treatment under U.S. tax laws. We also recommend that NAR look at alternative and companion solutions to the Silver Card Visa, because of the likely political barriers this proposal will face. To examine these potential alternatives, we suggest a small conference committee/working group led by Business Issues that would include members from NAR’s International Operations, Resorts, and Government Affairs committees.f. We believe NAR should oppose any move to make Realtors® the “watchdog” or “enforcer” of local mandates requiring buyers and sellers to prove they are legal U.S. residents or any mandates that make it illegal to rent to an illegal alien.
4.Visitability Housing Visitability Housing (also known as Accessible Housing) is designed and builtto 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 that a guest would need. Such housing also makes it easier for residentsto 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. (Please see IBP for more information )VI. Taxation IssuesA. Discussion/Reporting Items:1. Mortgage Cancellation C.A.R. Policy:C.A.R. has previously taken the policy: “That C.A.R., in conjunction with NAR, pursue changes in federal law or regulation to exempt from unfair taxation relief of indebtedness incomefrom short sales of principal residences.”In today's market, many homeowners have found themselves "upside down" on their mortgages (i.e., they owe more on the mortgage than the fair market value of the property). If they shouldsell the property and are unable to repay the full amount of any outstanding mortgage debt, known as a short sale, the lender may forgive some or the entire shortfall. 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. Under current laws, when a portion of a debt is forgiven, income tax is imposed on any amount that a lender forgives.Example: Assume thatan individual purchased a home for $450,000. At the time of a subsequent sale, the outstanding mortgage balance might be $415,000. If the home sells for $400,000, the individual has incurred a non-recognizable capital loss of $50,000 and is short $15,000to 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.
On September 25, 2007 Chairman of the House Ways & Means Committee, Rep. Rangel (D-NY) introduced his own mortgage cancellation relief bill, H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007.H.R. 3648 would remove taxes from mortgage cancellation relief provided on a mortgage of a primaryresidence. The tax relief would only apply to the acquisition indebtedness, plus personal improvements of a primary residence and would not cover any amount over the acquisition indebtedness (plus personal improvements) if a loan has been refinanced with a “cash out” option. The relief would not apply to home equity lines of credit (unless the HELOC was used for personal improvements of the primary residence). The relief would apply to any forgiveness given on or after January 1, 2007.The Senate amended H.R. 3648 and instead of making mortgage debt relief permanent, they put a 3-year sunset on the provision. H.R. 3648 covers mortgage debt relief from January 1, 2007 through January 1, 2010. Due to this change, the offsets for these provisions were also scaled back. Instead of the change on the capital gains exemption for second homes converted to primary homes, the new offsets would increase penalties on those who fail to file partnership returns, S corporation returns, and increases corporate estimated taxes by 1.5%.Included in H.R. 3648 was also a 3-year extension of the private mortgage insurance deduction, through December 31, 2010.H.R. 3648 passed the Senate on December 14, 2007 by unanimous consent and was then passed again by the House on December 18, 2007 by a voice vote. H.R. 3648 was signed by the President on December 19, 2007.2. Qualified Veteran Mortgage Bonds C.A.R. Policy:C.A.R. supports eliminating the pre-1977 service requirement for QVMB eligibility. As home prices have risen in California, only a few select veterans inCalifornia and four other states have benefited from low-interest rate mortgages secured by Qualified Veterans’ Mortgage Bonds (QVMB). The bonds are tax exempt government obligations and are backed by the full faith and credit of the issuing state. Veterans who finance their homes through QVMBs can receive an interest rate of .50-.75 percentage points less than that of a conventional loan. Under current law, to qualify for a QVMB a veteran must have served on active duty prior to January 1, 1977 and applied for financing before their thirty-year anniversary of leaving the service. This prohibits veterans of more recent or ongoing military conflicts such as Operation Iraqi Freedom, Operation Enduring Freedom, Kosovo, Somalia, and the 1991 Persian Gulf War from being able to benefit from these loans.H.R. 551, the Home Ownership for America’s Veterans Act of 2007, was introduced on January 18, 2007 by Rep. Davis (D-CA). H.R. 551is currently in the House Committee on Ways & Means and has 65 cosponsors, including 50 from California. H.R. 551 would eliminate the requirement that you serve before January 1, 1977 and replaces it with “who applied for thefinancing before the date 25 years after the last on which such veteran left active service.” It would also use the