Agenda Summary
Federal Housing Policy Committee
National Association of REALTORS®
2006 REALTORS® Conference & Expo
Hilton New Orleans Riverside
Grand Salon D
Friday, November 10, 2006
9:00 AM - 11:30 AM
Chair: JoAnne Poole, Glen Burnie, MD
Vice Chair: Conchita Sulli, Kenner, LA
Committee Liaison : Nick D’Ambrosia, La Plata, MD
Committee Executive: Ken Trepeta, Washington, DCI. Call To Order
NAR Ownership Disclosure and conflict of Interest Policy
1. When NAR has an ownership interest in an entity and a member has an ownership interest* in that same entity, such member must disclose the existence of his or her ownership interest prior to speaking to adecision making body on any matter involving that entity.
2. If a member has personal knowledge that NAR is considering doing business with an entity in which a member has any financial interest**, or with an entity in which the member serves in a decision-making capacity*, or wit, then such member must disclose the existence of his or her financial interest or decision making role prior to speaking to a decision making body about the entity.
3. If a member has a financial interest in, or serves in a decision-making capacity for, any entity that the member knows is offering competing products and services as those offered by NAR, then such member must disclose the existence of his or her financial interest or decision-making role prior to speaking to a decision making body about an issue involving those competing products and services.
After making the necessary disclosure, a member may participate in the discussion and vote on the matter unless that member has a conflictof interest as defined below.
Conflict of Interest Policy
A member of any of NAR’s decision making bodies will be considered to have a conflict of interest whenever that member:
1. Is a principal, partner or corporate officer of a business providing products or services to NAR or in a business being considered as a provider of products or services (“Business:); or
2. Holds a seat on the board of directors of the Business unless the person’s only relationship to the Business is service on such board of directors as NAR’s representative; or
3. Holds an ownership interest of more than 1 percent of the Business.
Members with a conflict of interest must immediately disclose their interest at the outset of any discussions by a decision making body pertaining to the Business or any of its products or services. Such members may not participate in the discussion relating to that Business other than to respond to questions asked of them by other members of the body. Furthermore, no member with a conflict of interest may vote on any matter in which the member has a conflict of interest, including votes to block or alter the actions of thebody in order to benefit the Business in which they have an interest.
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*Ownership interest is defined as the cumulative holdings of the member, the member’s spouse, children, siblingsand to any trust, corporation or partnership in which any of the foregoing individuals is an officer or director, or owns, in the aggregate, at least 50% of the (a) beneficial interest (if a trust), (b) stock (if a corporation) or (c) partnership interests (if a partnership).
**Financial interest means any interest involving money, investments, credit or contractual rights.
II. Approval of 2006 Mid-Year Meeting Minutes
III. Guest Speakers:
The Honorable Robert M. Couch, President, Government National Mortgage Corporation (Ginnie Mae)
Mr. Charles E. Gardner, Director, U. S. Department of Housing and Urban Development (HUD) Homeownership DirectorMr. Peter Morgan, Chief of Staff, Housing and Community Facilities Programs, Rural DevelopmentIV. Legislative/Regulatory Updates and Pending Business
1.
Status of Federal Housing Administration (FHA) Modernization.
Despite the successes of the FHA single-family mortgage program, too many potential homeowners in underserved populations continue to be left out from the American dream of owning a home. In high-cost areas of the country, FHA is not a useful homeownership tool because its maximum high-cost mortgage limits lag far behind the median price of housing. As a result, teachers, police officers, municipal workers and other middle class working people are excluded from the benefits of homeownership in communities where they work.
REALTORS® support modification of FHA program policies to enhance homeownership opportunities for homebuyers not served by the private mortgage sector. NAR members are active participants in, and supporters of, the FHA single-family mortgage insurance program and are committed to preserving its market viability and financial solvency.
The FHA single-family mortgage program has played an important and vital role in the mortgage marketplace.The FHA program has a public purpose obligation to provide mortgage insurance to American families who choose FHA to meet their homeownership needs.
Reps. Ney (R-OH), Waters (D-CA), Miller (R-CA) and Tiberi (R-OH) have introduced H.R. 5121, the "Expanding American Homeownership Act of 2006". This bill would make six major changes to FHA:
It would eliminate the 3% downpayment requirement, thus allowing FHA to offer flexible downpayment terms;raise the cap on loan terms from 30-40 years; increase the FHA loan limits to 65% of the conforming loan limit (from 48%), bringing the current limit to $271,050, and in high costs areas to 100% of the conforming limit, which currently is $417,000; allow FHA to use risk-based pricing for their premiums; move the condominium loan program to the 203b fund, and eliminate the cap on reverse mortgages. This bill passed the House Financial Services Committee on May 24, 2006. In addition, four of the provisions (loan limits, downpayment, riskbased pricing, and reverse mortgages) were included in the TTHUD Appropriations bill (HR 5576) that passed the House on June 14, 2006.
