Federal Issues
Committee
Sheraton Grand Hotel
Grand Nave Ballroom,Gardenia Room
Sacramento, CA
Thursday, June 5, 2008
3:00 PM - 5:00 PM
Presiding:
J. Michael Roberts, Chair
Barbara Palmer, Vice-Chair
Anthony Agurs, Vice-Chair
Malcolm Bennett, Executive Committee Liaison
Vince Malta, NAR Committee
Representative
C.A.R. Staff:
Matt Roberts,
Federal Governmental Affairs Manager
Jeff Keller, Public Policy
Analyst
I.
Opening Comments: J. Michael
Roberts
II. Report of Action Items from Reporting
Committees
A. Real Estate Finance
B. Taxation
C. Land Use and Environment
D. Equal Opportunity - Cultural Diversity
E. Housing Opportunity
F. Commercial
Investment
III.
Guest
Speaker: Tricia McClung, Freddie Mac Vice President of Single Family
Sourcing, Customer Outreach, and Offerings
Deployment
IV. First Impression
Issues
A.
Discussion/Reporting Items
1. Small Business Health Options
Program
On April 2, 2008, Senator Durbin (D-IL) introduced S. 2795, the "Small
Business Health Options Program Act of 2008". H.R. 2795 would create a
small business health board and an administrator within the Department of
Health and Human Services to create, monitor, and maintain health plans for
small businesses and the self-employed (HPSB) that can be state-by-state or
nationwide. These HPSB would be available to both small business and
those that are self-employed.
(Please see IBP
for further
information)
2. Immigration Reform
C.A.R. Position:
At the January 2008 C.A.R. meetings, the Federal
Issues Committee passed the following policy, "That C.A.R. believes that
before NAR promulgates a policy on immigration, or decides if they wish to
have a policy on immigration, the materials should be presented and voted
on by the appropriate NAR committees and the Board of
Directors."
At the May
NAR Mid-Year meetings, the NAR committees and board of directors passed the
following NAR
principles:
NAR
believes the interests of its members are best served by stable,
prosperous, thriving and secure communities. Accordingly, NAR policy should
be guided by the following
principles:
1.
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.
2. 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 legal immigration to accommodate the labor 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.
3. 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.
4.
We believe all resident owners of U.S. real estate should be subject to 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.
3.
Transportation
Policy
At
the May NAR Mid-Year Meetings, NAR passed the following updated policy on
transportation:
"The
timely provision of safe, convenient and efficient transportation
infrastructure enhances the quality of communities, supports property
values, and mitigates the effects of traffic congestion that accompany
growth. REALTORS® support improving mobility in communities so that all
citizens have access to transportation means best suited to their needs.
Changing travel patterns, shrinking petroleum supplies, and continuing
technological innovation will challenge traditional means of transportation
planning, construction and funding. With these challenges in mind, NAR
urges the federal government to incorporate the following principles in
future transportation authorization
legislation.
1. Federal spending for transportation infrastructure should be sufficient
to maintain the current physical condition and level of performance of
highways and transit systems and to make improvements to reduce congestion
and to foster economic development. To finance increased transportation
spending, NAR supports both a modest increase in the federal transportation
user charge tax rate and indexing the tax rate to account for
inflation.
In addition, the federal government should explore
a variety of means to ensure a reliable stream of revenue for
transportation funding so that revenues grow in step with increasing travel
demand.
2
. High occupancy toll lanes should be permitted on roads financed
with federal assistance. All tolls collected on such lanes should be
dedicated to transportation purposes in the same
community
in
which they are
collected.
3. Taxes
levied on transportation users should be deposited in a trust account for
spending exclusively on transportation purposes.
4. Interest on balances in the Highway Trust Fund
should accrue to the Fund and be spent exclusively for transportation
purposes.
5. States should have a large measure of
flexibility in determining how Highway Trust Fund monies are spent within
their borders.
6. Highway Trust Fund revenues should continue to
be used for projects designed to mitigate air pollution by reducing vehicle
travel.
