ValenciaBallroom I/II – Lower Level RenaissanceEsmeralda Hotel Indian Wells, California Thursday, January 24, 2008 1:00 PM – 2:50 PMPresiding:Raymond Rodriguez, Chair Betty Moore, Vice Chair Pam Winterbauer, Vice Chair Steve White, Executive Committee LiaisonStaff Coordinators:Carmen Petrinca, Membership Development Manager Jeff Keller, Public Policy AnalystI. Call to Order / Introductions –Raymond RodriguezII. Legal Update –Gov Hutchinson, Assistant General Counsel / Staff VPIII. Political Update - Jeff Keller
A. 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 that a guest 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 inclusionof accessible features in new homes as well. (Please see IBP for more information)REPORT/DISCUSSION ITEMS
A.HUD Update - FHA Reform: On September 18th,the House passed H.R. 1852 by a vote of 348 – 72.H.R. 1852 would increase the conforming loan limit to 125% of an area’s median home price, capped at $729,750, would allow for 0% downpayments (current FHA requires 3%) and would allow the FHA to set insurance premiums based on risk.
On December 12, 2007, the Senate passed their version of FHA reform, S.2338. The Senate version of FHA reform would increase the conforming loan limits to 100%, currently $417,000, would allow for downpayments of 1.5%, and would not include risk-based insurance premiums.
The House and Senate will now go to conference when they return in January for the 2nd session of the 110th Congress. C.A.R will follow the progress of the conference and will strongly lobby for an increase in the conforming loan closer to the House version, which would be vital to high-cost states such as California. Additionally, in August, President Bush announced that he wanted to see FHA modernization to help struggling homeowners refinance troubled loans. In the meantime though, they have started FHASecure Plan, which will help some families with strong credit histories and who have been making timely mortgage payments before their loans reset, but are now in default, to refinance into an FHA loan.
B.Mortgage Cancellation: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 should sell 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 entireshortfall. 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 that an 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 $15,000 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.
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 mortgageof a primary residence. 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 “cashout” 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.
C.Mortgage Assistance: If a homeowner is facing risk of foreclosure or starting to fall behind on payments, there are several steps a homeowner should take. The first step is to contact theholder of your mortgage. They are often willing to help you through either forbearance or even modify your original loan terms to help make the payments more manageable. Mortgage holders do not want to have to foreclose as it will cost them as well, so many are willing to attempt to find an alternative to help the homeowner.
Additionally, if a homeowner needs counseling to help them with their credit or payment problems, they can contact HUD housing agencies. HUD housing agencies are located in almost every county in California. These agencies can be found on the HUD website or by contacting Jeff Keller at C.A.R. (firstname.lastname@example.org or 213-739-8398).
Finally, the IRS has added a special section to their website concerning tax issues and consequences with foreclosures and debt cancellation. This information can be found on the IRS webpage (www.irs.gov) or directly at http://www.irs.gov/newsroom/article/0,,id=174034,00.htmlD.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.
H.R. 1427 includes a newly created independent GSE regulator to set high-cost conforming loan limits byan 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.
On May 22, 2007 the House passed H.R. 1427 by a vote of 313-104. The Senate has yet to introduce any legislation concerning GSEs and high-cost conforming loan limits, but Chairman of the Senate Finance Committee, Sen. Dodd, has said that GSE legislation could be considered as an option to help put more capital into the housing market. C.A.R. and NAR continue to lobby to have a bill introduced in the Senate that includes high-cost conforming loan limits. V. NAR Update - John Wong, NAR Representative
VI. Cultural Diversity Website Section- Betty Moore
VII. Roundtable Discussion: "What You Can Do Today" - Betty Moore
VIII. Roundtable Discussion: What Members Want - Pam Winterbauer