Agenda Summary National Association of REALTORS® 2011 REALTORS® Conference Anaheim Marriott Hotel Marquis Ballroom Northeast, Lobby Level Friday, November 11, 2011 1:30 p.m. – 4 p.m. Chair: Peyton Norville, AL Vice Chair: Jaren Davis, UT Committee Liaison: Bill Brown, CA Committee Executive: Jeff Lischer/Anthony Hutchinson/Charles Dawson
IV. Committee Goals for 2011 To develop Association policy on conventional mortgage finance and lending; to establish and maintain liaison with secondary market agencies, private mortgage insurers, trade associations, and other entities involved in regulating, providing, and maintaining conventional mortgage financing and lending. The committee is also the lead committee for issues regarding the banking and financial services industry and their intersection with real estate finance.
Goal No. 1: Position the Association to address legislation and regulations aimed at housing stimulus and mortgage reform
Goal No. 2: Fannie Mae, Freddie Mac and Federal Home Loan Banks (GSEs) Restructuring
Goal No. 3. Protecting the Real Estate Industry as the Dodd-Frank Wall Street Reform and Consumer Protection Act are Implemented
Goal No. 4: Monitoring issues related to Credit Unions conducting business with their members
VI. Housing Economic Outlook A. Dr. Selma Hepp, Ph.D, NAR Economist
VII. Panel Discussion on Short Sales A. Ms. Kimberly Dawson, Bank of America. B. Participant from a Consumer Advocacy Organization
VIII. Short Sales Sub-group Report A. Short Sales Fraud Prevention B. Tips for Second Lien Holders of a Short Sale
IX. Housing Market Strategies Sub-group Report A. Treasury-HUD-FHFA Request for Information on REO Disposition Strategies--NAR Comment Letter The Federal Housing Finance Agency (FHFA), the U.S. Department of the Treasury, and the Department of Housing and Urban Development (HUD) have published a Request For Information (RFI), seeking input on new options for selling single-family real estate owned (REO) properties held by Fannie Mae and Freddie Mac (GSEs), and the Federal Housing Administration (FHA).
The FHFA, Treasury and HUD are requesting input on what is essentially a proposal to expedite the disposition of the REO inventory currently on their books, as well as their expected future REOs. The RFI puts forward three different models:
• The GSEs and FHA partner with a third party to rent out a portion of their existing REO inventory. • The GSEs and FHA do a bulk sale of a portion of their REO inventory to investors (anywhere from $50 million to $1 billion in size) who would then be obligated to rent those units out. • The GSEs and FHA do a bulk sale of a portion of their REO inventory to investors with no restriction. This would mean investors could rent and/or sell as many or as little of the properties as they see fit.
The RFI is extremely vague on any details. There is no sunset date, no minimum amount of time that a property must be rented before it can be sold again, no details on what the structure of the partnerships would look like, and no numbers given on how many REOs would be put in this program and how many would continue to be listed individually with REO brokers. In fact the RFI is asking for the industry and interested parties to submit what they believe the answers to these questions should be.
The administration and many others in DC view this as an expedient opportunity to expeditiously eliminate non-performing assets through bulk sales and/or convert non-performing assets into performing ones by transforming them into rental units.
There is great pressure on the administration to take action on the issues surrounding the housing market. Issues this RFI is hoping to address include:
• Reducing the REO portfolios of the GSEs and FHA in a cost-effective manner, • Reducing average loan loss severities to the GSEs and FHA relative to individual distressed property sales, • Addressing property repair and rehabilitation needs, • Responding to economic and real estate conditions in specific geographies, • Assisting in neighborhood and home price stabilization efforts, and • Suggesting analytic approaches to determine the appropriate disposition strategy for individual properties, whether sale, rental or, in certain instances, demolition.
B. PPI-e21 Event Report: New Solutions for America's Housing Crisis (full report) Today, with housing in at least as bad a shape as it was in 2008, housing is now the forgotten debate. The conversation over Fannie and Freddie has stalled, if not died altogether; the government’s efforts to stem foreclosures have been largely unsuccessful; and with a handful of bold exceptions, few policymakers are putting forward ideas to restore homeowner equity, cope with burgeoning inventory and spark new demand in the market.
X. New Business / Updates A.2012 Committee Priority Issues • Seek enhanced Loss Mitigation Tools (including loan mods, HARP refi’s, short sales, REO disposition, and debt-for-equity (debt forgiveness in exchange for a share of appreciation)). • Support reasonable credit policies (monitor implementation of lending industry policies related to credit to promote consistency with NAR policy; urge those in the consumer credit reporting and scoring industry to study the impact of negative credit events on otherwise creditworthy consumers that occurred as a result of the extraordinary economic crisis; seek changes to GSE tight underwriting policies; and promote availability of FHA and GSE mortgages for condos). • Work for sound GSE Restructuring legislation (support legislation consistent with NAR policy). • Reinstate FHA and GSE high cost area loan limits and make them permanent. • Protect the real estate industry as the Dodd-Frank Wall Street Reform and Consumer Protection Act is implemented (including reasonable risk retention/QRM, ability-to-repay/QM, and seller financing rules.)