7. The federal share of funding for new transit
capital projects should remain on a par with the federal share of funding
for highway projects.
8.
Transportation
planning and implementation should be fully integrated into a comprehensive
community planning effort, coordinated with state and metropolitan planning
processes, using substantial citizen involvement and civic leadership to
achieve the consensus vision of the
community.
9. The federal
transportation funding bill should provide a predictable level of funding
that avoids large changes from one year to the next.
10.
All
federal taxes levied on any fuel or alternative energy source used for
surface transportation should be applied equally and deposited in the
Highway Trust Fund.
11. The time required for environmental review of
transportation projects should be significantly reduced without
compromising environmental protection.
12.
Federal surface
transportation assistance programs for states should be structured so
that:
- State and local
transportation planning is not biased in favor of one mode or another
because of differences in federal program
requirements.
In April,
the Senate passed a housing economic stimulus package, H.R. 3221. The
intent of the package is to help homeowners avoid foreclosure. In
actuality, the bill passed by the Senate would do little to help
individuals avoid foreclosure. The final bill was full of tax
incentives directed towards lenders and homebuilders along with FHA reform
that would severely cut the current higher loan limits implemented under
the first stimulus package - from $729,750 to $550,000. The tax
provisions in the Senate bill include:
-
Allowing homeowners to claim a standard property tax deduction of $500 for
single filers and $1000 for joint filers;
- A one-year/one-time
$7,000 tax credit (to be claimed over two-years) for homebuyers who
purchase a home in foreclosure;
- Modifications to
mortgage bonds to allow them to be used to refinance qualified subprime
loans, up to $10 billion worth;
-
A carry-back tax provision that allows companies
(including home builders) to apply losses in 2008 and 2009 to taxes paid in
the previous four years and receive some of those paid taxes back
(estimated cost of $25 billion through
2010).
The House has
amended the Senate housing stimulus package with their owner version.
The House version of tax provisions includes:
- A
first-time homebuyer tax credit on a principle residence of 10% of the
purchase price, up to $7,500. Income limitations apply and the capped
amount is reduced when an individual makes over $70,000 AGI or a joint
filer makes over $140,000 AGI,
The House
Democrats, especially the Blue Dog Democrats, want to make sure that the
extenders are offset. It appears as if there will be another showdown
with the Senate Republicans refusing to offset the extenders (and the
Senate Democrats requesting no offsets as they know the provisions wouldn?t
pass) and the House Democrats trying to hold to the fiscally responsible
PAYGO rules. The real estate tax extenders may be caught in this
legislative fight and be delayed, or potentially not passed if an agreement
cannot be
made.
3. Tax Reform and
AMT
The
issue of fundamental tax reform was quite for most of 2007 and will not be
actively pursued in 2008, an election year.
The largest tax debate in
the 110th Congress is the 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 to $64 billion one-year patch. In the
first session, 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. Last years AMT patch was passed without
the annual tax extensions. It appears as if this debate will rise
again this year. House members of the Blue Dog Coalition seem adamant
that this years AMT be offset. 41 Senate Republicans have already
sent a letter to Senate Finance Chairman Baucus stated that they will not
support offsets for the AMT and do not want offsets for
extending other current tax breaks either.
Currently there has been no AMT patch offered this year. Republicans
have tried to force it, without offsets, on the tax extenders bills, but
Democrats have refused and said they will propose an offset AMT patch later
this year.
4. FIRPTA
C.A.R. Position: In the January 2005 meetings C.A.R. adopted
policy which stated, "That C.A.R. in conjunction with N.A.R., "SUPPORT"
legislation that would permit a seller to provide the information required
by the Foreign Investment in Real Property Tax Act (FIRPTA) to escrow or
another settlement provider as an alternative to providing that information
to the buyer."
Over the past
several years as identity theft has become more of a concern for everyone,
sellers have grown increasingly uneasy with providing their taxpayer
identification numbers. The concern has become so great that some
sellers are refusing to provide the required non-foreign affidavit to the
buyer or are providing an affidavit with the seller's taxpayer
identification number removed. This creates a dilemma for buyers' who
may be liable for the sellers' tax liability from the sale of the real
property if they do not receive a fully completed sellers'
affidavit.