Senator Jim Talent (R-MO) has introduced companion legislation in the Senate (S. 3535). NAR President Tom Stevens testified at a hearing in the Senate Banking, Housing Subcommittee on June 20, 2006. However, the Senate Appropriations Committee only included the reverse mortgage language in their Appropriations bill.
2. FY2007 HUD Appropriations- Political Perspectives, Jim Freeman, NAR Lobbyist
3. FY2007 Rural Housing Appropriations
4. HUD Manufactured Housing Legislation Update
5. FHA Property Flipping Prohibition Final RuleIn 2001, HUD published a proposed rule aimed at preventing fraudulent propertyflipping in the FHA single-family program. "Flipping" is a major example of predatory lending whereby recently acquired property is resold for a considerable profit with an artificially inflated value. NAR submitted comments expressing serious concern about the proposed rule. These concerns addressed the fact that HUD currently had the authority to enforce against abusive flipping. We also addressed concerns regarding legitimate investors purchases. A new final rule expanding exemptions was issued in Juneof 2006.
While NAR supports the goal of addressing fraudulent property flipping, we support the preservation of legitimate investment opportunities in property rehabilitation.
REALTORS® support increasing the availability of mortgage credit to potentially creditworthy borrowers whether in the "prime" or in "subprime" credit markets.
HUD published the FHA property flipping rule in May, 2003. The rule stated if the re-sale date is 90 days or less following the date ofacquisition by the seller, the property is not eligible for FHA insurance. This is an improvement over the proposed rule which would of imposed a 180 day restriction before you would of been eligible for FHA insurance. Also in the final rule, if the re-sale date is between 91 days and 180 days then the property is generally eligible for FHA insurance, but HUD will require that the mortgagee obtain additional documentation if the re-sale price is 100 percent over the purchase price. The rule states that "such documentation must include an appraisal from another appraiser." NAR strongly recommended that HUD include an appraisal as part of its documentation in our comments on the proposed rule.
In December 2004 HUD published an interim rule that broadens the exceptions to the property flipping time restrictions to include repossessed properties of all Federal agencies such as the Veterans Administration and the Rural Housing Service and to properties that have been acquired through inheritance. Inour comments, we indicated that we supported expanding the time restriction exceptions to include other Federal agencies. We also indicated that HUD should be cognizant of the fact that there may be other circumstances where an exception to the time restrictions would be appropriate. For example, since the rule went into effect in 2003, it has proven to be a disincentive to legitimate contractors who improve houses and resell them at affordable prices. By eliminating the ability of legitimate investors to resell homes using FHA financing, the 90 day restriction has reduced the incentive for investors to buy and rehabilitate properties. NAR believes that investors, which include REALTORS®, will continue to be discouraged from participating in the property rehabilitation/marketing process utilizing FHA insurance.
HUD issued a final rule in June of 2006 that further broadens exemptions. The final rule broadens the exceptions to the time restrictions on sales to include government-sponsored enterprises (GSEs), state- and federally chartered financial institutions, nonprofits organizations approved to purchase HUD Real Estate-Owned (REO) single-family properties at a discount with resale restrictions, local and state governments and their instrumentalities, and, upon announcement by HUD through issuance of a notice, sales of properties in areas designated by the President as Federal disaster areas.
6. Real Estate Settlement Procedures Act (RESPA) Update (Business Issues Committee Jurisdiction)
RESPA Realities FlyerIn June 2005, the Department of Housing and Urban Development (HUD) released its “roadmap to RESPA reform,” a continuation of its efforts to revamp the Real Estate Settlement Procedures Act (RESPA) regulations. A new proposal has been delayed after Secretary Jackson initially indicated it would be available in the spring.
NAR advocates a market-based approach to RESPA reformthat encourages fair competition, protects consumer choice and provides full disclosure of costs and services in the mortgage transaction.
Large-lender groups support a packaging rule that provides a “safe harbor” or exemption fromRESPA’s anti-kickback provisions. Most large lenders do not support the enhanced Good Faith Estimate (GFE).
