The Washington Report

In This Issue
Realtor Insider DC News and Events Report
Obama Administration to Announce Financial Stability Plan

Business Report
H-2B Visa Legislation Introduced
NAR Holds Webinar on New RESPA Rule

Conventional Residential Lending Report
Freddie Mac Increases Fees, Following Fannie Mae Lead
Freddie Mac Kicks Off Pilot to Help High Risk Borrowers Avoid Foreclosure
Fannie Raises Limit on Investor and Second Home Borrowers from 4 to 10 Financed Properties

Federal Tax Report
Senate Modifies Homebuyer Tax Credit

Housing Report
House Committee Passes Reforms to Foreclosure Assistance Program

Obama Administration to Announce Financial Stability Plan

Treasury Secretary Timothy Geithner is now scheduled to announce the Obama Administration's "Financial Stability Plan" on Tuesday, February 10, 2009. Speculation and rumors abound in Washington. Important elements of the plan are apparently still being debated within the Administration.

Reportedly, the plan may include:

Expanding the Federal Reserve Board's Term Asset-Backed Securities Loan Facility (TALF) to include federal support for both commercial and residential lending. NAR has strongly urged Secretary Geithner to expand TALF to include commercial lending.
Subject to rules still being developed, guaranteeing banks against certain losses on loans, including mortgage loans. One goal is to attract more private investment in banks, which would stabilize the capital position of banks and allow them to make more loans.
Using $50-100 million from the remaining Troubled Asset Relief Program (TARP) funds to help home owner occupants avoid foreclosure. NAR supports the goal of minimizing foreclosures to help keep families in their homes, protect communities, and minimize increasing the inventory of homes for sale.
Purchasing troubled assets from banks to stabilize their financial condition and enable them to make more loans. NAR has urged government officials to get TARP back on track, including the purchase of troubled assets to help unclog the credit markets and establishing an interest rate buy-down program.
Making additional federal investments in banks, in exchange for securities convertible into common stock, which could give the government power control over banks that are remain troubled. The additional investment would come with conditions on the use of the additional funding.

Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120

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H-2B Visa Legislation Introduced

U.S. Senators Barbara A. Mikulski (D-Md.) and Arlen Specter (R-Pa.) have introduced S. 388 - the Save Our Small and Seasonal Business Act of 2009, that will protect small and seasonal businesses by providing an exemption for returning seasonal workers. NAR supports this legislation because many resort and second home areas, such as ski and beach resorts, rely on these workers to ensure their continued operation.

The Save Our Small and Seasonal Business Act of 2009 will:

Extend the H2B Returning Worker Exemption that expired on September 20, 2007 for an additional three years;
Revise the "three year qualifying period" to include H2R workers, in addition to H2B workers. and;
Ensure that employers can only fill the positions with H2B and H2R workers only when no American workers are available to fill them.

Seasonal workers are crucial for the success of many small and seasonal businesses across the country. Over the past several years, the seasonal worker visa program has come under increasing stress with the number of applicants reaching statutory caps earlier in the year. This year, the cap was reached on January 7th. Because of this, businesses whose peak seasons come later in the year may be unable to get the workers they need to keep their businesses going.

Russell Riggs 202-383-1259, Melanie Wyne 202-383-1234

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NAR Holds Webinar on New RESPA Rule

NAR held a webinar on Wednesday February 4, 2009 with RESPA Attorney Phil Schulman covering the major provisions of the new RESPA rule set to go into effect January 1, 2010. Schulman discussed the new Good Faith Estimate, the new HUD-1, and a number of other provisions important to real estate agents, brokers, and others in the broader real estate industry. Schulman also gave his perspective on the likely prospects of lawsuits by the NAHB and NAMB dealing with "required use" and yield spread premium respectively. The webinar is now posted on the web at the link below.

Listen to the Webinar
Good Faith Estimate
HUD-1

Kenneth Trepeta 202-383-1294, Marcia Salkin 202-383-1092, Scott Rinn 202-383-7508

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Freddie Mac Increases Fees, Following Fannie Mae Lead

On January 30, 2009, Freddie Mac announced fee increases, effective April 1, 2009. The Bulletin explained that Freddie expects that continuing declines in home values through 2009 will result in higher default rates for mortgages with lower credit scores or higher loan-to-value (LTV) ratios. Freddie anticipates that mortgages with additional risk characteristics, such as cash-out refinancings, interest-only adjustable rate mortgages, and condominium unit mortgages are at even greater risk of default.