On April 17,
2007 the House passed H.R. 1677, The Taxpayer Protection Act by a vote of
407-7. Thanks to the help and efforts of Congressman Mike Thompson
(D-CA), C.A.R. and NAR were able to get FIRPTA language attached as an
amendment to H.R. 1677. So far, H.R. 1677 has not moved in the
Senate.
Additionally, the same
FIRPTA amendment has been added to H.R. 3221, the "American Housing Rescue
and Foreclosure Prevention Act of 2008." H.R. 3221 was passed by the
Senate on April 10, 2008 by a vote of 84-12 and then amended and passed by
the House on May 8, 2008, where the FIRPTA amendment was
added.
5. Tenants
in Common
Tenant in Common is a form of co-ownership in real estate which, due to a
2002 IRS ruling, has increasingly been sold as securities offerings. In
2002, the IRS provided guidance on how the TIC ownership structure, which
is often used to attract investors to own a partial interest in real
property, may be used in section 1031 tax deferred like kind
exchanges.
Those TICs sold as securities generally meet the Supreme Court's definition
of an investment contract. Though TIC securities are real estate,
securities laws and regulations prohibit securities broker dealers from
either directly or indirectly compensating non broker
dealers.
There
are currently attempts to work with the SEC on defining a role for real
estate professionals in the brokerage of securitized TIC interests, whereby
they can provide real estate services and derive compensation. NAR
is currently in negotiations with the SEC concerning REALTORS® roles in
securitized TICs.
At this moment, they are unable to put many
details on paper due to the changing and confidential nature of the
negotiations. However, if there are any questions, you can contact
Lisa Brechtel at NAR. You can contact her by phone, 202-383-1090, or
email at lbrechtel@realtors.org
6. 1031 Exchanges
In the Senate version of the Farm Bill, H.R. 2419, there was a provision concerning like kind exchanges of agricultural property for non-agricultural property. This provision would change the current 1031 exchange rules and disallow an exchange of "improved real property" for "unimproved agricultural real property."
However, this provision was not included in the
House version, or the final conference version of H.R.
2419.
7. Vacation Home Safe
Harbor
In March 2008 the IRS released a Revenue Procedure
concerning the involvement of 1031 exchanges and vacation homes.
Revenue Procedures lay out what the taxpayer must do in order to receive a
certain result from the IRS - in this case what needs to be done in order
for the IRS to NOT dispute the investment nature of a taxpayer's vacation
home. This ruling was prompted by a decision last year in the U.S.
Tax Court that disallowed a taxpayer's exchange from one vacation home to
another; prompting the question of what has to be done to qualify a
vacation home for a 1031 exchange.
First, there is a 24 month holding period whether the old property is a
vacation home, the new property is going to be a vacation home, or if
moving from one vacation home to another. For each 12 month block
during this period you must have rented the vacation home for at least 14
days at a fair market rent and the owner cannot use the property for the
greater of 14 days or 10% of the days rented during each 12 month
block.
This is a safe harbor ruling, meaning that if you
can meet these requirements your exchange should not be challenged.
If you do not meet this test your exchange is not immediately denied;
however, if you do not meet these requirements your exchange will likely
been scrutinized and possibly
denied.
8. Carried Interest
C.A.R. Position:
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.
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 success
of 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 26 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
Committee on 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 include real estate and mirror H.R. 2834.
This provision has been discussed numerous times as a tax offset for other
bills, including housing bills and AMT relief.
NAR opposes any proposal
that would eliminate capital gains treatment for any carried interest of a
real estate partnership.
VI. Real Estate Finance
Issues
A. Discussion/Reporting Items:
1. Stimulus Package and Temporary FHA and GSE Loan Limit Increase
C.A.R. Position:
C.A.R. is supporting the
House proposed Housing Stimulus Package that
includes:
-
Permanent extension of the temporary increase in the GSE and FHA loan
limits from Stimulus I,
-
Reforming the GSE and FHA
programs,
- Creating a tax
credit for first-time homebuyers,
- A FIRPTA fix,
and
-
Expanding FHA so it may insure troubled mortgages
from lenders.
