Marriott Hotel
San Jose, California
Wednesday, October 7, 2009
2:00 pm - 4:00 pm
Presiding:
Steve White, Chair
Cas Pinkowski, Vice Chair
Georgia Richardson, Vice Chair
Le Francis Arnold, Committee Liaison
C.A.R. Staff:
Dave Milton
Matt Roberts
I. Opening Comments
II. Introduction/Discussion of 2010 Housing Committee Structure:
Housing Committee Mission Statement - This Committee is a
Policy Committee. Its mission is to develop C.A.R.'s housing policy.
It has original jurisdiction to evaluate housing legislation and regulation
in the following issue areas:
Common Interest Developments
Fair Housing/Equal Opportunity
Housing Policy
Manufactured Housing
Multifamily Housing
Property Management
Real Estate Finance
Presiding:
LeFrancis Arnold, Chair
John Torres, Vice Chair
Issue Chairs:
Rana Linka, Common Interest
Development
Miguel Garcia, Fair Housing/ Equal Opportunity
Georgia Richardson, Housing Policy
Diane Conaway, Manufactured Housing
Mike Riley, Multifamily Housing
Tica O'Neill, Property Management
Winnie Davis, Real Estate Finance
Committee Liaisons:
Kevin Brown
Annette Graw
Staff Coordinators:
Dave Milton
Matt Roberts
III. State Legislation
A. C.A.R-Sponsored Bill
SB 206 (Dutton) Tax Credit for Purchasers of Foreclosed Homes as
Principal Residence- SB 206 proposes to establish a tax credit of
limited duration for the purchase of foreclosed homes. This measure is
intended to incentivize specified homebuyers, those that do not have
adjusted gross income over ninety-five thousand dollars ($95,000) or one
hundred seventy thousand dollars ($170,000) for joint filers, to purchase
homes that have been foreclosed upon and returned to the lender. Low
mortgage rates and house prices, coupled with the federal first-time home
buyer tax credit, is having a definite impact on the California housing
market. SB 206 could increase this impact by positively contributing to
reduction of the REO (foreclosure) inventory in California. Until the
backlog of unsold foreclosed homes is significantly reduced, the housing
market in California will not enjoy a full economic recovery. C.A.R is also
very aware of the current fiscal challenges facing the State and this tax
credit is therefore predicated on securing non-General Fund dollars to pay
for it.
Position: Sponsor Status: Senate
Revenue & Taxation Committee
B. Other Housing Tax Credit Legislation
AB 765 (Caballero) Revision of Franchise Tax Board (FTB)
Computation Process re Allocation of Current Housing Tax Credit for
Purchase of New Homes -This bill is designed to correct an
implementation problem with the State's Homebuyer Tax Credit Program.
AB 765 proposes technical changes to existing law in order to fully utilize
the $100 million in funding that was authorized by SB 15XX (Ashburn) in
February as part of the State Budget compromise. Since March 1, more than
10,000 California families have purchased homes using the tax credit. Due
to the process utilized by FTB to account for the use of the tax credit,
technically the program’s $100 million spending limit was reached in July.
AB 765 seeks to revise statutory procedures for FTB, more accurately
reflecting the tax credit program’s cost – an estimated $7,000 per credit
instead of the $10,000 utilized under the current process. The effect
of revision in the allocation process would be to free up roughly $30
million in unused tax credit funds – enough authority to help as many as
4,200 more homebuyers to purchase a home.
Position: Support
Status: Senate Floor
SB 49 (Dutton) Lifting of Funding Cap on State Housing Tax Credit
for New Homes Purchases - This bill proposes to modify the
existing tax credit authorized by SB 15XX (see above) for purchases of a
new principal residence made before December 1, 2010. It would revise
the certification requirements to provide that the taxpayer receive this
written notification no later than one week after the close of escrow on
the qualified principal residence and that the Franchise Tax Board be
provided with the certification upon request by the board. This bill would
also remove the cap on the total credit amount allowed and the requirement
that the tax credits be allocated on a first-come-first-served basis.
Position: Support
Status: Senate Revenue & Taxation Committee
C. Other Housing Bills of Interest
AB 720 (Caballero) Housing Element Units Rehabilitation
-The Planning and Zoning Law requires each city, county, and city and
county to prepare and adopt a general plan that contains certain mandatory
elements, including a housing element that analyzes existing and projected
housing needs and includes a statement of goals, quantified objectives,
policies, financial resources, and scheduled programs for the maintenance,
preservation, improvement, and development of housing. This bill would
authorize a city, county, or city and county to include weatherization and
energy efficiency improvements as part of its efforts to substantially
rehabilitate a unit.
