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1. High-Cost Conforming Loan Limits & GSE Oversight
SENATE ACTION REQUESTED: Amend and Pass S. 190 to create a new GSE regulator with similar powers to those provided in H.R. 1461; including the authority to set high-cost conforming loan limits by an area’s median home price.
On October 26, 2005 the House passed H.R. 1461, which overhauls the government sponsored enterprises (GSE) of Freddie Mac and Fannie Mae. These reforms will restructure the regulations on GSE’s and includes a C.A.R. sponsoredprovision that would allow the new GSE regulator to set high-cost conforming loan limits by an area’s median home price, up to 150% of the national conforming loan limit. This move was seen as a victory for the real estate industry. However, a controversial provision was included in the bill that creates an affordable-housing fund that would be financed with a portion of Fannie Mae’s and Freddie Mac’s profits. There was a fear thatthe affordable-housing fund would be used to support political campaigns, so amendments were passed that would require those receiving these funds to not participate in political activities.GSE reform is now in the Senate and faces an uphillfight. The Senate version of GSE reform, S. 190, was reported out of the Banking, Housing, and Urban Affairs Committee along a party line vote. There is less interest in the Senate to pass this reform and real estatewill again have to fight to make sure that S. 190 also includes a provision allowing the new GSE regulator to set high-cost conforming loan limits by an area’s median home price. REALTORS® also want to ensure that any reform grants the new regulator the authority to adjust the GSE portfolio size and does not curtail this with statutory limits.2. FIRPTA (Federal Investment in Real Property Tax Act)
HOUSE & SENATE ACTION REQUESTED: That the House and Senate find legislation to attach an amendment that would allow for sellers to provide information required under FIRPTA to escrow or another settlement provider as an alternative to having to give their taxpayer identification number 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 affidavit to the buyer or are providing an affidavit without the seller’s taxpayer identification number. This creates a dilemma for buyer’s 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. C.A.R. believes a seller should be able to provide the information require by FIRPTA to escrow or another settlement provider as an alternative to providing that information to the buyer. NAR has presented proposed legislation to the House Ways and Means Committee Staff, and are working with them to finalize the wording. At this time, however, it is unclear what, if any, tax legislation this provision could be attached to.
3. Natural Disaster Insurance
HOUSE & SENATE ACTION REQUESTED: That Congress pass a federal reinsurance program to encourage more participation by insurance companies in the homeowner’s insurance market.
On November 17, 2005 Representative Ginny Brown-Waite (R-FL) introduced the Homeowners’ Insurance Protection Act, H.R 4366. The bill would create a reinsurance program for natural disasters and encourage prevention and mitigation programs. States that create an insurance and or reinsurance programto cover against residential property loss and the contents of apartment buildings will be able to purchase reinsurance contracts from the U.S. Treasury. These contracts will cover earthquakes and the natural disasters that result fromthem such as fires and tsunamis, hurricanes and typhoons, tornados, volcanic eruptions, severe winter storms and others. Because H.R. 4366 requires states to create their own insurance or reinsurance program to qualify for the federalreinsurance, states that don’t feel endangered by natural disasters do not have to participate.C.A.R. supports the promotion of available and affordable homeowners’ insurance.
4. Estate Tax Repeal
SENATE ACTION REQUESTED: Ask Senators to support either reforming or full repeal of the estate tax. Urge them to make sure that either way the “stepped-up basis” is preserved.
With the recent appreciation of housing in California, many middle and working class individuals could find themselves in the unfortunate circumstances of having to sell loved ones’ property to cover estate taxes. Easing this scenario, the Economic Growth and Tax Reconciliation Act of 2001 set in motion a ten-year process to increase the exemptions from the estate tax and lead to full repeal in 2010. In the interim, the amount of the exclusion is gradually increasing from $675,000 to $3 million and the estate tax rates are gradually reducing from a maximum of 50% to a maximum of 45%. However, in 2011, the estate tax laws will revert to the laws that were in effect on June 6, 2001.As under prior law, the basis of assets received between 2001 and 2010 is "stepped up" to its fair market value at the time of death. When repeal comes into effect, the estate will not be taxed, but the basis of assets that heirs receive will be "carried over" so that the basis in the hands of the heir is the same as the basis of the previous owner.