Conventional Mortgage Home Price Index compiled by Freddie Mac to help determine inflation rates and after 2010 the limit of the amount a state is allowed to use would be adjusted based off this inflation rate (multiply the limit by the inflation adjustment factor).H.R. 3997, the Heroes’ Earnings Assistance and Relief Tax (HEART) Act of 2007, was introduced and also included provisions concerning QVMBs. While it did not address every issue found in H.R. 551, it did include language that would make permanent the exception that allows QVMBs to be eligible for any housing, not justa first-time homebuyer, and included the change that instead of having to serve prior to January 1, 1977, you now would just have to apply for the QVMB within 25-years of your last date of active duty service. The Senate has passed their version of H.R. 3997 and it is fully offset. It is expected that this bill will be taken up and passed by the House when they return for the 2nd session of the 110th Congress. This will be a substantial victory for REALTORS® and C.A.R.3. Tax Reform and AMT The issue of fundamental tax reform was quite for most of 2007. There have been discussions of reprising the issue in2008; however, with 2008 being an election year, it would be unlikely for a fundamental tax reform to take place. However, the issue of the AMT was highly contentious is 2007 and is expected to heat up even more in 2008.The large debate in the 1st session of the 110th Congress revolved around a one-year patch to the AMT. Early on, the concept of overall AMT reform was dropped and attention turned to a one-year patch. The main controversy surrounded the issue of off-setting the $53 billion one-year patch. Democrats tried a variety of options to find an acceptable off-set for the AMT patch in order to keep with PAYGO rules. However, Republicans in the Senate and the President refused to accept any off-sets.In the end, the Democrats decided that it was more important to help keep an extra 20 million Americans out of the AMT and in the waning days before Christmas passed a one-year patch without off-sets.This may become a larger issue and struggle during the 2nd session of the 110th Congress. The AMT patch was passed without the annual tax extensions. This includes state and local state deductions, among other popular one-year extenders. Senate Republicans have stated that they were willing to do off-sets for these deductions. However, this could change and they could try to win these extensions without off-sets, they could try to tack on more controversial tax changes, such as the estate tax or extension of the Bush tax cuts, or the Democrats could demand that in order to get these tax extenders they need to be fully off-set plus include the off-sets for the AMT. This could lead to a highly contentious and drawn out fight on these extenders when Congress returns.4. Mortgage Insurance Premium Deduction C.A.R. Policy:“That C.A.R., in conjunction with NAR, ‘OPPOSE’ the introduction of income limitations on the proposed mortgage insurance deduction provisions of the Internal Revenue Code.”
In the last hours of the 109th Congress, H.R. 6111, the Tax Relief and Health Care Act of 2006, was passed. Inside this tax extenders and Medicare bill, a new tax deduction for mortgage insurance premiums was included. This was a one-year-only provision that would allow some 2007 home buyers to deduct the cost of their mortgage insurance premiums (PMI). In order to qualify, the loan must have originated in 2007 and can be applied to private mortgage insurance, FHA insurance, and VA and Rural Housing premiums as well. The new deduction was available to those with less than $100,000 adjusted gross income on a joint or single tax return ($50,000 for married filing separately) and phases out for incomes above $110,000 ($55,000 for married filing separately). Individuals who claim the deduction were not permitted to prepay premiums that are otherwise due after 2007. This provision expired on December 31, 2007.
H.R. 1813 was introduced by Rep. Levin (D-MI) on March 29, 2007. H.R. 1813 currently has 39 cosponsors, including Reps. Calvert, Herger, and McNerney and is in the House Ways& Means Committee. H.R. 1813 would allow for PMI to be permanently deductible and would remove any income limitations. The Senate companion bill is S. 1416, which was introduced by Senator Smith (D-OR) on May 16, 2007. S. 1416 is currently in the Senate Committee on Finance and has 12 cosponsors.Additionally, an extension of the current PMI deduction was added to H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007. H.R. 3648extended the PMI deduction through December 31, 2010. H.R. 3648 passed the Senate on December 14, 2007 and then passed the House on December 18, 2007.5. 1031 Exchanges The like-kind exchange provisions ofInternal Revenue Code Section 1031 permits a taxpayer to defer taxation on capital gains if within 45 days of selling a "relinquished property," the taxpayer identifies a "replacement property" and closes on the acquisition of that property within 180 days of the sale of the “relinquished property”. The regulations for these rules provide a roadmap for securing the benefits of deferral and a well-established body of law governs these transactions.
