California Congressional Issues Briefing Marriott Wardman Park Hotel Thurgood Marshall Ballroom South Mezzanine Level Washington, D.C. Tuesday, May 15, 2012 12 Noon – 1:30 p.m.
Presiding: Mark Peterson, C.A.R. Federal Committee Chair
Staff: Matt Roberts, Federal Governmental Affairs Manager
REALTORS® Federal Legislative Priorities:
I. REO Bulk Sale Initiative A. Talking Points for Hill Visits • Thank members who signed onto Gary Miller’s letter to FHFA opposing bulk sales Gary Miller Susan Davis Jerry Lewis Brad Sherman Ken Calvert Joe Baca Jeff Denham Grace Napolitano Elton Gallegly Judy Chu Dana Rohrabacher Jim Costa Buck McKeon Adam Schiff Duncan Hunter Barbara Lee Brian Bilbray Howard Berman Mary Bono Mack
• Let you member of Congress know how tight inventory is in your market and what the impact would be if foreclosures were taken off the market, and thus reducing inventory even more. • Bulk sales of Fannie Mae and Freddie Mac properties will cost the tax payers money because they will be sold for less than what they could receive by selling them individually.
B. Background FHFA has announced a pilot program to bulk sale 484 properties in Riverside/San Bernardino/Los Angeles counties, no date has been set yet for when the sale will be made. Nineteen members of California’s Congressional Delegation have signed onto a letter to Acting Director Edward DeMarco stating their opposition to a proposed bulk sale pilot program for Fannie Mae REOs. Many members of Congress on both sides of the isle have been frustrated with how Edward DeMarco has utilized the GSEs in addressing their distressed properties and as a tool to address the housing market.
II. Preserve the Mission and Purpose of the FHA Program
A. Talking Points for Hill Meeting • Support H.R. 4264, the "FHA Emergency Fiscal Solvency Act of 2012," as it was passed out of committee, which balances the need to improve the fiscal solvency of the FHA fund with costs and availability to consumers. • Submit comments to HUD opposing the condominium regulations, and expressing concern that qualified homebuyers are being shut out of often the most affordable homeownership option available.
B. Background FHA, like every other holder of mortgage risk, has incurred financial losses as a result of increasing foreclosures. However, FHA has increased premiums in order to compensate for these losses. Congress should NOT impose any additional burdens on consumers. Further mandated increases to premiums or increases to downpayments will disenfranchise FHA borrowers and hurt our housing recovery.
III. Protect Homeownership Tax Benefits A. Talking Points for Hill Meetings • House members should cosponsor H.R. 4336 or H.R. 4323 is they have not yet done so. • Senators should cosponsor S. 2250 if they have not yet done so. • More time is needed to restore equilibrium in the market. More than 20 percent of all homeowners currently owe more on their mortgages than the current fair market value of their home. • The extension should be enacted as quickly as possible and well before year-end. Foreclosure and short sale transactions take several months to complete. Both homeowners and lenders need certainty about the consequences of these difficult transactions. • The relief provision assures that individuals in foreclosure, short sales and loan modification situations will not have to pay income tax on forgiven debt. Individuals who have experienced what for most will be the greatest economic loss of a lifetime have no cash with which to pay the tax. • Most of the housing dislocation caused by predatory or imprudent loans has worked its way through the system. Today, people seek loan modifications or experience short sales and foreclosures most frequently because of job loss. Struggling families should not be further burdened with additional income taxes.
B. Background Prior to 2007, the tax laws required that any time a lender forgave any part of mortgage debt, the person responsible for that debt was required to pay income tax at ordinary rates on the forgiven amount. Over the past 60 years, there had never been a time when housing values all over the U.S. collapsed. A collapse occurred in 2007
Legislation to relieve homeowners of any requirement to pay income tax on forgiven debt was enacted in 2007. Among the limitations to the relief was a provision to assure that tax relief was not extended to cash out refinancing or to very large amounts of debt (more than $2 million). That provision was originally scheduled to expire at the end of 2009, but was extended during the financial crisis so that it would expire at the end of 2012.
