Agenda SummaryFederal Housing Policy Committee National Association of REALTORS® 2007 REALTORS® Conference & Expo The Venetian ResortHotel Casino Palazzo B, Level 5 Tuesday, November 13, 2007 9:00 AM - 11:30 AMChair: Conchita Sulli, LA Vice Chair: Lolis Killebrew, TN Committee Liaison: Gary Thomas, CA Committee Executive: Megan Booth/Jerry Nagy, DCI. Call To Order NAR Ownership Disclosure and conflict of Interest PolicyOwnership Disclosure Policy
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 a decision making body on any matter involving that entity.
If a member has personal knowledge that NAR is considering doing business with an entity in which a member has anyfinancial 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.
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 mustdisclose 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 conflict of interest as defined below.
Conflict of Interest Policy
A member of any of NAR’s decision making bodies will beconsidered to have a conflict of interest whenever that member:
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
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
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 Businessor 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 onany matter in which the member has a conflict of interest, including votes to block or alter the actions of the body in order to benefit the Business in which they have an interest. ________________________________________ *Ownership interest is defined as the cumulative holdings of the member, the member’s spouse, children, siblings and 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 2007 Midyear Meeting Minutes
III. Guest Speaker
A. FHA Commissioner Brian Montgomery As Assistant Secretary for Housing-Federal Housing Commissioner, Brian D. Montgomery is responsible for overseeing the $400 billion Federal Housing Administration (FHA) insurance portfolio. In addition, he oversees HUD's regulatory responsibilities in the areas of the Real Estate Settlement Procedures Act (RESPA), the housing mission of Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, and the manufactured housing industry.Mr. Montgomery came to theU.S. Department of Housing and Urban Development from the Executive Office of the President, where he served as Deputy Assistant to the President and Cabinet Secretary from January 2003 until April 2005. While serving in the White House, Mr. Montgomery contributed to the policy process on a wide range of issues including the Administration's efforts to boost homeownership, increase access to affordable housing, and to reform both RESPA and the GSEs. Mr. Montgomery also served as Deputy Assistant to the President and Director of Advance from January 2001 until January 2003.Following the Shuttle Columbia accident in February 2003, Mr. Montgomery headed up a White House working group to monitor all facets of the accident investigation. This ultimately led to the process that developed the President's vision for space exploration. For this effort, Mr. Montgomery was awarded the NASA Exceptional Service Medal in June 2004.Since his Senate confirmation in June 2005, one of Mr. Montgomery's primary initiatives has been the creation and promotion of a bill designed to modernize FHA. The Modernization Bill, which passed the House of Representatives in July 2006, is primarily focused on increasing borrower flexibility through both policyand programmatic changes. Included among them are increased loan limits, updated down payment assistance options, and a risk-based premium structure. The goal of Mr. Montgomery's bill is to provide low and moderate-income borrowers a safe homeownership option at a fair price.Another one of Mr. Montgomery's priorities while at HUD has been the preservation of affordable multifamily rental housing, achieved primarily through mortgage insurance as well as flexible refinancing options. During Mr.Montgomery's tenure, HUD has gone to great lengths to get legislation passed in the House of Representatives that will preserve more than 900 apartment complexes, allowing for 87,000 additional units of affordable housing.Mr. Montgomery's time at HUD has also been marked by extensive work with Hurricane Katrina disaster victims. He chaired HUD's Hurricane Recovery and Response Center at Headquarters and helped coordinate and secure temporary and long-term housing for displaced persons.
