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 In This Issue Conventional Residential Lending Report Treasury Department Announces Public-Private Investment Program Environment Report NAR Opposes Omnibus Lands Bill Federal Tax Report Baucus Introduces Estate Tax Solution Mortgage Interest Deduction Limits Not Included in Proposed Budget President Obama Appoints Tax Reform Panel Housing Report NAR Calls on HUD to Accept E-Signatures in FHA Case Binders NAR Calls on HUD to Monetize Tax Credit for FHA-Insured Mortgages HUD Temporarily Places Limits on FHA Cash-Out Refinances Funds Available for USDA's Single Family Housing Guaranteed Loan Program Conventional Residential Lending Report  Treasury Department Announces Public-Private Investment Program On March 23, 2009, Treasury Secretary Timothy Geithner announced the Obama Administration's Public-Private Investment Program (PPIP) for Legacy Loans, to purchase toxic assets from the books of banks. The Federal Deposit Insurance Corporation (FDIC) will oversee new public-private investment funds (PPIFs) that will purchase loans and securities from banks. Private investors will be involved, attracted through an FDIC debt guarantee and a Treasury Department co-investment. By removing these assets from their books, banks should be able to raise more capital and make more loans. Visit FinancialStability.gov Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120 back to top Environment Report NAR Opposes Omnibus Lands Bill Congress approved omnibus lands legislation containing dozens of bills which expanded wilderness, heritage and conservation areas, as well as authorized public-private land exchanges. NAR objected to extending the government's reach, limiting access to public lands and otherwise diminishing property rights. The President is expected to sign the legislation. Austin Perez 202-383-1046, Russell Riggs 202-383-1259, Helen Devlin 202-383-7559 back to top Federal Tax Report Baucus Introduces Estate Tax Solution Senate Finance Committee Chair Max Baucus (D-MT) has introduced legislation that would, among other things, resolve the estate tax dilemma. Under current law, the estate tax has been on a glide path toward repeal. For 2009, the exclusion amount is $3.5 million, and the maximum rate is 45%. Then, in 2010, the tax would be temporarily repealed, but the burdensome carryover basis regime would be put in place. After 2010, the pre-2001 rules would be reinstated. These rules had an exclusion of only $1 million and very steeply graduated rates that topped at 55% when the size of the taxable estate was about $20,000. The Chairman's bill would make the 2009 rules permanent. Linda Goold 202-383-1083, Lisa Brechtel 202-383-1090, Samuel Whitfield 202-383-1131 back to top Mortgage Interest Deduction Limits Not Included in Proposed Budget The proposal in the Administration's FY 2010 budget to limit itemized deductions, including the mortgage interest deduction, for upper income taxpayers has found no champions in either the House or the Senate. The House and Senate Budget Committees have met to formulate a Budget Resolution to provide a guide for revenues and spending. NAR had been concerned that the Budget Resolution might include references to the Administration's proposal to use a portion of the mortgage interest deduction as a means of setting aside funds to "pay for" revisions to the health insurance and health care systems. In the end, neither the House nor the Senate included any reference to the proposal. The proposed Budget Resolutions did direct the tax-writing committees to set aside reserves for funding health care reform, but left the challenge of identifying the payment mechanism to the tax writers. Visit www.realtor.org/2009housingtaxcredit Linda Goold 202-383-1083, Samuel Whitfield 202-383-1131 back to top President Obama Appoints Tax Reform Panel To the surprise of many, President Obama has named a tax reform panel and asked that the panel report to him no later than December 4, 2009. An important mission for the panel will be to identify ways to close the so-called tax gap. The tax gap is the difference between what the government believes should be collected in tax revenues and the (lesser) amount that is actually collected. Some have estimated the tax gap as being more than $300 billion annually. Former Fed chief Paul Volcker has been named chair. Harvard Economist Martin Feldstein (Reagan administration), Berkeley Economist Laura Tyson (Clinton administration), Roger Ferguson (former Fed official) and William Donaldson (former SEC chief) were named to the panel. Obama advisor Austin Goolsbee will be chief of staff. The working group has been given some severe limitations: their proposal cannot increase the taxes of anyone earning less than $250,000 and there can be no tax increases of any kind during 2009 and 2010. No other