HUD’s withdrawn 2004 RESPA rule would have put lenders in control of the entire real estate settlement transaction while operating under an exemption from Section 8’s anti-kickback provisions. The rule could have lead to increased concentration but less competition within the lending industry. Any regulation that moves an industry toward greater concentration should beviewed with considerable caution, as it could lead to higher closing costs.
A new proposal from HUD has been delayed. When it is released, it is expected to be based upon a series of informal meetings with industry and consumer representativesto initiate a “meaningful exchange of ideas” on possible changes to the RESPA regulations. The roundtable meetings were held in July and August of 2005: four in Washington D.C. and three co-hosted with the Small Business Administration in LosAngeles, Chicago and Fort Worth. NAR was represented at each of these meetings.
At the roundtables, HUD disclosed the provisions of a 2004 “final” RESPA rule which was withdrawn from the Office of Management and Budget’s (OMB)consideration. That RESPA rule would have included an enhanced Good Faith Estimate (GFE) four-page form with yield spread premium disclosure and tolerances for third party settlement services; a Mortgage Package Offer (MPO) (formerly the Guaranteed Mortgage Package Offer or GMP), that would have been exempt from RESPA’s Section 8 anti-kickback provisions; and a Settlement Services Package (SSP) product that would allow non-lenders to offer packages including appraisals, title services, recording fees and other lender required settlement services. HUD’s 2004 rule would not have required a lender to accept an SSP the consumer brought to the transaction.
HUD has said it is committed to drafting a rule that would provide greater certainty of closing costs for consumers. While there is no "formal" consensus, most roundtable participants seemed to agree that HUD should pursue an enhanced or improved GFE and should forgo its regulatory efforts to develop a packaging rule. NAR President Tom Stevens met with Secretary Jackson in June of 2006 and with OMB Director Portman in August of 2006 and reiterated NARs position. NAR staff met with the HUD General Counsel in July and gave him a detailed view of NAR's position as well. The RESPA PAG hasdeveloped a clearer and simpler GFE as well as adopting the concept of including a summary of the GFE that surfaced during work with the Center for Responsible Lending.
7. FHA Multifamily Housing Legislation and Regulatory Update (Commercial Issues Committee Jurisdiction)
Congress is considering several proposals to extend and reform federal multifamily programs. HUD's FY07 budget included a proposal to increase the mortgage insurance premium (MIP) on FHA multifamily mortgage insurance programs. Also within HUD, the authority to restructure federally-assisted multifamily mortgages under the Mark-to-Market program expires at the end of this fiscal year. Lastly, the Rural Housing Service is looking to restructure the 515 federally-assisted multifamily rural properties in a program similar to mark-to-market,which would reduce rents, and allow owners to restructure their mortgages to provide funds for rehabilitation and repair.
NAR recognizes the need to maintain the viability of federal multi-family housing programs and to increase the availability and affordability of rental housing. NAR encourages the removal of policy and program disincentives that inhibit owner participation in the development of new rental housing or the preservation of existing safe and affordable rental housing.
NAR and its affiliate, The Institute of Real Estate Management (IREM), is involved in the ownership and management of federally-assisted properties in recognition that affordable rental housing is the first step on the housing ladder for many Americans.
FHA insurance programs help finance the construction, rehabilitation and improvement of rental housing in communities across the nation. The budget proposal to increase mortgage insurance premiums are said to offset administrativecosts of the programs because the affected programs (with the exception for those properties with low income housing tax credits) do not serve a “public purpose.” However, we argue that all FHA programs have a strong public purpose, providinga key source of affordable rental housing for individuals and families throughout the country. We believe these new fees will cause fewer properties to be built or rehabilitated and will result in an increase in rents for tenants. NAR signed onto a coalition letter opposing this fee increase.
Prior to adjourning for midterm elections, the House passed two housing affordability bills supported by NAR – H.R. 6115 and H.R. 5503. H.R. 6115, the “Market-to-Market Extension Act,” sponsored by Deborah Pryce (R-OH), would extend the Mark-to-Market program for Section 8 project-based housing for one year. Essentially the program decreases rents in Section 8 properties by allowing property owners to restructure their debt. The Mark-to-Market program was established in 1997 to preserve project-based Section 8 housing, while reducing costs to the federal government. More than 2,200 properties have gone through the Mark-to-Market process, preserving units for more than 188,000 families. Housing & Urban Development (HUD) estimates additional properties could be preserved through this process. Also passed, H.R. 5503, the “FHA Multifamily Loan Limit Adjustment Act,” sponsored by Gary Miller (R-CA), would increase the multifamily loan limits in high-cost areas to 170 percent above the base limit and give HUD the discretion to increase the limit to 215 percent on a case-by-case basis. H.R. 5503 provides adequate assistance to families who do not have access to subsidized housing. Both bills now move to the Senate where action is uncertain.
