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 In This Issue Conventional Residential Lending Report Fannie Mae Clarifies Condominium Occupancy Rules Credit Crisis & Real Estate Markets Report NAR Welcomes Lower Interest Rates and Urges Action to Address Remaining Problems Federal Reserve Board Slashes Fed Funds Rate Streamlined Modification Program (SMP) in Effect Federal Tax Report IRS Expedites Tax Lien Removal Process Housing Report Streamlined Modification Program Does Not Require Appraisals NAR Supports Temporary Modifications to Affordable Housing Program Conventional Residential Lending Report  Fannie Mae Clarifies Condominium Occupancy Rules On December 18, 2009, Fannie Mae announced a new Project Eligibility Review Service (PERS) for condo and coop projects and changes to its condo and coop project policies. The announcement clarifies how real estate owned (REO) units are treated for determining the owner-occupancy ratio. Established projects where borrowers will occupy the unit or use the unit as a second home are not subject to any owner-occupancy ratios. For investment properties, however, Fannie Mae requires that established condominium projects have an owner-occupancy ratio of at least 51 percent at loan origination. Projects where a borrower is an investor and the project does not meet the owner-occupied ratio of 51 percent may request a waiver based on the overall risk of the project. On October 28, 2008, NAR President Dick Gaylord asked the Federal Housing Finance Agency and the Federal Housing Administration to clarify the owner-occupancy rules for condominiums. The Fannie Mae clarification will help lenders sell foreclosed properties, give homebuyers opportunity to access more fair and affordable financing options in a wider choice of condominium developments, and ultimately benefit existing owners of units in condominium developments as owner-occupancy rates increase. Fannie Mae Announcement 08-34: Project Eligibility Review Service and Changes to Condominium and Cooperative Project Policies Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120 back to top Credit Crisis & Real Estate Markets Report NAR Welcomes Lower Interest Rates and Urges Action to Address Remaining Problems On December 18, 2008, NAR President Charles McMillan wrote to Treasury Secretary Paulson, Federal Reserve Board Chairman Bernanke, and Federal Housing Finance Agency Director Lockhart congratulating them on the initial success of government actions designed to reduce mortgage interest rates. President McMillan also sent the letter to the Obama-Biden Transition Team. NAR has aggressively pushed for lower rates since the meetings in Orlando. The letter also identifies remaining problems and urges the federal government and the mortgage lending industry to address remaining problems that are impeding the delivery of mortgage credit and resulting in too many foreclosures. First, the Treasury Department should make additional TARP funding subject to conditions that the recipients agree to make more loans, prevent foreclosures, and/or improve the short sales process. Second, all participants in the mortgage lending industry should adopt and implement foreclosure avoidance programs. Where foreclosure cannot be avoided, short sales should be facilitated. Third, mortgage lenders and private mortgage insurers should reexamine underwriting standards and remove those that are unnecessarily strict. Finally, credit bureaus should improve compliance with the Fair Credit Act. NAR’s letter to Secretary Paulson, Chairman Bernanke, and Director Lockhart NAR's letter to the Obama-Biden Transition Team NAR's Press Release Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120 back to top Credit Crisis & Real Estate Markets Report Federal Reserve Board Slashes Fed Funds Rate On December 16, 2008, the Federal Reserve slashed the target range for the federal funds rate to 0%-0.25%--a clear signal that Chairman Bernanke and other members of the Board will take all necessary steps to achieve economic recovery. The press release announced that, in addition to the existing commitment by the Federal Reserve to purchase up to $500 billion of Fannie Mae and Freddie Mac mortgage backed securities and $100 billion of their debt obligations, the Fed will expand these purchase programs "as conditions warrant." The Fed clearly understands that the key to economic recovery is restoring health to and confidence in the housing and mortgage markets. Federal Reserve Press Release Commentary by NAR's Chief Economist Lawrence Yun Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120 