In April, the Senate passed their second Economic Stimulus Package of
2008. The intent of the package is to help homeowners avoid
foreclosure. In actuality, the bill passed by the Senate would do
little to help individuals avoid foreclosure. The final bill was full
of tax incentives directed towards lenders and homebuilders, along with a
version of FHA Reform that would severely cut the current higher loan
limits implemented under Stimulus I.
As expected, the House
started from scratch on its own Housing Stimulus Plan; which it passed on
May 8, 2008. The House bill will:
While there are a number of proposals from Congressmen, Senators and
federal regulators that would address the current housing downturn, the two
bills that have the best opportunity of passage are those by Representative
Barney Frank and Senator Christopher Dodd. Frank and Dodd jointly
announced their bills on March 13, and while there are some differences the
primary intention of the two proposals is to utilize the FHA to insure
troubled mortgages.
3. 2009 OFHEO
Conforming Loan Limit Rule
OFHEO announced in March 2008, that they would NOT
decrease the 2009 conforming loan limit. This is a reversal of a
previous OFHEO announcement stating their intention to lower the 2009 loan
limits. This has no impact on the temporary increase of the
conforming loan limits in high cost areas that was enacted by Stimulus
I.
4. GSE Appraisal Deal with
N.Y. (C.A.R. Comment
Letter)
C.A.R.
Position:
C.A.R. is opposed to not only the proposed Code, but the manner in which
the Code was created and is being enacted.
In March, Fannie Mae,
Freddie Mac, and OFHEO announced they had reached a deal with the Attorney
General's Office of New York over appraisal standards that will reshape the
appraisal industry across the country. Facing investigations by the
N.Y. Attorney General, Fannie and Freddie reached a compromise so the AG
would stop his investigation.
C..A.R. is staunchly opposed
to this agreement as it will preempt all state laws and hinder the loan
process. Under the agreement Fannie and Freddie will only be allowed
to purchase loans from lenders who meet the new appraisal requirements
regardless of what state the loan was originated in. C.A.R. believes
this agreement sidestepped the proper and legal routes for the GSE to enact
new rules. Many lenders have already hinted they plan to challenge
the legality of the agreement.
The deal will create a Home Valuation Code of Conduct that is intended to
create and protect the independence of home appraisals. The original
publication of the Code caused much angst due to vague writing that led
many in the industry to believe lenders and mortgage brokers would be
unable to communicate with appraisers.
REALTORS® are hoping the final draft language will clarify that
communication is allowed so long as their intention is not to fraudulently
influence the appraiser.
One drastic change the Code
creates is removing the ability of mortgage brokers to order
appraisals. Only lenders would be allowed to order independent
appraisals for properties under the Code.
5. Federal Mortgage Broker
License Requirements
C.A.R. Position:
C.A.R. is supporting Senator
Feinstein's mortgage broker license requirements bill.
There has been growing
concern by members of Congress over the education, oversight and regulation
of mortgage brokers. Of great concern to members of California's
Congressional Delegation is the Department of Corporations' California
Finance Lenders License (CFL). Because there are no education
requirements or licensing requirements for employees of CFL companies,
Congress is looking to implement minimum standards on loan
originators.
Senator Feinstein has
introduced the SAFE Mortgage Licensing Act that would ensure all mortgage
professionals are trained in federal lending laws, ethics, consumer
protection, and the sub-prime mortgage marketplace. It would also
create a national database for consumers to use to verify the credentials
of their brokers and lenders. The bill will require mortgage brokers
to meet minimum education requirements on an annual basis, but will not
require an annual license renewal.
The bill has been marked up
out of the Senate Banking, Housing and Urban Affairs Committee as part of
the Dodd GSE Reform bill and may be included in a final version of the
Housing Stimulus Package.