The exchange rules have not been modified since 1991. Two developments; however, have brought new scrutiny of the rules. The first of these is an effort to repeal the exchange rules that has been mounted by farmers located primarily in Iowa and Illinois. They believe that the exchange rules have the effect of driving up the price of farmland. A second development is the rise of the Tenant-in-Common (TIC) market since 2002.
The one challenge to 1031 exchanges during the first session of the 110th Congress was in H.R.2419, the Farm Bill. Included in H.R. 2419 was a proposed rule that an exchange of “improved real estate” with “unimproved agricultural real estate” will not be eligible for like-kind exchange treatment because those two classes of properties are not “of a like kind”. At the November NAR meetings, NAR’s Taxation Committee took the following policy: “That NAR oppose changes to the like-kind exchange rules that would makespecified classes of real estate ineligible for like-kind exchange tax treatment”. H.R. 2419 passed the House on July 27, 2007 and the Senate on December 14, 2007. H.R. 2419 will now go to conference to work outthe differences between the bills.Additionally, at the November NAR meetings, the Taxation Committee had a guest speaker from the Federation of Exchange Accommodators (FEA) to discuss what they were doing in the wake of the recent unlawful activities of some Exchange Accommodators that left property owners with serious financial and tax consequences. The FEA is pursing changes to their own bylaws as well as asking the Federal Trade Commission whether they can decide regulatory rules or if any new rules have to be passed through Congress first.6. Carried Interest Under most real estate partnerships when a private equity partnership is developed there are two categories of participants. There is the general partner (GP) and the limited partner(s) (LP). The LPs are the ones who contribute the capital to fund the projects. The GP either puts up a small (usually 1-2%) amount of capital, or none, but handles the financial dealings of the partnership and brings their expertise and experience to the project. When that property is sold, the profits are divided, primarily among the LPs. However, there is a common practice in partnerships, including real estate partnerships, that gives the GP a portion of the profits. This is separate from his annual management fee which covers his salary and overhead. This part of the profit is known as carried interest. The carried interest (which can be up to 20% of the profit from the investment) is part of the setup of the partnership and is done to give the GP an incentive to push for the successof the partnership venture and is a return on their “sweat equity”.The House has introduced H.R. 2834, which is currently in the House Ways & Means Committee with 23 cosponsors. H.R. 2834 would eliminate taxing carried interest at capital gain rates (currently 15%) and instead tax them at the standard income rates (currently up to 35%). The Senate has introduced S. 1624, which is currently in the Senate Committeeon Finance with four (4) cosponsors. S. 1624 currently focuses on private equity groups and does not include real estate carried interest in the language of the bill, but it is expected that this will be amended in the future to includereal estate and mirror H.R. 2834. The House has also looked at carried interest as on off-set for the one-year AMT patch. However, that provision has been removed as an option for an AMT off-set for the one-year patch.At the October 2007 C.A.R. business meetings both the Taxation and Federal Issues Committees choose not to take any action on carried interest. At the November NAR meetings, NAR took the following policy: “That NARoppose legislation that would change the taxation of a general partner’s income from a carried interest in a real estate partnership from capital gains rates (current law) to ordinary income rates.”7. Internet Taxation C.A.R. Policy:In 2000 C.A.R. took the policy that there should be no state/local taxes on internet access and that there should not be federal efforts to preempt states’ efforts to address sales and use tax issues.In 1998 the Internet Tax Freedom Act was passed, which created a moratorium on federal, state, and local government from imposing taxes on internet access, creating “internet only taxes” such as taxes on bandwidth or emails, and also restrictedmultiple taxes on e-commerce. Since 1998 the moratorium has been extended twice and is currently set to expire in November 2007.