On April 13, 2005, the House passed H.R. 8, the Death Tax Repeal Permanency Act, which would make permanent the death tax repeal after 2010. Currently, Senate Majority Leader Frist has announced that he will seek a similar bill in the Senate in June 2006. It is believed that a Senate compromise bill would increase the threshold that an estate must meet in order tobe taxed to between $2 million to $10 million and reduce the estate-tax rate. In addition, it is believed that the compromise would allow for “stepped-up basis” instead of “carry over”. Any full repeal of the estate tax would likely mean there would only be a “carry over” provision.5. Endangered Species Act
SENATE ACTION REQUESTED: That the Senate pass H.R. 3824, The Threatened and Endangered Species Recovery Act of 2005 (TESRA), to amend the Endangered Species Act of 1973 in order to provide for greater results in conserving and recovering listed endangered species while continuing the ability to provide for development.
REALTORS® support amendments to the Endangered Species Act that recognize the economic impact in designating and recovering endangered species, provide incentives to encourage species protection and compensate private property owners when they have been wholly or substantially deprived of the economic value of their property.
H.R. 3824, “The Threatened and Endangered Species Recovery Act of 2005 (TESRA)”, sponsored by Representative Richard Pombo (R-CA), would revise various provisions of the ESA relating to determinations of endangered or threatened species, recovery plans for such species, and the role of states and private property owners in protecting such species. TESRAlooks to find a balance between the needs to protect endangered species and the needs for responsible development. H.R. 3824 was introduced on September 19, 2005 and passed by the House just 10 days later. The bill now sits in the Senate, in the Committee on Environment and Public Works, and no indication has yet been given as to when the Senate will pick up this issue.6. Banks out of Real Estate
HOUSE & SENATE ACTION REQUESTED : That the House pass H.R. 111 and the Senate pass S. 98, the Community Choice in Real Estate Act,which will permanently prohibit banks from entering commerce.
The Community Choice in Real Estate Act, H.R. 111, was re-introduced by Rep. Ken Calvert on January 4, 2005 and currently has 253 co-sponsors. S. 98 was re-introduced by Sen. Wayne Allard on January 24, 2005 and currently has 26 co-sponsors.
On January 7, 2003, Rep. Ken Calvert first introduced H.R.111. At the end of the 108th Congress, HR111 had 254 co-sponsors, however the bill failed to get out of the Financial Services Subcommittee on Financial Institutions and Consumer Credit. S.98 was originally introduced on January7, 2003 by Sen. Wayne Allard. At the end of the 108th Congress, S.98 had 27 co-sponsors, however the bill failed to get out of the Committee on Banking, Housing and Urban Affairs. In January 2001 the Treasury Department and Federal Reserve Bank issued a rule allowing banks to enter the real estate industry. H.R. 111 and S.98 are the response by Congress to the agencies’ rule.H.R.111 and S.98 would permanently prohibit banks from entering the real estate brokerage business and property management business. REALTORS® have successfully lobbied Congress to prohibit the Treasury from implementing their rule through one-yearappropriation provisions.
Additionally, in January of 2006, recent OCC rulings were made public that allowed Bank of America the right to develop a hotel property next to its headquarters, PNC the right todevelop a mixed-use property including a restaurant and condo units near its base of operations, and Union Bank of California was given permission to own 70% of a company developing a wind energy project, including the land where the turbines will be installed. C.A.R. and NAR have lobbied and warned Congress of the dangerous precedent rulings such as these can set.C.A.R. supports keeping banks out of real estate.7. National Flood Insurance Program Reform
HOUSE & SENATE ACTION REQUESTED: That Congress pass legislation to reform the National Flood Insurance Program (NFIP) to ensure its continued solvency. These reforms should include increasing the dollar caps on how much the NFIP may cover and studying the impact of using a 500-year flood plain.
Congress has introduced numerous bills to reform the NFIP which has become insolvent. One of the bills, H.R. 4973, the Flood Insurance Reform and Modernization Act of 2006, was passed out of the House Committee on Financial Services on March 16, with bipartisan support. Included in the bill are provisions that will increase the borrowing authority of the NFIP to $25 Billion, increase the coverage limits for residential flood insurance from $250,000 (structure) and $100,000 (contents) to $335,000/$135,000, increase coverage on non-residential properties from $500,000 to $670,000, increase amount FEMA can raise premiums annually from 10% to 15%, review the nation’s flood maps (including mapping the 500-year floodplain), and extend the mitigation program for properties with severe repetitive losses.
Also included in H.R. 4973 is a provision to phase in actuarial rates for subsidized vacation homes, second homes, and non-residential properties. Currently, all properties priorto 1975 and are required to have flood insurance are subsidized with low premiums. NAR has policy opposing a blanket imposition of higher insurance premiums on vacation homes and rental properties.