6. Neighborhood
Stabilization Act
C.A.R.
Position:
C.A.R. has no position on this issue.
Introduced in April of 2008 by Maxine Waters, the Neighborhood
Stabilization Act, H.R. 5818, was passed by the House on May 8, 2008, by a
vote of 239-188.
The bill would provide grants and loans to states to purchase foreclosed
housing for resale to families having incomes up to 140% of the area's
median income, rental of such housing by low- and moderate-income families,
and the rehabilitation of such homes for the purpose of reselling
them.
While this bill
was passed separate from the Housing Stimulus package, there will be
efforts by Democrats to include it in any final version.
7. Treasury Restructuring
Blueprint
C.A.R.
Position:
C.A.R. has no position on this issue.
On March 31, 2008, Secretary
Paulson announced the Treasury Department's Blueprint for a Modernized
Financial Regulatory Structure. The plan includes short, intermediate,
and long-term recommendations.
Of most immediate importance to
REALTORS® is the proposal to create a Mortgage Origination Commission to
set minimum state licensing standards for state mortgage market
participants. Most believe Congress will not act on this or other elements
of the plan this year, but the Commission could be an
exception.
In the section on long-term issues, Treasury supports allowing holding
companies to own both banks and commercial firms. REALTORS® are strongly
opposed to mixing banking and commerce. This section of the Blueprint would
take many, many years to enact and be extensively revised along the
way.
Read below for more details
and a link to the Treasury website on this subject.
========================================
Short-Term
Recommendations:
- Create a federal Mortgage Origination Commission
(with federal and state regulators) to set minimum licensing standards for
state licensing of its mortgage market participants. Treasury decided
not to propose preemption of state rules in this area. (But setting
minimum standards for state entities may be seen as a form of preemption.)
The Fed would continue to issue regulations implementing national mortgage
lending laws.
- Enhance
the mission of the President's Working Group on Financial Markets (PWG),
made up of the Treasury, the Federal Reserve Board, the SEC, and the CFTC.
The Blueprint would enlarge PWG membership to add the missing bank
regulators: OTS, OCC, and FDIC.
- Consider the role of
the Fed in providing additional liquidity for participants in the financial
markets.
Intermediate Term Recommendations:
- Repeal the thrift charter and abolish OTS, the thrift federal regulator.
- Authorize an optional federal insurance charter. Congress would establish a federal Office of Insurance Oversight within Treasury.
- Study the federal regulation of state-chartered banks (some now
regulated by the Fed and others by the FDIC), and consider the appropriate
federal regulator for state-chartered banks, to promote efficiency and
minimize
duplication.
Long-Term
Recommendations:
The Blueprint proposed a complete restructuring of the current regulatory
structure. Secretary Paulson acknowledges this will take many any years to
achieve. There would be 3
regulators:
-
Market Stability Regulator. The Fed would oversee all the various
actors in the financial markets, to promote market stability. This is a
major expansion of Fed powers.
-
Prudential
Regulator. There
would be a safety and soundness regulator for institutions with explicit
government guarantees - insured depository institutions and insurance
companies. The OCC would be the model. Treasury recommends continuing a
separate regulator for the GSEs, to avoid the implication the Federal
government guarantees GSE obligations.
- Business Conduct
Regulator. There
would be a new entity to monitor business conduct to protect consumers and
investors.
Key
Long-Term Issues
The Treasury Blueprint includes a discussion of
key long-term issues, including its proposal for a Federal Insured
Depository Institution (FIDI) Charter. The Treasury recommendation contains
a number of extremely troublesome
recommendations.
8. Mortgage
Reform
C.A.R.
Position:
C.A.R. opposes federal preemption of state laws. Additionally, C.A.R.
supports strong consumer protection laws, but those laws must not be so
stifling as to hinder the flow of capital to the markets.
The continued crisis in the
subprime market has caused both the Senate and the House to introduce
subprime and mortgage reform bills to address what many politicians and
consumer groups perceive as predatory practices. The hope of the
legislation is to protect consumers while not crippling the subprime
market; which, when properly utilized by home buyers serves as a valuable
resource for home ownership opportunities to those not able to procure
prime rate financing.