The House and Senate had a difficult fight determining whether the moratorium should be extended or made permanent. The fighting continued close to the expiration of the current moratorium, which was to end on November 1, 2007.After arduous debates and compromises, Congress agreed to a seven year,through 2014, extension of the Internet Tax moratorium. The House passed H.R. 3678, the Internet Tax Freedom Act Amendments Act of 2007, on October 16, 2007 by a vote of 405-02. The Senate then received and passed H.R. 3678 by unanimous consent, with amendments, on October 25, 2007. The House then passed the amended version of H.R. 3678 on October 30, 2007 by a vote of 402-0 and it was signed into law on October 31, 2007.H.R. 3678 extended the current moratorium for another seven years, through November 1, 2014. It still would only apply to taxes on Internet access; not to sales tax on items purchased over the internet.VII. Real EstateFinance IssuesA. Discussion/Reporting Items:1. National Affordable Housing Trust Fund (Please see IBP )2. FHA Risk Based Pricing (Please see IBP )3. National Flood Insurance Program; Non-Primary residence Subsidies and Wind Coverage (Please see IBP )4.Subprime and Mortgage Reform (Please see IBP )5. National Disaster Insurance C.A.R. Policy:C.A.R. believes Congress should look to implementlegislation that will create a government backstop for private insurance providers, create incentives for homeowners to take steps to mitigate the effects of a natural disaster on their property, and update insurance regulations and the tax code so that insurance companies may better prepare for disasters.In recent years, the intensity of large natural disasters has made the acquisition of adequate homeowners’ insurance very difficult in some areas.More and more insurers are declining to write policies, canceling existing policies, or increasing premiums on existing policies to the point where homeowners can no longer afford to make payments.In California, it is onlya matter of time until a large earthquake hits a highly populated area causing incalculable financial damage along with personal casualties that follow such a tragedy. According to the California Insurance Commissioner, only 14 percentof California homeowners have earthquake insurance. Some can’t afford it, while others believe the federal government will pay to rebuild their homes, such as it is doing after Hurricane Katrina.OnNovember 8, 2007, the House passed the Homeowners Defense Act of 2007, H.R. 3355, by a vote of 258-155. The legislation is the latest attempt to address the issue of natural disaster insurance. The legislation will:
Create the ability for states to pool their catastrophe risk with one another,
Allow states to transfer risk to the private markets through catastrophe bonds and reinsurance contracts, and
Create the National Homeowners Insurance Stabilization Program to provide low interest federal loans to states impacted by severe natural disasters.
While numerous bills have been introduced in the Senate, the Banking, Housing, and UrbanAffairs Committee has yet to address any of them. It is still uncertain what, if anything, Dodd will do.6. Banks in Real Estate C.A.R. Policy:C.A.R. supports the separation of Banking and Commerce. In early 2001, the Federal Reserve and the U.S. Treasury Department proposed rules to expand the powers of national bank conglomerates. The agencies proposed allowing national bank conglomerates to engage in real estate brokerage and management; reclassifying these activities as financial in nature.The House introduced H.R. 111 and the Senate introduced S. 413, both of which would place a permanent ban on banks entering into real estate activities. Presently, H.R. 111 has 267 cosponsors and S. 413 has 21 cosponsors.While the Community Choice in Real Estate Act has yet to pass, C.A.R. and NAR have been successful in getting Congress to block the Treasury from implementing its rule. In December, Congress passed a two-year moratorium on banks in real estate.7. Industrial Loan Companies C.A.R. Policy: C.A.R. supports the separation ofBanking and Commerce. In 2006, in response to applications from Wal-Mart and Home Depot to become owners of industrial loan companies (ILCs), REALTORS®, bank trade associations, and many others voiced concerns to the Federal Deposit Insurance Corporation (FDIC) and Congress about mixing banking and commerce through the ILC statutory loophole that permits commercial firms to own this type of federally insured state bank. Congress is considering amending the Federal Deposit InsuranceAct to close the ILC loophole.Responding to pressure by Congress and the regulators, Wal-Mart withdrew its application to charter an ILC. However, numerous commercial companies, including Home Depot, DaimlerChrysler, Ford Motor Company and