Equal Opportunity – Cultural Diversity Committee
Bonsai Room I/II/III – Level One
Portola Plaza Hotel
Monterey, California
Thursday, January 22, 2009
1:00 PM – 2:50 PM

Presiding: Cathlyne Scharetg, Chair
               Miguel Garcia, Vice Chair
               Denise Smith, Vice Chair
               LeFrancis Arnold, Executive Committee Liaison

Staff Coordinators: Carmen Petrinca Hirciag, Membership Development Manager
                            Jeff Keller, Public Policy Analyst

I. Call to Order / Introductions – Cathlyne Scharetg

II. Legal Update – Gov Hutchinson, Assistant General Counsel / Staff VP  

III. Political Update – Jeff Keller

REPORT/DISCUSSION ITEMS

1. Stimulus Package
The new Congress and Obama Administration have said that they want a stimulus package ready as early as January 20th.  Nonetheless, this will likely be an overly ambitious goal as it would mean that no committees could hold hearings; however, there is nevertheless a bipartisan agreement that a stimulus package in needed quickly.
 
The size of this stimulus package has fluxuated and the final size is not yet known.  There is a general consensus that the package will be between $700 billion and $1.3 trillion.  This package should include tax breaks for the lower and middle class, funding for infrastructure, potentially money for cash-strapped states, and other projects that are believed to either stimulate the economy or create jobs.
 
Included in the tax provision section could be $300 billion or more in tax breaks for individuals and businesses.  This could include: a tax credit on the first $8,100 of wages ($500 individual/$1000 couple), a decrease in the payroll tax, enhancements to the Child Tax Credit, allow the carry-back provisions to be extended to a 5-year period, extended bonus depreciation, and an extension of the small business expensing limit at $250,000.

Additionally, the stimulus package could include:

• Foreclosure Mitigation: Senator Dianne Feinstein and Representative Maxine Waters stated have introduced legislation that would codify the FDIC mortgage workout program currently being utilized by IndyMac. The purpose of this would be to systemically target troubled mortgages that could be modified instead of doing them one at a time.

• GSEs and FHA Loan Limits: On January 1, 2009, the GSEs loan limit was reduced from the greater of $417,000 or 125% of an area’s median home price capped at $729,750; to the greater of $417,000 or 115% of an area’s median home price capped at $625,500.  For the FHA the loan limit was reduced from the greater of $271,050 or 125% of an area’s median home price capped at $729,750; to the greater of $271,050 or 115% of an area’s median home price capped at $625,500. C.A.R. is working with NAR and the California Congressional Delegation to retroactively extend the 2008 loan limits until the end of 2009.
 
• Bankruptcy Reform: Bankruptcy reform is another issue that will likely be included in this package. If it is included there will be a very strong push by Democrats to include a provision giving judges the authority to cramdown mortgage principles for primary residences. Senator Durbin (D-IL) has already introduced his Bankruptcy Reform bill with Senators Boxer and Feinstein signed on as cosponsors.

2.  Homebuyer Tax Credit
In 2008 Congress passed H.R. 3221, which included a first time homebuyer tax credit.  The tax credit was 10% of the purchase price, capped at $7,500 and did need to be repaid; therefore working more as an interest free loan than a true tax credit.  The credit is repaid out of your taxes over 15-years.  To use the credit the home must be purchased between April 8, 2008 and June 30, 2009 and be of an owner occupied primary residence.

While this credit is being used by many of those eligible, some in the housing industry want to see it expanded, in both size and scope.  There are numerous proposals being put out by mortgage brokers, builders, and even NAR.  NAR has proposed, as part of their 4-point plan, to extend the tax credit to all purchasers and extend the deadline for use as well as eliminating the repayment requirement.  Some builder organizations have proposed increasing the tax credit up to $22,000 as well as expanding its availability.  With all of these proposals, nobody has indicated how they would like to offset the expanding cost of the program.  Additionally, Congress has given no indication that they plan on expanding the program.

3. GSE Reform
The future of the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac is expected to be addressed by Congress. The questions facing Congress on the future of the GSEs, taken into government conservatorship in September of 2008, are daunting. Currently the GSEs own or guarantee approximately $6 trillion worth of home mortgages. Congress must determine if the GSEs and the government will play as large of a role in the future of the nation’s housing market and in what form.  Some of the questions Congress will be forced to answer while determining the future of the GSEs include:

• Can the GSEs continue in a quasi private/public forms?
• Should the GSEs be restructured in a manner that more closely resembles a public utility company?
• What role should the government play in the future of the nation’s mortgage market?
• What role should the government play in the current housing crisis?  Currently, many legislators are proposing the utilization of the GSEs in purchasing troubled mortgages from private lenders and having the GSEs burden the cost and work of loan modification.
• What role should the GSEs play in promoting “affordable housing”?

These questions are merely the tip of the iceberg on this issue. C.A.R. has and continues to support efforts by the government to ensure a strong and viable secondary market to the nation’s mortgage market. The current down market has demonstrated the need for a government presence in the mortgage market to fill the void created by the private market’s tightening of available capital.

4. The National Commission on Fair Housing and Equal Opportunity Report on Fair Housing
Forty years ago, after Congress passed Title VIII of the Civil Rights Act of 1968 (the "Fair Housing Act"), which prohibits discrimination in public and private housing markets that is based on race, color, national origin, religion, sex, disability, or familial status. The Act requires communities and the federal government to proactively further fair housing, residential integration, and equal opportunity goals. 

The National Commission on Fair Housing and Equal Opportunity held hearings in five major U.S. cities – Chicago, Houston, Los Angeles, Boston, and Atlanta – to assess the progress in achieving fair housing. The hearings exposed the fact that despite strong legislation, past and ongoing discriminatory practices in the nation’s housing and lending markets continue to produce extreme levels of residential segregation that result in significant disparities between minority and non-minority households, in access to good jobs, quality education, homeownership attainment and asset accumulation.

While what we learned about the state of fair housing was sobering, this report is by no means gloomy. We have made progress. Most states and many localities have fair housing laws, some of which provide greater protection than the federal Fair Housing Act. The National Commission on Fair Housing and Equal Opportunity proposed the following recommendations:

 Create an Independent Fair Housing Enforcement Agency
 Revive the President’s Fair Housing Council
 Ensure Compliance with the "Affirmatively Furthering Fair Housing" Obligation
 Strengthen Compliance with the Affirmatively Furthering Fair Housing Obligation by Federal Grantees
 Strengthen the Fair Housing Initiatives Program (FHIP)
 Adopt a Regional Approach to Fair Housing
 Ensure that Fair Housing Principles are Emphasized in Programs Addressing the Mortgage and Financial Crisis
 Create a Strong, Consistent, Fair Housing Education Campaign
 Create a New Collaborative Approach to Fair Housing Issues

5. New HUD Secretary
In December, President Elect Obama announced he will be appointing New York City Department of Housing Commissioner Shaun Donovan as the new HUD Secretary.  Donovan has an extensive housing background that includes a prior stint at HUD as Deputy Assistant Secretary for Multifamily Housing, researching and writing about the preservation of federally-assisted housing at New York University, and working for Prudential Mortgage Capital as managing director of its FHA lending and affordable housing investments.        

IV. NAR Update – Winnie Davis, NAR Representative     

V. Lender Panel – Miguel Garcia
     Panelists
     Richard M. Duncan, Regional Executive CRE Division, LA CCA NNV Region, Bank of America
     Tom Swanson, Retail Regional Sales Manager, Wells Fargo Home Mortgage 

VI. Other Business – Cathlyne Scharetg       

VII. Adjournment -- Cathlyne Scharetg