The House bill, H.R. 3915,
was passed on November 15, 2007, by a vote of 291-127. The House bill
primarily proposes the following:
-
Create minimum standards for state licensing of "mortgage loan originators"
and create a federal registration for them. This would not include
real estate agents; and is intended for mortgage brokers and bank employees
who originate mortgages.
- Tighten Home Owners Equity Protection Act (HEOPA) requirements so the APR and fee triggers are reduced.
- Prohibit the financing of points and fees, balloon payments, or
excessive fees for payoff information, modifications, and/or late
payments.
The Senate bill, S. 2542,
which was introduced at the end of 2007 by Senator Dodd is waiting to be
heard in the Senate Banking, Housing, and Urban Affairs Committee.
While both Democrats and Republicans will make recommendations and
amendments to Dodd's bill, as introduced it
would:
- Redefine a HOEPA loan to 8% above Treasury on the first, 10% for the second, or 5% of fees (including YSP),
- Define a "subprime mortgage" as 3% above Treasury on the first, 5% for the second,
- Prohibit any Yield Spread Premium (YSP) and prepayment penalties on HOEPA, subprime, and nontraditional mortgages,
- Give borrowers the ability to "unwind"or rescind a loan that violates provisions laid out in the legislation (it would actually be up to the note holder to help make the home buyer whole; we will have to see the actual text of the legislation to better understand this provision),
- Require mortgage brokers to have a fiduciary duty to their customers and hold them accountable under the Truth in Lending Act (TILA),
- Prohibit Steering,
- Address appraisals, loan servicers, and foreclosure
prevention.
Dodd's bill was drafted
and introduced with little to no consultation from many within the industry
and appears to be more of a wish list for consumer groups. If Dodd is
serious about moving his bill there will be many amendments
made.
9. Banks in Real Estate
C.A.R. Position: C.A.R. supports the separation of banking and commerce.
On December 26, 2007,
President Bush signed into law the FY2008 omnibus appropriations bill which
includes a two-year provision prohibiting banks from entering the real
estate brokerage, property leasing and management business. NAR was well
position to secure a permanent ban. However, due to a last minute objection
by Senator Robert Byrd (D-WV), Chairman of the Senate Appropriations
Committee, the permanent language was struck and replaced with a two-year
ban. In 2008 NAR will be advocating Congress to approve its Community
Choice in Real Estate bill (H.R.111/S.413).
V. VA & HUD Issues
A. Secretary Jackson
Steps Down
In March, then HUD Secretary Alphonso Jackson announced his
resignation. While stating the need to focus on "personal and family
matters," Jackson resigned amid several ethics investigations that have yet
to be resolved. President Bush has nominated Steven Preston who
currently serves as the Administrator of the Small Business
Administration. While Preston would appear to have little to no
housing background, at least one Senate hearing has been held and his
confirmation would appear to be all but assured.
B. HUD RESPA
Proposal
On May
7, 2008 the Department of Housing and Urban Development (HUD) announced a
30-day extension, to June 12, 2008, for the public to comment on the
proposed Real Estate Settlement Procedures Act (RESPA) rule. The
announcement came just six days before the initial comment period was to
end on May 13, 2008 and two days after HUD received a Congressional written
request for a 60-day extension signed by 149 members of Congress.
The Congressional letter, organized by Rep. Ruben Hinojosa (D-TX) and Rep.
Judy Biggert (R-IL), referred to the extensive nature of the RESPA reform
proposal and the fact that some aspects had not previously been the subject
of public comment.
In addition, the letter stated that further analysis was needed on the
proposed rule's interaction with state and federal laws and regulations
including the Federal Reserve Board's proposal to amend its Truth in
Lending Act (TILA) regulations.
REALTORS® worked closely with the offices of Representatives Hinojosa and
Biggert to help collect signatures for the letter. The fact that HUD
provided a 30-day extension rather than the 60-days requested by Congress
will be revisited in the future and another extension request may be made
if warranted.