IV. Reauthorizing the National Flood Insurance Program (NFIP) A. Talking Points for Hill Meetings • Thank your House members for voting for H.R. 1309. Ask your House member to urge the Senate to pass a 5-year flood insurance reauthorization bill before the current temporary extension of the current flood bill expires on May 31. • Urge your Senator to take up and approve a 5-year reauthorization measure and end the uncertainty of extensions and shutdowns. • Urge House-Senate conferees to act quickly once a Senate bill is passed. • Do not let a vital program lapse again or hold it hostage to extensions of other federal programs.
B. Background Since September 2008, Congress has approved more than a dozen NFIP extensions and allowed several lapses. During the June 2010 lapse, 47,000 home sales stalled according to NAR survey data. Further research confirms that another shutdown risks 1,300 more sales each day. Real estate markets require certainty to make the long-term investments that are vital to the U.S. economic recovery.
Floods claimed more lives and property than any other natural disaster in the U.S. over the last century. Unable to ignore the rising cost to taxpayers of disaster payments for uninsured properties or the lack of a private market for flood insurance, Congress created the NFIP in 1968. That is still true today, except 5.6 million property owners rely on the program in 21,000 communities where flood insurance is required for federally related mrotgages.
V. Secure the Future of Homeownership A. Talking Points for Hill Meeting • Reform of the secondary mortgage market should be comprehensive, and the federal government must have a continued key role in the secondary mortgage market in order to ensure that there is capital for mortgage lending in all mortgage markets under all market conditions. • NAR would like a hearing on H.R. 1498 (Rooney R-FL; Andrews D-NJ) or S. 2120 (Murkowski R-AK; Brown R-MA; Brown D-OH). This legislation requires servicers to decide whether to approve a short sale within a specified time frame of completion of the short sale request. • Support increased educational standards for appraisers, and support state regulation of ALL appraisers, regardless of their source. • Congress should insist that the Regulators put forth broad QRM and QM rules that maximize access to reasonable and safe credit for borrowers as Congress intended.
B. Background GSE Reform
The GSEs, though they have been in conservatorship for more than 3 years, remain critical to ensuring mortgage liquidity. Removal of the GSEs, without a viable replacement for their secondary mortgage market mission, will mean severely restricted mortgage capital and higher costs for qualified, creditworthy borrowers.
Expedited Short Sales
The short sale process still takes many months and countless hours and often requires remarketing because buyers lose patience and terminate the contract. Streamlining short sales will reduce the amount of time it takes to sell the property, improve the likelihood the transaction will close, and reduce the number of foreclosures.
Appraisals continue to be a source of frustration for consumers trying to purchase a home Geographic competency is the most often cited concern. Overall competency is also an issue, as experienced appraisers leave the market. Regulation of Appraisal Management Companies (AMCs) differs based on the ownership of the AMC. This creates confusion and leads to different standards.
The impact of the proposed narrow definition of QRM would be to curtail the ability of creditworthy households from obtaining mortgages to purchase a home. Focusing the QRM exemption on underwriting factors that do not significantly improve loan performance (e.g., a mandatory high percent down level, 20%) means millions of families will fail to qualify for a QRM mortgage and will have to pay higher rates and fees for a mortgage, if they are even able to qualify.
VI. Bolster Commercial Real Estate Financing
A. Talking Points for Hill Meetings • Pass H.R. 1418 and S. 2231. Credit unions can fill in the commercial real estate lending gap, and help get capital to the struggling small businesses that occupy commercial space. • Pass H.R. 940 and S. 1835 to create a U.S. covered bond market, which would complement the fragile commercial mortgage-backed securities (CMBS) market by providing an additional new source of capital for the commercial real estate.
B. Background Continued economic weakness and uncertainty are contributing to lackluster demand for commercial space, which has resulted in reduced operating incomes, property values and equity—all of which complicate efforts to refinance maturing loans. Approximately $1.6 trillion in commercial real estate mortgages will mature between 2012 and 2016. Currently there is insufficient credit capacity for small businesses and other commercial property owners to refinance this wave of loan maturities, which could result in higher loan defaults and delinquencies—further endangering economic recovery.