IV. Issues Discussion
A. National Affordable Housing Trust FundFunding of the Trust Fund: The goal of the Trust Fund is to construct, rehabilitate, and preserve 1,500,000 units of housing over the next 10 years. The bill seeks to accomplish this with funding from the proposed GSE Affordable Housing Fund (H.R. 1427), FHA savings that result from the enactment of the Expanding AmericanHomeownership Act (HR 1852), and any other sources of funds subsequently identified.Formula under the Trust Fund: 60% of monies will go to participating local jurisdictions and 40% to states, Indian Tribes and insular areas. A proportionate amount of funds to States must go to rural areas in each State. If the total amount available in any year is less than $2 billion, there is a $750,000 minimum funding threshold for local jurisdictions.Targeting under the Trust Fund: All Trust Fund monies must be used for low income families (below 80% of state or local median income), except that this income ceiling is reduced to 60% of local median income ifannual funding in any year is less than $2 billion. At least 75% of funds must go to extremely low-income families (below 30% of median income or below the national poverty level). At least 30% of funds must go to families with incomes below the SSI income limit. In addition, at least 10% of funds must go to families with incomes over 50% of the local area median income.Eligible Recipients of Trust Fund Monies: States, participating local jurisdictions, and insular areas are required to makeTrust Fund grants to eligible recipients, which can be any organization, agency, or other entity, including for-profits, nonprofits, and faith-based organizations, that have demonstrated the experience and the capacity to carry out the proposed Trust Fund activity. HUD allocates grants to Indian tribes by competition.Eligible Uses of Trust Fund Monies: The bill would allow Trust Fund monies for construction, rehabilitation, acquisition, preservation incentives (including for manufactured housing and community land trusts) and operating assistance to facilitate affordability. Funds may be used for both rental housing that is affordable and for down payment and closing cost assistance by first time homebuyers.Prohibited Uses: Thebill includes prohibitions against any funds being used for administrative costs or expenses, political activities, advocacy, lobbying, counseling, travel expenses, and preparation of or advice on tax returns. In addition there is a requirement that grantee develop systems to ensure program compliance, and require annual state fund use reports, and authority for HUD to impose penalties on states that do not comply with requirements, including requiring states and grantees to reimburse misused funds.Matching Requirements of the Trust Fund: The bill requires a match for Trust Fund dollars equal to 12.5% if provided from state, local and private resources or 25% if provided from federal sources. Up to 33% of this match may be provided through binding commitments to provide services for residents. The match may be reduced or waived where a zoning variance or other waiver of regulatory barriers was required to site Trust Fund-assisted housing.
B. FHA Risk-based Pricing
C. Visitability Recommendations NAR’s Visitability Working Group has mad the following recommendations:
That NAR believes that visitability, the ability to host visitors with mobility impairments, can beimportant in homes.
That NAR believes that any visitability policy should be defined as voluntary. Further, NAR believes that the market is the best mechanism to produce visitable housing and opposes any federal visitability mandates.
For the purposes of this policy, the key features of visitability apply to one level of the home. These are a no-step entry, passage doorways that provide at least 32” clearance, and a minimum of a useable half bathroom with asink and water closet.
That NAR educate its members about the concept of visitable housing.
That NAR become a resource on visitable housing, compile best practices and examples of local and state building codes and make this information available to state and local associations.
In celebrating 100 years, the NATIONALASSOCIATION OF REALTOR® remains dedicated to the protection and the preservation of the free enterprise system and the right of the individual to own real property as guaranteed by the Constitution of the United States of America. We offerthe benefits that our knowledge of real estate, our experience, and our technical resources bring to the public in general and the government which serves them. Because we are concerned with a number of issues facing our members and our country, the following statement of the principles underlying our policy recommendations is provided so that the public will better understand our specific positions.
We believe in the free enterprise system, and oppose undue intervention by the government in the affairs of American business. We oppose counterproductive taxation, governmental guidelines, regulations, rules and procedures which unnecessarily increase consumer costs and unnecessarily burden the business community.
We believe that the political stability and economic prosperity of the United States of America is dependent in large measure upon the right of the individual to own and freely transfer real property and to exercise and enjoy the benefits of ownership. Because we strongly support the full and free exercise of this right, we oppose actions by governments, groups, or individuals which diminish or deny it, and we will concern ourselves with legislation, regulations and litigation which impact on real estate and the REALTOR®organization.
We will continue to be responsive to the increasing needs of our members for direct and indirect economic and professional benefits and services by striving to increase the professional image, standards and productivity of our members. The growing specialized and diversified needs of the members of the various disciplines in the real estate industry in domestic and international markets are also of major importance to our organization. Thus, we will work to ensure that our members in both residential and non-residential specialties provide the highest quality services to their clients, while addressing the continually changing nature of brokerage and business practices in real estate, including the professional and liability concerns of our members. We will inform our membership of domestic and international real estate business trends and practices, and the effects of changing demographics. We will promote the benefits of additional real estate education and develop new ways ofassisting real estate specialties. We will also work to build coalitions and work with other trade groups, professional associations, and firms in areas such as education, legislation, services, marketing and membership.
We believe that homeownership is a cornerstone of our democratic system of government and deserves a preferred place in our system of values. Homeownership contributes to community responsibility; civic, economic, business, and employment stability; and family security. As realestate professionals we know that homeownership is a primary goal of American families. We also believe that every individual should have the opportunity to live in safe and decent housing. These objectives can best be served by a healthy housing marketin an economic environment that fosters an ample supply of safe, affordable and accessible financing provided by both domestic and international sources.
We believe in balancing the needs for private property rights, low- and moderate-income housing, economic growth, and a healthy environment. In this respect, agricultural needs, social and economic factors, and the future growth of our nation must be considered in the development of land use policies.
We firmly believe in equal opportunity in housing. No person of this country should have the right to rent or purchase shelter of choice abridged because of race, ethnicity, religion, gender, handicap, familial status or national origin. Furthermore, these rights should not be limitedby ethnic, racial or religious proportions in any defined area.