Position: Watch Status: Enrolled to
Governor
AB 1246 (Jones) Housing Cooperative Trust and Workforce Housing Trust-
Existing law defines "limited-equity housing cooperative". It also exempts
a limited-equity housing cooperative from specified requirements for the
regulation of transactions of subdivided lands. This bill would revise the
definition of a "limited-equity housing cooperative" to also apply to a
"workforce housing cooperative trust." It exempts such an entity from
provisions governing the regulation of transactions of subdivided land if,
among other organizations, the Federal Home Loan Bank System or any of its
member institutions directly finance or subsidize at least 50% of the total
construction or development cost or $100,000, whichever is less. The bill
also would exempt such an entity from these provisions if the real property
to be occupied by the cooperative was sold or leased by the Department of
Transportation, other state agency, a city, a county, or a school district
for the development of the cooperative.
Position: Watch Status: Enrolled to
Governor
AB 1432 (Mendoza) Expenditure Control of TARP Funds -
Existing law authorizes the California Housing Finance Agency (CalHFA) to
make loans to qualified mortgage lenders under terms and conditions
requiring the proceeds to be used for construction loans and mortgage loans
for the purpose of financing housing developments and residential
structures. This bill provides that if the agency receives funds from the
federal Troubled Asset Relief Program (TARP) established pursuant to the
Emergency Economic Stabilization Act of 2008, the agency shall use
the funds to make or refinance acquisition, construction, or development
loans for housing developments or residential structures affordable to
persons and families earning up to 200 percent of the area median
income.
Position: Favor Status:
Assembly Housing & Community Development Committee
AB 1459 (Davis) Multifamily Housing Program for Veterans -
The Multifamily Housing Program is administered by the Department of
Housing and Community Development. It provides a standardized set of
program rules and features applicable to all housing types based on the
department's California Housing Rehabilitation Program. Under these rules,
a sponsor of a supportive housing development can restrict occupancy to
persons with veteran status if the development is located on property that
is owned or leased by the United States Department of Veterans Affairs or
the California Department of Veterans Affairs and is leased to the sponsor
for not less than 55 years. This bill would delete the requirement that the
development be located on property owned or leased by the United States
Department of Veterans Affairs or the California Department of Veterans
Affairs and establishes parameters for restricting occupancy in the
development to veterans and veterans' families.
Position: Watch Status:
Enrolled to Governor
SB 326 (Strickland) Required Quantification of Local Foreclosure
Rate in Housing Element - The Department of Housing and Community
Development is required to determine each region's existing and
projected regional housing need and adopt a final plan that allocates
a share of the regional housing need to each city, county, or city and
county. This bill provides an alternative methodology for a city or county
to identify or make available adequate sites to accommodate that portion of
the regional housing need allocated to it.
Position: Watch Status:
Assembly Local Government Committee
SB 575 (Steinberg) Local Requirements for Revision of Housing
Element - Metropolitan planning organizations are required to
conduct at least 2 informational meetings in each county within the region
for members of the board of supervisors and city councils on the issue of
sustainable communities and alternative planning strategies. The purpose of
the meetings is to present a draft of the sustainable communities strategy
to the supervisors and city council members and to solicit their input and
recommendations. This bill would expand the purpose of such meetings to
also include key land use and planning assumptions, as well as specifically
require the Tahoe Metropolitan Planning Organization to use the Regional
Plan for the Lake Tahoe Region as its sustainable communities
strategy.
Position: Watch Status:
Senate Floor for Concurrence on Assembly Amendments
IV. Federal Issues- Discussion Items
A. Federal Homebuyer Tax Credit - The current First-time Homebuyer Tax Credit (HTC) expires on November 30, 2009; meaning that in order to be eligible for the HTC the escrow cannot close past November 30, 2009. The current HTC is:
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.
C.A.R. and NAR are working diligently on both expanding and extending the HTC. C.A.R and NAR want to see the tax credit expanded to all homebuyers and extended until the end of 2010.
The HTC has accomplished its primary goal; it has helped create homeowners
and has helped stabilize housing prices. C.A.R.’s research on the use of
the tax credit in California showed that 39% of homebuyers said that they
would not have purchased a home without the tax credit. Additionally, 52%
of homebuyers making under $100,000/year said that they would not have
purchased a home without the tax credit. Furthermore, of those first-time
homebuyers who planned to apply for the tax credit, 40% of respondents said
it was the “most important” factor in their purchasing of a home.