Toyota are still pursuing owning an ILC.REALTORS® are supporting the enactment of H.R. 698, the "Industrial Bank Holding Company Act of 2007." H.R. 698 would prevent an ILC from being controlled by a commercial firm. On May 21, 2007, the House overwhelmingly passed H.R. 698 by a 371-16 vote. On May 10, 2007, Senator Sherrod Brown (D-OH) introduced companion legislation in the Senate, S. 1356. S. 1356 has been referred to the Senate Banking, Housing, and Urban Affairs Committee. On October 4, 2007, the Senate Banking, Housing, and Urban Affairs Committee held hearings on this issue. Senators from Utah have held up proposed legislation due to the fact the majority of ILCs are chartered in Utah. While these Senators have hinted at accepting a compromise; it is still unclear what if any compromise may be made.8. FHA Issuesa. FHA Reform C.A.R. Policy:C.A.R. supports increasing FHA’s loan limit, allowing FHA to treat all condos as single family homes, allowing FHA to set insurance premium using risk-based pricing, and allowing FHA to insure zero-downmortgages.On March 29, 2007, Maxine Waters introduced H.R. 1852, the expanding American Homeownership Act. The bill will attempt to expand the FHA’s ability to compete with the subprime market and regain market sharesin high-cost areas. The reforms proposed include:
Increasing the FHA insurable limits. Currently, the FHA insures 95% of an area’s median home price with a ceiling of 87% of the conforming loan limit ($362,790) and a floor of 48% of the conforming loan limit. California Congressmen Gary Miller and Dennis Cardoza added an amendment to increase the FHA loan limit to 125% of an area’s median home price, capped at $729,750.
Making it so that condos are insured in the same manner as single-family homes.
Allowing for the coverage of zero-down loans. Currently, the FHA may only insure loans witha minimum of three percent down.
Allowing the FHA to set its insurance premiums by risk.
On September 18, the House passed H.R. 1852 by a vote of 348 – 72.On December 14, the Senate passed S. 2338, the Senate FHA reform bill by a vote of 93 – 1. The Senate version differs from the House version in a few ways; including, a requirement for at least 1.5% down and increasing the FHA loan limit to 100% of conforming ($417,000).The Senate and House are expected to Conference in February to work out the differences between the two bills. Senator Feinstein voted in favor of the FHA reform, and while SenatorBoxer was unable to make the vote, she submitted for the Senate record a letter of support for both the bill and higher FHA loan limits.9. VA & HUD Issuesa. RESPA Reform A new proposed rule was submitted by HUD to OMB onNovember 8, 2007. OMB has up to 90 days to clear it or recommend revisions. The proposal includes a four-page (letter size) Good Faith Estimate (GFE) that would standardize the GFE and enhance the disclosure of loan terms, including: the initial interestrate and monthly payment, whether the interest rate and principal balance can increase and the maximum amount they can increase, whether the loan has a prepayment penalty and/or a balloon payment, the yield spread premium, if any, and the total estimatedsettlement charges. HUD's approach is to provide more loan information in a consumer-friendly format that will enable consumers to lower costs and shop for the most appropriate loan. The proposed rule also identifies charges that can and cannot change atsettlement, limits the amount of permissible changes and modifies the HUD-1 to facilitate comparison of the estimated charges on the GFE and the final charges on the HUD-1. Finally, the proposal includes a "Closing Script" as an Addendum to the HUD-1 that compares actual charges at closing with the estimated charges on the GFE and details the loan terms for the specific mortgage loan the borrower takes out at closing. The Closing Script would be read to the borrower by the settlement agent at closing, with a copy provided to the borrower. In conjunction with the proposed rule, HUD intends to seek legislative changes to RESPA that will require delivery of the HUD-1 to the borrower three days prior to closing, establish a uniform statute of limitations applicable to governmental and private actions under RESPA, and increase civil money penalties for specific RESPA sections and provide authority to HUD and State regulators to seek injunctive and equitable relief for violations of RESPA.b. HomeOwnership Opportunities for Veterans C.A.R. Policy:C.A.R. supports increasing the VA loan limit, in high-cost areas to allow veterans better access to affordable home loans.On May 16, 2007, Senator Hillary Clinton (D-NY) and Congressman Patrick Murphy (D-PA) introduced companion bills in both the House and the Senate. The purpose of these bills, S. 1409 and H.R. 2385, the 21st Century