We encourage persons of all racial and ethnic groups, genders, with and without disabilities, and individuals otherwise protected from discrimination by the Fair Housing Act, to participate at all levels within the REALTOR® Associations.
We believe in and support policies that promote the healthy growth of the American economy. Investment in structures, equipment, and the skills of people is necessary toincrease the standard of living, jobs and household income. To accomplish these goals, we urge changes in tax policy that encourage savings, investment and homeownership.
We believe that active involvement in political activity is a privilege and responsibility of every citizen. We urge qualified individuals to engage in public service. We encourage continuing participation in local, state, and national political affairs and urge support of those candidates who pledge, preserve and strengthen America's free enterprise system, which is based upon the underlying principle of private property ownership.
V. Legislative/Regulatory Updates and Pending Business
A. Status of Federal Housing Administration(FHA) ModernizationOn March 29, 2007, Maxine Waters introduced H.R. 1852, the expanding American Homeownership Act. The bill will attempt to expand the FHA’s ability to compete with the subprime market and regain market share. The reforms proposed include:
Increasing the FHA insurable limits. Currently, the FHA insures 95% of an area’s median home price with a ceiling of 87% of the conforming loan limit($362,790) and a floor of 48% of the conforming loan limit. Originally, the legislation would have increased the FHA limit to 100% of an area’s median home price capped at 100% of the conforming loan limit ($417,000), with a floorof 65% of the conforming loan limit ($271,050). But, on September 18, California Congressmen Gary Miller and Dennis Cardoza introduced an amendment to increase the FHA loan limit to 125% of an area’s median home price, capped at$729,750.
Making it so that condos are insured in the same manner as single-family homes.
Allowing for the coverage of zero-down loans. Currently, the FHA may only insure loans with a minimum of three percent down.
Allowing the FHA to set its insurance premiums by risk.
On September 18, the House passed H.R. 1852 by a vote of 348 – 72. On September 19, the Senate Banking, Housing, and Urban Affairs Committee marked up their version of FHA reform. The Senate version differs from the House version in a few ways; a requirement for at least 1.5% down; and increasing the conforming loan limit to 100% of conforming, $417,000. B. FHASecure Program
The Federal Housing Administration has helped millions of Americans secure their dream of homeownership since 1934. FHA provides mortgage insurance on loans made by approved lenders throughout the United States and its territories. FHA insures mortgages on singlefamily, multifamily and manufactured homes and healthcare facilities. It is the largest government backed mortgage insurer. Since its inception, FHA has insured more than 34 million properties.
What is FHASecure? FHASecure is a refinancing option that gives credit-worthy homeowners, who were making timely mortgage payments before their loans reset but are now in default, a second chance with a FHA insured loan product.
Lenders and homeowners may refinance mortgages that, due to the increased mortgage payment following the reset, have become delinquent. The mortgagee letter also reiterates guidance to lenders about making objective decisions regarding the underlying collateral in declining markets.
FHASecure is a temporary program designed to provide refinancing opportunities to homeowners and to increase liquidity in the mortgage market and requires that the loan application be signed no later than December 31,2008.
By refinancing into a FHA insured mortgage, you can expect to pay lower monthly mortgage payments. FHASecure can improve the quality of life for many communities by helping to reduce the number of mortgage defaults and bringing greater stability to local housing markets.
Why not just use existing FHA refinancing programs? Homeowners may choose to refinance using FHA for the same reasons they might refinance using conventional lenders. Such reasons mayinclude taking advantage of lower interest rates or consolidating debt.
FHASecure, however, is designed only for homeowners that are delinquent because their adjustable rate mortgage has reset. Eligible homeowners must meet the following requirements:
Have a non-FHA insured ARM that has reset
Sufficient income to make mortgage payment, and
A history of on-time mortgage payments before the loan reset
What Else Should Realtors and Brokers Know? There is no limit on how far behind a borrower can be on a mortgage or how many payments have been missed. The amount refinanced will depend on the value of the home, how much the homeowner owes, and if the lender is willing to take back a second mortgage to bridge any gap.
Mortgagees must determine, as part of the underwriting process, that the reset of the non-FHA ARM monthly payments caused the mortgagor’s inability to makethe monthly payments and that the mortgagor has sufficient income and resources to make the monthly payments under the new FHA-insured refinancing mortgage
Under certain conditions, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2) either the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing if the indebtedness exceeds FHA prescribed LTV and maximum mortgage amount limits.
FHA will permit the inclusion of the existing first lien, any purchase money second mortgage, closing costs, prepaid expenses, discount points, prepayment penalties, and late charges. FHA will also permit arrearages (principal, interest, taxes and insurance) to be added into the new loan amount. Lenders may also include other reasonable and customary costs that are standard servicing practices and are included in payoff statements. If there is not sufficient equity in the home to include these costs the borrower can consider a second mortgage to pay the difference. Offering a second mortgage is at the discretion of the lender.