directives were provided. Linda Goold 202-383-1083, Lisa Brechtel 202-383-1090, Samuel Whitfield 202-383-1131 back to top Housing Report NAR Calls on HUD to Accept E-Signatures in FHA Case Binders The National Association of REALTORS® President Charles McMillan sent a letter to US Department of Housing and Urban Development (HUD) Secretary Shaun Donovan requesting that FHA accept paper copies of documents with electronic signatures as part of the case binder submission for mortgage insurance. While FHA does not currently accept this practice, the use of e-signatures for real estate documents is widely accepted by other financial and lending institutions. Generally, these transactions are completed before FHA receives the application and enforceability is not in dispute. The parties execute the contracts in good faith and in accordance with state and federal statutes designed to support and promote electronic commerce. FHA's policy effectively forces parties to the sale to re-execute the transaction with manual signatures. NAR Letter to HUD on Electronic Signatures Jerome Nagy 202-383-1233, Megan Booth 202-383-1222 back to top NAR Calls on HUD to Monetize Tax Credit for FHA-Insured Mortgages The National Association of REALTORS® President Charles McMillan sent a letter to US Department of Housing and Urban Development (HUD) Secretary Shaun Donovan requesting that FHA be permitted to utilize its authority and permit FHA financing that would effectively result in monetizing the federal tax credit currently available to first-time homebuyers. Monetizing the tax credit through a loan combined with FHA's low 3.5 percent down payment requirement offers strong incentive to buyers who would otherwise not purchase a home this year. NAR estimates that hundreds of thousands of buyers will take advantage of the tax credit. During confirmation hearings, Mr. Donovan stated that FHA has the discretion to permit this type of financing mechanism. FHA regulations permit a borrower to use loan proceeds for a home purchase as long as the loan is "secured by property or collateral owned by the borrower independently of the mortgaged property." Loans may be used for a down payment on FHA-insured mortgages, and secured by the mortgaged property, in certain circumstances. NAR Letter to HUD on Monetizing the Tax Credit Jerome Nagy 202-383-1233, Megan Booth 202-383-1222 back to top HUD Temporarily Places Limits on FHA Cash-Out Refinances The US Department of Housing and Urban Development announced that effective April 1, 2009, the loan-to-value (LTV) of any cash out refinance insured by the Federal Housing Administration (FHA) cannot exceed 85 percent of the appraised value of the home. Further, if new subordinate financing is offered, the combined loan-to-value (CLTV) is limited to 85 percent. In Mortgagee Letter 2009-08, HUD states this temporary action is a result of the continuing deterioration of the housing market and the need to limit FHA's exposure to the risk of this market. HUD specified underwriting and eligibility requirements to participate in a cash-out refinance. Owners living in the house less than 12 months are limited to a refinance amount that is the lesser of 85 percent of appraised value or 85 percent of the sale price when the property was acquired. A second appraisal is required on refinances that exceed $417,000. Delinquent borrowers are not eligible for a cash-out refinance. Mortgagee Letter 2009-08: Limits on Cash-Out Refinances Jerome Nagy 202-383-1233, Megan Booth 202-383-1222 back to top Funds Available for USDA's Single Family Housing Guaranteed Loan Program On March 20, 2009, the US Department of Agriculture (USDA) Rural Development announced that, under the American Recovery and Reinvestment Act of 2009, approximately $10 billion is now available for the Single Family Housing Guaranteed Loan Program. Rural Development is issuing Conditional Commitments and Loan Note Guarantees for purchase loans. Rural Development cautions that given the expected volume of new loan activity, it is possible the standard 48-hour turn around on loan packages may not be met. Rural Development is not accepting Reservation of Funds request for new applications. Funds for refinance loans should be available in the coming weeks. In January 2009, Rural Development announced temporarily exhausted funds for the Single Family Housing Guaranteed Loan Program. The funding depletion was a result of the federal government's operation under a Continuing Resolution. Rural Development continued to accept and process applications and issued conditional commitments "subject to receipt of Congressionally appropriated funds." USDA Rural Development Megan Booth 202-383-1222, Kenneth Trepeta 202-383-1294 back to top Go to archived weekly reports >> Last Updated: 03/27/2009 Bira de Aquino |
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