Additionally, Congressman Geoff Davis (R-KY) has introduced H.R. 5039, the “Saving American’s Rural Housing Act of 2006.” This legislation would create a Mark to Market-type program for the rural housing 515 multifamily insurance program. The 515 portfolio is very important to rural communities, where affordable rental housing can be scarce. However, this housing is primarily older stock and in desperate need of rehabilitation. A program like that proposed in HR 5039 would allow these mortgages to be restructured so owners could obtain monies to revitalize these properties. H.R. 5039 was not addressed prior to the House adjourning for the midterm elections and it is unlikely this measure will be voted on once the House returns in late November.
V. General Information
1. Update: Shopping for a Mortgage FHA-NAR Partnership Brochure
2. Housing& Market Conditions: Committee Member PerspectivesVI. Other Business
1. Introduction of 2007 Committee Vice-Chair Ms. Lois Killebrew (TN)
2. 2007 Committee Goals
Purpose:
Monitors and analyzes current and prospective federal housing issues affecting the FHA single-family (1-4 units) housing programs, HUD-assisted housing programs, the VA Home Loan Guaranty Program, the rural housing programs under the Rural Housing and Community Development Service, the Farmer MAC and the Farm Credit System, and federal budgetary policies and actions pertaining to each, and the Committee recommends appropriate public policies to address them.
Liaison:
Gary Thomas
Staff Contacts:
Megan Booth, 202/383-1222, Colin McLaurin, 202/383-1089 Ken Trepeta, 202/383-1294
Goal #1:
To enhance, maintain, and protect federal mortgage insurance programs.
Issue:
FHA Modernization: Over the last year, the Federal Housing Administration (FHA) has implemented a number of regulatory program reforms, and has proposed dramatic legislative program reforms, both designed tomake FHA a more available opportunity to program participants. NAR will continue working with FHA to communicate reforms that have already been implemented, and to advocate for modernization initiatives under consideration.
Actions to be taken by Committee to Achieve Goal:
Committee will review changes made to the FHA single-family mortgage insurance program. Committee will discuss options for promoting the “new FHA” to members to ensure (1) the widest possible use of FHA programs, and (2) that federal mortgage insurance funds are safe and sound, and their premium rates appropriately measure risks. These options could include involving local HUD field staff in state and local Realtor events. Inaddition, the Committee will look forward to continued progress on the creation of a REALTORS and FHA: Partners in Homeownership” trifold color brochure that will be both informational, but will also serve as an advocacy piece for both Realtors andFHA with potential homebuyers as the target audience.
Expected Outcome:
Continued partnership with FHA to promote and disseminate information about FHA to Realtors and consumers.
Goal #2:
Continue and strengthen the federal government’s role in providing housing opportunities at all levels, beginning with rental housing.
Issue:
Multifamily Rural Housing - Recently the Rural Housing Service (RHS) of the Department of Agriculture (USDA) conducted a comprehensive property assessment of the existing multifamily housing portfolio, and determined that dramatic steps must be taken to addressfinancial and physical needs of this aging housing stock. With funding shortages, many of these properties have deferred maintenance and lack adequate reserves. Legislation is being developed to provide a means of restructuring and revitalizing the RHS multifamily portfolio. Similar to the HUD Mark-to-Market program, these proposals would restructure Section 515 loans to provide for the economic viability of these properties. The proposals strive to preserve the availability of this housing, and to protect tenants residing in those properties that leave the Section 515 program. Loan restructuring will allow owners to obtain new financing to rehabilitate and increase reserve funding to facilitate on-going maintenance. The proposals also extend homeownership options for tenants with vouchers.
Actions to be taken by Committee to Achieve Goal:
Committee will review and analyze legislative proposals and identify changes that will be beneficial to the program.
Expected Outcome:
NAR advocacy will contribute to the successful enactment of legislation designed to preserve affordable multifamily housing in rural communities.
Tentative Date and Time for upcomingmeetings:
- Wednesday May 16, 2007, 10:00 a.m. to 12:00 p.m. Washington D.C.
- Tuesday, November 13, 2007 9:00 a.m. to 11:30 a.m. Las Vegas, NV
VII. Adjournment