If the new maximum FHA loan is not enough to pay off the existing first lien, closing costs and arrearages, the lender may execute a second lien at closing to pay the difference. The combined amount of the FHASecure first mortgageand any subordinate lien may exceed the applicable FHA loan-to-value ratio and geographical maximum mortgage amount. If payments on the second are required, they must be included in qualifying the borrower. If payments are deferred, they must be so for noless than 36 months to not be considered in the qualifying ratios. Borrowers need not yet have missed any mortgage payments to be eligible for this type of subordinate financing.
The FHASecure initiative for refinancing borrowersharmed by non-FHA ARMs that have recently reset is NOT to be used to solicit homeowners to cease making timely mortgage payments. FHA may reject those mortgage applications where it appears that a loan officer or other mortgagee employee suggested that the homeowners could stop making their payments, refinance into a FHA insured mortgage, and keep, as cash, the amount of payments not made on time.
FHA has geographical loan limits and how much it can insure is established by law. These limits are not changed as a result of FHASecure.
Interest-only fixed-rate non-FHA mortgages are NOT eligible. An interest-only ARM is eligible for FHASecure.
Borrowers that are current on their mortgage but facing an ARM reset can be assistedthrough FHA’s standard refinancing programs.
If a borrower does not qualify for FHASecure or other FHA refinance programs, homeowners should contact their lenders as many offer loss mitigation programs to borrowers. Homeowners should also contact a HUD-approved counseling agency. To find a HUD-approved housing counseling agency call 1.800.569.4287 or visitwww.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm.
Where can I get more information? You can find more information about FHA programs, including FHASecure, atwww.fha.govor by calling 1.800.CALL.FHA (225.5342).
C. VA InitiativesIncreasing the VA Loan Limits in High Cost Areas – VA
The current VA loan limit is 100% of the conforming loan limit. We support legislative language that would increase the limits to 150% of the conforming limit in high cost areas. This would allow many more veterans to find homeswhere they want to live. The VA loan guarantee is a critical entitlement for our men and women of uniform, providing them a centralized, affordable, and accessible method of purchasing homes in return for their service to our nation. Especially in light of risky and sometimes predatory loan products that are being marketed to our citizens, the veteran's loan guarantee needs to be able to serve all veterans, regardless of where they chose to live. Legislation has been introduced to increase the loanlimits (H.R. 2385 and S. 1409), but there has been no activity as of yet.
Easing Refinancing for Veterans – VA
Currently it is very difficult for veterans to refinance into a VA home loan. First, VA requires veterans tohave at least 10% equity in a home prior to refinancing. This limitation would make it impossible for many veterans in risky sub-prime loans to refinance into a safer, more affordable VA loan. Raising the limit to 95% from 90% will make a big difference.
The second issue is that the law limits to $36,000 the guaranty that can be used for a regular refinance loan. This restriction means a refinance over $144,000 will result in the lender not receiving 25 percent backing from VA and, as a result,probably not making the loan. (On a regular loan the VA limit goes to $104,250, or 25% of $417,000). We recommend eliminating the refinancing restriction and making the maximum VA guaranty – 25 percent of the Freddie Mac conforming loan limit – equal across the board for all VA-guaranteed loans.
Expanding the Good Neighbor Next Door Program (GNND) – HUD
Under HUD’s REO sales program, police officers, teachers, firefighters and EMTs can purchase homes in revitalization areas for 50% of the list price on the home. In return, they must live in the home for a minimum of three years. The purpose of the GNND Sales Program is to improve the quality of life in HUD designated revitalization areas by encouraging law enforcement officers, teachers, and firefighters/emergency medical technicians to purchase and live in homes in these areas. Including veterans and active duty military would meet the same goals of this program.
D. FHA Manufactured HousingOn June 25, 2007, the House of Representatives passed H.R. 2139, the FHA Manufactured Housing Loan Modernization Act, by a voice vote. The purpose of this bill is to, among other things:
Allow lenders to do more FHA insured manufactured loans,
Raise the loan limits from $48,000 to $69,678,
Index this limit for inflation on an annual basis, and
Increase the up front FHA insurance premium to ensure the program is sufficiently financed.
The Senate version of this bill is included in the Senate’s FHA Reform bill that passed out of Committee in September.
VI. Informational Items A. Regulatory Issues Forum – Wednesday 3:30 – 5:00pm Titian 2303, Venetian B. Brochures – FHA update and Manufactured Housing C. Freddie Mac Reception – Wednesday 7:00-9:00pm Chambertin Room, Wynn