Among the Freddie Mac fee increases are (1) 75 basis points for condominium unit mortgages with LTV ratios greater than 75 percent; (2) 25 basis points for interest-only ARMs, (3) 25, 50 or 75 basis points for mortgages with certain credit score and LTV ratio combinations, and (4) 25 or 50 basis points for cash-out refinancings with certain credit score/LTV ratio combinations.

The Freddie Mac increases follow increases Fannie Mae announced on December 29, 2008. On January 2, 2009, in response to the Fannie Mae increases, and anticipating that Freddie Mac would follow Fannie's lead, NAR President Charles McMillan wrote to Director Jim Lockhart, head of the Federal Housing Finance Agency and the federal conservator and regulator of Fannie Mae and Freddie Mac. The letter questioned whether it makes sense, from a policy standpoint, to increase fees considering the mission of the GSEs to promote affordable homeownership. NAR urged Director Lockhart, in the absence of a compelling justification, to require Fannie Mae to rescind the fee increases and to direct Freddie Mac not to raise its fees.

Director Lockhart has not yet responded to the January 2, 2009 letter, but in light of the Freddie Mac increase, it is clear that he agrees that the enterprises should increase fees, notwithstanding NAR's concern about the negative impact on mortgage affordability.

Freddie Mac Bulletin (January 30, 2009)
NAR's Letter to Director Lockhart (January 2, 2009)
Fannie Mae's Announcement 08-38 (December 29, 2008)

Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120

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Freddie Mac Kicks Off Pilot to Help High Risk Borrowers Avoid Foreclosure

On February 3, 2009, Freddie Mac announced its new "Workout Strategy for High Risk Loans" to keep more families in their homes. The pilot uses servicers, including Ocwen Financial Corporation, that specialize in dealing with Alt A and other higher risk mortgage loans.

Under the pilot, borrowers who are at least 60 days delinquent will receive intensive servicer attention to achieve a successful work-out. The pilot will help 5,000 loans from California, Nevada, and other high delinquency rate states. Freddie may expand the pilot after reviewing the results due in June 2009.

Freddie Mac Press Release

Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120

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Fannie Raises Limit on Investor and Second Home Borrowers from 4 to 10 Financed Properties

At the urging of NAR, Fannie Mae announced a new policy on February 6, 2009, to allow investors and second home buyers to own up to 10 financed properties. The new policy takes effect on March 1, 2009, and replaces the current 4-property limit. The restriction applies to the total number of financed properties, not just to the number sold to Fannie Mae.

Investor and second home borrowers that seek to own between 5 and 10 financed properties must meet additional eligibility requirements. Borrowers must have a credit score of at least 720. The maximum loan-to-value ratio is 70% or 75%, depending on specified criteria. Borrowers may not have any history of bankruptcy or foreclosure in the past 7 years, or any mortgage delinquencies of 30 days or greater within the past 12 months. Reserve and other requirements also apply.

Fannie Mae Announcement 09-02 (2/6/09)

Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120

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Senate Modifies Homebuyer Tax Credit

During debate on the stimulus bill, Senator Johnny Isakson (R-GA) offered an amendment that significatnly expands the homebuyer tax credit. The credit would be $15,000 and would be available to all purchasers of a principal residence, not just first-time homebuyers. The legislation is still in flux and must be reconciled in a House-Senate conference. The chart attached compares current law with the House and Senate versions of the bill.

Chart Comparing Current Law, H.R.1, and Senate Amendment

Linda Goold 202-383-1083, Megan Booth 202-383-1222, Samuel Whitfield 202-383-1131

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House Committee Passes Reforms to Foreclosure Assistance Program

The House Financial Services Committee last week approved H.R. 787, a bill which reforms the Hope for Homeowners program. Hope for Homeowners was designed to help families who are facing foreclosure refinance into a safe, affordable FHA mortgage. However, the restrictions on the program have been such that lenders are refusing to participate, and since October of 2008 only 25 mortgages have closed under the program. HR 787 eases some restrictions to make lender participation more likely. The bill allows for payments to loan servicers and lessens the write-down for lenders, while preserving the benefits to homeowners and limiting risks to the FHA fund and the American taxpayer. In addition, the Committee approved another bill, HR 788, to provide a safe harbor for mortgage servicers who engage in certain loan modifications. This bill should also help ease the way for more loan modifications for families in trouble. Both bills are expected on the Floor of the House this week.

Megan Booth 202-383-1222

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Last Updated: 02/09/2009 Bira de Aquino