B. GSE Update
1. GSE Reform
Many people expected the Administration to announce its plans to address
the future of Fannie Mae and Freddie Mac when they released their
regulatory reform proposal in late June. Instead, the Administration
has stated they will release their plans for the future of the GSEs around
the time they release their proposed 2011 budget in February of 2010.
It is still unclear how or if the Administration or Congress will
restructure the GSEs, and what role government is to play in the future of
the nation’s housing market.
The first detailed proposal for the future of the GSEs and the nation’s mortgage capital markets has come from the Mortgage Bankers Association. Their proposal would create new privately owned, government-chartered and regulated, mortgage credit guarantor entities (MCGEs). These would be very similar to Ginnie Mae and would guarantee timely interest and principal payments to bondholders.
With Congress still focused on other priorities, it is doubtful this issue will pick up much momentum prior to the Administration releasing their proposal. However, we can expect other interested parties to continue to put forth ideas and for hearings to be held in both chambers of Congress.
2. GSE and FHA Loan Limits
Included in the House passed Transportation, Housing and Urban Development
appropriations bill (THUD) was a provision that would extend the current
loan limits until the end of the fiscal year 2010 (October 1, 2010).
The Senate passed version does not include this provision. There is
still a great amount of support for it and both NAR and C.A.R. will work to
ensure it is included in the final version that comes out of
conference.
C. FHA Anti-Flipping Rule - The rule was put into place in 2003 as
the housing market was heating up. It was a response to the problem
that, with too much frequency, collusion was occurring between investors,
appraisers, agents, and/or lenders. Investors were buying up inner
city homes at rock-bottom prices, performing cosmetic improvements, and
then reselling the homes after a few weeks or days at artificially high
prices supported by fraudulent appraisals. Lenders and/or mortgage
brokers would simply lie on homebuyer applications and FHA would be "stuck"
with the bill. Sometimes homes would be sold to fictitious buyers and
then resold again and again inflating the price along the way and then sold
to a legitimate FHA buyer but at a significantly above-market price.
Since FHA is often the lender of last resort, FHA borrowers are more likely
to not have the financial background and education of conventional
homebuyers. This makes FHA borrowers an easier target for predatory
flipping, placing the U.S. taxpayer at risk since FHA is backed by the full
faith and credit of the U.S. government.
Should the HOC recommend to the Real Estate Finance Committee that C.A.R. go "on record" as opposing the "Anti-Flipping" Rule and recommending to FHA that it be eliminated?
Please see the IBP on this issue:
D. FHA Update
1. FHA Appraisal
Under pressure to come closer in line with the GSEs and their Home
Valuation Code of Conduct, the FHA has adopted new appraisal requirements
to go into affect on January 1, 2010. While not completely identical
to the HVCC, the new requirements will implement many of the same
guidelines, these include:
• Prohibiting mortgage brokers or commission based lender staff from
choosing the appraiser,
• Allowing for the use of AMCs or other third party organizations for
appraisal ordering, and
• The prevention of improper influences on appraisers.
To address REALTORS®’ greatest concern with the HVCC, HUD reaffirmed in their Mortgagee Letter that an appraiser should have knowledge of the market area and have geographic competency for where the home is located. However, there doesn’t appear to be anything in FHA’s mortgagee letter that will prohibit lenders from merely extending their current HVCC practices to FHA loans; except for allowing FHA appraisals to be portable.
2. FHA Reserve Fund
The FHA is expected to report their reserve fund has dropped below the two
percent level required by Congress. FHA Commissioner, David Stevens
has stated that while the reserve must get above that threshold again, the
FHA’s total reserve is more that $30 billion, or about 4.4 percent of its
book of business. Stevens noted that the study will project the
reserves should rebound above the two percent threshold within two
years.
To address the reserve problem, FHA will hire a chief risk officer, and will likely take additional steps in the future. The FHA does not anticipate raising borrower premiums or minimum down payments for now.
3. H.R. 3146
On September 16, 2009, the House passed H.R. 3146, the 21st Century FHA
Housing Act. As FHA gains a larger share of the nation’s housing
market and plays an ever more important role in its recovery it became
important for Congress to take action to ensure FHA has the resources and
tools necessary to meet these goals. This includes the ability to
expand their staff and upgrade their technology, target reviews of loan
performance to better protect the financial health of the program, and
provide the HUD Secretary with authority to implement new programs to
minimize foreclosures, which may include short sales and deeds-in-lieu.
Lastly, the legislation will fix technical errors from the Housing and
Economic Recovery Act that passed in 2008. These errors include
streamlining condominium purchases and implementing the new dollar limit on
energy efficient mortgages.
V. Other Business
VI. Adjournment