REALTORS® have been working with its members and
industry partners to analyze and determine the proposal's impact on
association members and the settlement service industry.
REALTOR® Gary Thomas, along with other settlement service industry
representatives participated in a Small Business Roundtable on April 24,
2008 and expressed REALTORS®' concerns about the proposed rule, including
the comprehensive nature of the proposal which goes well beyond the
anticipated reform narrowly focused on improved disclosures, the timing of
provisions requiring significant changes to the real estate settlement
process, and comments directed at specific provisions including volume
discounts, average cost pricing, price tolerances, a new definition of
"required use" and a new "closing script" which must be read aloud at
closings.
NAR will submit comments to HUD on these and other
aspects of the proposed rule and encourages members to submit their own
comments to HUD by June 12, 2008.
Proposed Good Faith
Estimate
Proposed Instructions for Closing Script
Proposed
Rule
C. Home
OwnershipOpportunities
for Veterans
C.A.R.
Position:
C.A.R. supports increasing homeownership opportunities for
California and the nation's
veterans.
The House Veterans Affairs Committee has favorably reported H.R. 4884, the
"Helping Our Veterans to Keep Their Homes Act of 2008". This bill,
sponsored by Rep. Filner (D-CA), will reform the VA loan program so that it
is able to adequately serve the many deserving veterans who could use its
benefits. The bill does 3 major
things:
-
Permanently
increase the VA loan limits to 175% of the Freddie/Fannie limits (currently
that would be equal to
$729,750);
-
Streamline
refinances for veterans by eliminating the equity requirement and raising
the refinancing loan limits to the same level as the purchase loan limits;
and
-
Extend the
authority of VA to offer Adjustable Rate Mortgages (ARMs).
This bill is
expected on the House Floor in the next few weeks. Similar legislation has
not
yet
been introduced in the Senate.
An additional piece of proposed legislation to help veterans with their
homeownership opportunities is the Qualified Veterans’ Mortgage Bonds
(QVMB) program. As home prices have risen in California, only a few
select veterans in California 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). Most of the
provisions in H.R. 551 were rolled in H.R. 3997, the “Heroes’ Earnings
Assistance and Relief Tax (HEART) Act of 2007”. 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 just a 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.
When
the House returned for the 2nd session of the 110th
Congress, they introduced an updated version and passed H.R. 6081, the
“Heroes Earnings Assistance and Relief Tax Act of 2008” on May 20, 2008 by
a vote of 403-0. Included in H.R. 6081 are the same QVMB provisions
that were found in H.R. 3997.
VII. Land Use
& Environment
Issues
A. Discussion/Reporting
Items
1. 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.
Additionally, Congress has passed H.R. 2419, the Farm Bill.
Included in H.R. 2419 was a two-year extension of
a tax deduction encouraging the contribution of real property for
conservation purposes and a deduction for endangered species recovery
expenditures.
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.
3. NAR Policy on Water Resources
At the May NAR Mid-Year meetings, NAR's Land Use Committee
announced the completion of their newest water resources policy.
Below is the language of the new
policy:
"The
National Association of REALTORS® supports healthy, clean and abundant
supplies of water.
We support finding voluntary, market-based solutions to address excessive
pollution and degradation of the nation's waterways, while always being
mindful of and vigorously defending, private property rights. We also
support adequate federal funding for a well-developed system of water
resources infrastructure and technology to ensure water quality and
quantity nationwide.
We support the responsible use and management of our nation's water
resources so that residential, commercial, and industrial development can
proceed without degrading the nation's
water and without excessive regulatory encumbrances.
We believe that the development of a comprehensive
federal water resources policy should take into account traditional state,
local and private water rights, and uses. We pledge to cooperate with
federal, state, and local agencies responsible for water resources to
educate REALTORS®, their clients, homeowners, and consumers on water
resource issues and the value and benefits of protecting water
supplies"
VIII. New
Business
IX. Adjournment