back to top Credit Crisis & Real Estate Markets Report Streamlined Modification Program (SMP) in Effect On December 18, 2008, the Federal Housing Finance Agency (FHFA), the regulator of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks and the conservator of Fannie Mae and Freddie Mac, announced that the Streamlined Modification Program (SMP) went into effect on December 15, 2008, as planned. Fannie Mae, Freddie Mac, and the Hope Now Alliance joined in the announcement. The SMP is an expedited loan modification program that targets troubled borrowers. Seriously delinquent borrowers should contact the mortgage servicer for assistance. More details are in last week's Washington Report. Federal Housing Finance Agency Announcement Freddie Mac Press Release Freddie Mac Bulletin (December 12, 2008) Fannie Mae News Release Fannie Mae Announcement 08-33 (December 12, 2008) Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120 back to top Federal Tax Report IRS Expedites Tax Lien Removal Process The IRS has released IR-2008-141 to alert taxpayers how to expedite the process of clearing federal tax liens when they are trying to refinance or sell a property. The IRS is aware that these liens can create significant delays for homeowners. Options available to homeowners:
To request that the tax lien be discharged (forgiven), the homeowner must follow the directions and submit a typed letter to one of the IRS Debt Collection groups as specified in IRS Publication 783. Submission information is the same as above, IRS Publication 4235. All of these publications can be found at the IRS website, Read more Linda Goold 202-383-1083, Helen Devlin 202-383-7559 back to top Housing Report Streamlined Modification Program Does Not Require Appraisals On December 12, 2008, Fannie Mae released Announcement 08-33: Introduction of Streamlined Modification Program (SMP). The SMP allows a lender use a streamlined loan modification process to provide a borrower with an affordable monthly payment. The program is available for borrowers who missed at least three monthly payments on their existing mortgages and loans must have been originated on or before January 1, 2008. The program requires that the loan-to-value (LTV) ratio be at least 90 percent based on an appraisal, valuation provided by Fannie Mae, or an estimated sales price from a broker's price opinion (BPO). A BPO or appraisal must be completed within 90 days of the date the servicer determines SMP eligibility if either is used for establishing mark-to-market LTV for securing the delinquent mortgage. Automated valuation models may not be used. Announcement 08-33: Introduction of the Streamlined Modification Program Jerome Nagy 202-383-1233, Chere LaRose-Senne 312-329-8455, Megan Booth 202-383-1222 back to top Housing Report NAR Supports Temporary Modifications to Affordable Housing Program On December 15, 2008, the National Association of REALTORS® (NAR) President Charles McMillan sent a letter to the Federal Housing Finance Board (FHFB) supporting temporary modifications to the Affordable Housing Program (AHP). NAR previously supported the use of the AHP to provide subsidies for the restructuring of mortgage loans as FHFB did with the Federal Home Loan Bank (FHLB) of San Francisco. The interim final rule allows FHLBs to use AHP homeownership funds to provide subsidies refinancing or restructuring troubled mortgage loans under the Hope for Homeowners Program. Use of AHP subsidies in conjunction with the Hope for Homeowners Program will enhance the effectiveness of each program and will allow more families to remain in their homes. NAR believes safeguards should be put in place to protect the AHP and ensure the mortgage is affordable for the homeowner. Any loan refinancing or restructuring program should, as a general rule, be limited to loans originated or held by the bank member or its affiliates. Mortgages held by a third party could be eligible for participation if the member bank or its affiliates require the third party to contribute or otherwise absorb costs of refinancing. Further, priority should be granted to homeowners with loans used to acquire the property, refinance the original purchase money mortgage, or make capital improvements to the home. Borrowers who have a mortgage from a "cash out" refinancing should be eligible if sufficient funds remain. NAR Letter to FHFB Supporting Temporary Modifications to AHP Jerome Nagy 202-383-1233, Jeff Lischer 202-383-1117 back to top Go to archived weekly reports >> Last Updated: 12/22/2008 Christopher Gosselin |
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