Equal Opportunity – Cultural Diversity Committee
Room 306 / 307
Convention Center
Sacramento, California
1:10 PM – 2:50 PM

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

Staff Coordinators: 
Carmen 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  

Political Update – Jeff Keller  

REPORT/DISCUSSION ITEMS

1. Making Homes Affordable
On March 4, 2009, the Obama Administration released detailed guidelines for homeowners to help them determine if they qualify for the Administration’s new Making Home Affordable plan. 

The plan has two primary goals:
1.To help homeowners in existing Fannie Mae or Freddie Mac loans that are current on their mortgage payments to refinance and take advantage of today’s lower interest rates.  Many of these homeowners are unable to refinance because of lost appreciation in their homes due to the continuing decline in home prices.  These homeowners still have equity in their home, just not the necessary 20% to get a refinance.  Under the Administration’s plan, Fannie and Freddie will be allowed to refinance qualified homeowners up to a 105 percent loan-to-value of the current value of the home.

2. To help homeowners who are at risk of foreclosure. The Administration is offering loan servicers and investors government assistance to help offset the cost of modifying qualified homeowners into affordable mortgages that will allow them to keep their homes. This may be done by reducing the mortgage interest rate, extending the term of the loan, principal forbearance, and/or principal reduction. This program is voluntary and the servicers must agree to contracts with the Treasury to participate. Some of the details include:

− Lenders reduce borrower’s primary mortgage monthly payment to 38% of borrower’s debt-to-income ratio (DTI);  with the costs of doing so borne by the lender
− The government and lender then would split the costs of further reducing the monthly payments until they were at a 31% DTI
− Lenders to keep modified payments for 5 years – after which, lenders can increase interest rate gradually to the conforming loan rate at the time of modification  
− Creates incentives for servicers and mortgage holders.
− Servicers would receive an up-front fee of $1,000 for every eligible modification meeting the initiative’s guidelines.
− Mortgage holders will receive an incentive payment of $1,500, and servicers $500, for modifications made on loans that are current but at risk of imminent default.

In early May the Administration updated their “Make Homes Affordable” program to also include second liens and piggyback loans.  These second liens and piggyback loans were hindering many of the loan modifications being attempted.  Therefore, the Administration’s plan is to include cash incentives and subsides to lenders holding these second loans, similar to those being offered to lenders holding the primary mortgages. 

The plan would include agreements with second lien holders to reduce interest rates to 1% on fully-amortizing second mortgage and 2% on interest-only seconds for five years. The lender will receive $500 for each second loan modified and $250 for each year the homeowner stays current.  If the lender chooses, they can take a lump-sum cash payment and cancel the second lien altogether.

More information can be found at:
http://www.car.org/governmentalaffairs/federal/hrlmp/

2.  Homebuyer Tax Credit
The First-time Homebuyer Tax Credit (HTC) was changed as part of the 2009 Stimulus Package.  Below is a description of the previous HTC and the updated HTC.

If the home was purchased between April 8, 2008 and December 31, 2008
 - The tax credit is 10% of the purchase price, capped at $7,500.
 - The tax credit does need to be repaid, therefore working more as an interest free loan.  The credit is repaid out of your taxes over 15-years.
 - You cannot get the credit if the property is financed by a tax exempt qualified mortgage issue/bond.

If the home was purchased between January 1, 2009 and November 30, 2009
 - The tax credit is 10% of the purchase price, capped at $8,000.
 - The tax credit does not need to be repaid – the only exception being if the property is sold within 3-years of purchase.
 - You can get the credit if the property is financed by a tax exempt qualified mortgage issue/bond.

3. Combating Fraud
The FBI has reported that their mortgage fraud caseload has more than doubled in the past three years; and the surge shows no sign of subsiding.  Agents have more than 2,000 active mortgage fraud investigations, up from 700 several years ago, and are pursuing more than 560 corporate fraud cases, including probes directly related to the financial turmoil.

Additionally, The Federal Trade Commission (FTC) is harnessing new powers (authorized in the FY09 omnibus spending bill) and using existing authorities to clamp down on mortgage assistance fraud and other abuses. They are focusing on foreclosure-rescue scam artists as well as enforcing new mortgage rules by the Federal Reserve taking effect this fall. In the past five years, the agency has brought 70 cases in the financial service arena.

4. Property Tax Scams
As the housing market has stumbled, there has been a marked increase in “property tax reduction scams”. These are private companies -- often posing as governmental agencies -- who will charge property owners for filing a tax assessment appeal. It has become such as problem that C.A.R. issued a warning over the practice and many county assessors have done the same.

These companies send out unsolicited mail claiming they can help homeowners reduce their property taxes, but may charge hundreds of dollars to file for a reduction in value on behalf of the property owner. Some companies are even imposing late fees if the application is received after an arbitrary deadline. Many of these companies try to pose as if they are a government agency; even though they are supposed to clearly state that they do not represent any government agency.

There is nothing illegal about charging for the service of filing an assessment appeal. But it must be made clear that the company offering the service is not a government agency and that their services are not approved by any government agency. Even if proper disclosure is made, though, it is not clear why anyone would pay for such a service as it is a free review process (often a simple one-page form and little to no documentation) and many assessors are performing these reviews without even being prompted by the homeowner. 

If you or any of your clients have any questions concerning property tax reductions please have them contact their county assessor for more information.

5. Study Finds Minorities and Woman Did Not Receive Higher Levels of Subprime Mortgages
A study of information recorded by lenders under the Home Mortgage Disclosure Act indicated that, contrary to some previous studies, minorities and women didn’t receive higher levels of subprime mortgages nor did their interest subsequently reset to higher levels.  The study concluded: “If any pricing differential exists, minority borrowers appear to pay slightly lower rates.”

Authors of the research were Joseph Tracy, director of research at the New York Fed; Andrew Haughwout, head of microeconomics and regional studies at the New York Fed; and Christopher Mayer, a professor of real estate finance and economics and vice dean of the Columbia University Business School.

Critics of the findings said there was no information available about whether minority borrowers were charged higher upfront costs or whether they might have qualified for less-expensive financing.  “If you don’t have information on two of the biggest areas of abuse, you have to wonder how definitive a report like this is,” said Sarah Ludwig, co-director of the Neighborhood Economic Development Advocacy Project in New York and a former member of the Fed’s Consumer Advisory Council.

III. Everything You Want to Know – And More! - About Fair Housing Law in California – Ann Noel, Esq., Executive & Legal Affairs Secretary, California Fair Employment and Housing Commission, and Annmarie Billotti, Esq., Associate Chief Deputy Director & Special Projects Counsel, Department of Fair Employment and Housing

IV. Other Business – Cathlyne Scharetg       

A.  NAR Update – Winnie Davis, NAR Representative     

V. Adjournment -- Cathlyne Scharetg