GI Bill of Rights Act, is to extend and improve access toa number of benefits designed for veterans. This includes exempting, “Veterans from paying loan fees and expand opportunities for veterans to purchase, build, repair or improve a home by increasing access to low interest loans through the Veterans Affairs Home Loan Guaranty Loan Program for homes valued up to $625,000. The current program requires loan fees and is capped at the conforming loan rate of $417,000.”10. Fannie Mae & Freddie Mac Issuesa. High-Cost Conforming Loan Limit & GSE Reform C.A.R. Policy:C.A.R. supports GSE oversight reform and creation of a new GSE regulator with powers that include the authority to set high-cost conforming loan limits by an area’s median home price.On May 22, 2007, the House passed H.R. 1427 – GSE Reform Bill. Included in the final version is a provision to increase conforming loan limits to match the median home price in high-cost Metropolitan Statistical Areas were the median home price is above the $417,000 conforming loan limit. The high-cost conforming loan limit would be capped at 150% of the national limit, $625,500. Beyond increasing the loan limit, the bill will also overhaul the regulatory oversight of the housing government-sponsored enterprises (GSEs) -- Fannie Mae, Freddie Mac, and the Federal Home Loan Banks system (FHLBanks). The proposed legislation would create astrong, independent safety and soundness regulator with broad powers analogous to current banking regulators.Senator Dodd stated his intent to move a GSE reform bill in his Committee, though no timeline was set. The Administration stated its willingness to accept a high-cost conforming loan limit provision that is temporary to address the current housing crisis.VIII. Land Use & Environment IssuesA. Discussion/Reporting Items1. Endangered Species On October 24, 2007 the Senate Finance Committee passed by voice vote S. 2223, the Habitat and Land Conservation Act of 2007. S. 2223 was introduced by Senate Finance Chairman Baucus (D-MT). The bill extends tax incentives for farmers and ranchers that establish conservation easements on their land, extends tax credits for taking voluntary measures to protect and restore habitats of endangered species and threatened species, and allows for tax deductions for environmental cleanup costs. This was a rare time where there was an agreement between property rights advocates and environmentalists.
This bill replaces a previous bill introduced, S. 700. There was also a companion bill to S. 700, H.R. 1422. These two bills will likely be replaced by S. 2223.
S. 2223 would make permanent the current provisions that allow ranchers and farmers the ability to deduct the contribution of property to a charitable organization and to carryover the amount above the allowed deduction for up to 15-years. Additionally, it allows the Treasury, Commerce, and Interior Departments to set up funds to allow taxpayers a credit against income tax for costs incurred when they setup a habitat restoration plan. Finally, it would extend the current Brownfield deductions for three more years, through December 31, 2010.2.Eminent Domain On May 17, 2007 the House Agriculture Committee passed H.R. 926, the STOPP Act of 2007 (Strengthening the Ownership of Private Property Act) by voice vote. H.R. 926 was introduced by Rep. Herseth (D-SD)and currently has 26 cosponsors. H.R. 926 would restrict federal agencies from providing funding to a state or local government under specified Federal economic development programs for two years if that state or local government uses the power of eminent domain to transfer property from a private entity to another private entity. H.R. 926 also restricts funds when a state or local government fails to provide relocation assistance to a person displaced by the use of eminent domain for economic development purposes.Exceptions to these rules include when eminent domain is for: use by a public utility, for a road of common use, for an aqueduct or pipeline, prison or hospital, or for any use during and in relation to a national emergency or a natural disaster declared by the President.Since H.R. 926 covers issues that fall into numerous jurisdictions, the bill will be held up in numerous committees during the 110th session. While the House Agriculture Committee has passed H.R. 926, it is still sitting in the House Committee on Transportation and Infrastructure, Financial Services, Natural Resources, and Education and Labor.
During the 109th Congress, the House passed similar legislation, but the Senate never took action. So far there is no Senate companion bill to H.R. 926. Every state has different needs, and many question whether there is a proper federal response that can address the diversity of situations that will be experienced across all 50 states.