B. 2011 NAR Legislative & Regulatory Year in Review
C. Legislative Update 1. Government Sponsored Enterprises (Briefing Paper) On September 7, 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac (the government sponsored enterprises, or GSEs) into conservatorship. FHFA explained it took this action “to help restore confidence in Fannie Mae and Freddie Mac, enhance their capacity to fulfill their [housing] mission, and mitigate the systemic risk that has contributed directly to the instability in the current market.” Until 2011, the discussion regarding the fate of the GSEs was relatively quiet as Congress has focused on issues deemed more pressing, such as healthcare and financial regulatory reform. However, with those bills passed and signed into law, and the 112th Congress comprised of a Republican majority in the House, Congress is now focused on reforming the secondary mortgage market and deciding what to do with the GSEs, Fannie Mae and Freddie Mac.
2. Short Sales Short sales continue to be a large share of the housing market. While efforts have been made to make the short sale transaction easier, many of our members continue to have difficulty with this type of transaction. The biggest hurdles to successful short sale transactions continue to be different requirements from lender to lender, length of time for the short sale process, lack of transparency and poor escalation mechanisms for troubled transactions. Congress has introduced H.R. 1498 and H.R. 3164. The H.R. 1498 would require a response by lenders to a short sale offer, and H.R. 3164 would require for Fannie Mae and Freddie Mac loans to provide a price a short sale would be accepted at if the original offer was declined.
3. Loan Limits (Briefing Paper) The mortgage loan limits for the GSEs (Freddie Mac and Fannie Mae) and for FHA are critical to providing liquidity in today's housing market. Especially as the private market has yet to return, these programs are vital to our housing recovery. On October 1, the GSE and FHA limits reduced from $729,750 to $625,500 in high cost areas, and from 125% to 115% of local median home price.
D. Regulatory Update 1. Short Sales (Briefing Paper) Since 2008, NAR has been actively pushing the lending industry to improve the process for approving short sales. In a direct response to REALTOR® concerns, the Treasury Department developed a new program, the Home Affordable Foreclosure Avoidance Program (HAFA), to establish uniform procedures, forms, and deadlines for short sales. It took effect on April 5, 2010. Fannie Mae and Freddie Mac have issued their own version of HAFA, which took effect August 1, 2010. The challenge now is to push lenders to implement HAFA and to improve other short sales programs so short sales reach closing at much higher rates.
2. MARS (Briefing Paper) NAR has made an important step in resolving the confusion caused by the Federal Trade Commission’s (FTC) Mortgage Assistance Relief Services Rule (MARS) among real estate professionals who provide assistance to struggling homeowners in negotiating short sales with servicers on the sale of the home.
3. Risk Retention (QRM Briefing Paper) The Dodd-Frank Act requires lenders that securitize mortgage loans to retain 5% of the credit risk unless the mortgage is a Qualified Residential Mortgage (QRM) or is otherwise exempt. Six federal regulators have issued a proposed rule that would narrowly define a QRM to require a 20% down payment, stringent debt-to-income ratios, and rigid credit standards. NAR is asking federal regulators to honor congressional intent by crafting a QRM exemption that includes a wide variety of traditionally safe, well documented and properly underwritten products.
4. Ability to Repay (QM Briefing Paper) Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, no creditor may make a mortgage loan without making a reasonable and good faith determination that the borrower has the ability to repay, based on eight statutory criteria. One compliance option is for the creditor to originate a loan that means the definition of a Qualified Mortgage (QM). By doing so the creditor is presumed to have complied with the general ability to repay standard. The term creditor, for purposes of this ability-to-repay requirement, is a person who “regularly extends” consumer credit, which is defined as more than 5 times in a calendar year.
There are two alternative proposed definitions of a QM in the proposed rule. They both place limits on risky features and points and fees and require verification of income. The first alternative—safe harbor--has fewer underwriting criteria. The second alternative--rebuttable presumption--requires all the underwriting criteria of the safe harbor plus five additional factors to consider and verify.
5. Seller Financing (Briefing Paper) In 2008, President Bush signed the Secure and Fair Enforcement of Mortgage Licensing Act or SAFE Act, which requires licensing and registration of loan originators. In 2010, President Obama signed the Dodd–Frank Wall Street Reform and Consumer Protection Act into law, which restructures the oversight of financial regulation and includes amendments to the Truth in Lending Act (TILA). Both of these laws will affect seller financing, except to the extent that exemptions apply.
XI. Announcements A. Midyear Meeting: Washington, D.C., May 16, 2012, 10 a.m.- Noon