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 In This Issue Conventional Residential Lending Report NAR Joins MBA and NAHB in Urging OFHEO to Increase Portfolio Caps for Fannie and Freddie NAR Urges the Fed to Adopt Strong Regulations to Prevent Unfair, Deceptive, and Abusive Lending Banking Regulators Urge Mortgage Servicers to Pursue Loss Mitigation Strategies and Preserve Homeownership Business Report NAR Holds Second RESPA Education Session for CE Credit Joint NAR–Center for Responsible Lending Letter Sent to HUD Encouraging Enhanced Good Faith Estimate FTC Encourages Use of Its Products on Privacy and Identity Theft GAO Report Spotlights Agency Reviews of Existing Regulations Housing Report Hearing on Reforms to Elderly Housing President Announces New Foreclosure Initiative FHASecure Environment Report NAR Testifies at House Hearing on Catastrophic Property Insurance Bill Conventional Residential Lending Report  NAR Joins MBA and NAHB in Urging OFHEO to Increase Portfolio Caps for Fannie and Freddie On August 13, 2007, NAR, the Mortgage Bankers Association (MBA), and the National Association of Home Builders (NAHB) wrote to Jim Lockhart, the Director of the Office of Federal Housing Enterprise Oversight (OFHEO), urging him to temporarily increase the caps on the investment portfolios of Fannie Mae and Freddie Mac (GSEs). NAR, MBA, and NAHB believe that increasing the cap will help inject needed liquidity and stability into the mortgage market. The letter recommends that the increase in the portfolio caps should be targeted to assure that Fannie and Freddie use the increased capacity to help meet the most urgent credit needs, including the non-government mortgage backed security (MBS) market and mortgages for creditworthy families finding it difficult or impossible to find a mortgage. Director Lockhart is already on record against increasing the portfolio caps. In his August 10, 2007, letter to Senator Schumer, he stated that in light of “significant supervisory concerns” (an allusion to the GSEs’ accounting problems) and current stability in the prime, conforming loan market, he did not believe higher caps are appropriate or necessary. But he noted he would continue to monitor the markets and the GSEs' safety and soundness and look for other ways for the GSEs to support affordable housing. Letter to Director Lockhart Jeff Lischer 202-383-1117, Lynn King 202-383-1156 back to top NAR Urges the Fed to Adopt Strong Regulations to Prevent Unfair, Deceptive, and Abusive Lending On August 15, 2007, NAR President Pat Combs sent a letter to the Federal Reserve Board (Fed) urging it to adopt strong regulations to prevent unfair, deceptive, and abusive lending practices in the mortgage markets. The letter is based on NAR’s subprime lending policy. NAR’s letter notes the current turmoil in the mortgage markets and suggests that a strong Fed rule could help reassure investors and borrowers and help stave off or recover from an unnecessary overreaction that could deny mortgage loans to borrowers who are willing and able to meet their mortgage obligations—whether prime, Alt-A, or subprime. The letter recommends that the Fed regulations:
NAR's letter Lynn King 202-383-1156, Jeff Lischer 202-383-1117 back to top Banking Regulators Urge Mortgage Servicers to Pursue Loss Mitigation Strategies and Preserve Homeownership On September 4, 2007, six federal and state banking regulators issued a statement encouraging residential mortgage servicers to take action to mitigate losses while preserving homeownership. The issuing agencies were the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), the National Credit Union Administration (NCUA), and the Conference of State Bank Supervisors (CSBS). The regulators are especially concerned that a significant number of hybrid, adjustable rate, subprime mortgages are facing interest rate resets and higher monthly payments. As these mortgages reset, borrowers face a higher risk of default. The statement notes that although lenders have sold many of these mortgages in the secondary market, the servicers may have authority to restructure loans that are delinquent, in default, or in imminent risk of default. The regulators’ statement encourages servicers to take proactive steps to prevent loss of homes to the extent possible and appropriate, including referring borrowers to qualified homeownership counseling organizations and programs. Later on the same day, the FDIC, CSBS, and the American Association of Residential Mortgage Regulators—but not the other four federal banking regulators—issued a supplementary statement warning the institutions they supervise (state banks and other state lenders) about high debt-to-income (DTI) ratios. Absent mitigating circumstances, the three regulators believe that DTI ratios above 50 percent increase the chance of delinquencies or defaults. To illustrate, if the borrower has a monthly income of $3,600, a monthly payment of $1,800 for principal, interest, taxes, and insurance would be a 50 percent DTI ratio. Press Release from 6 Banking Regulators (with link to the Statement on Loss Mitigation Strategies) Press Release from the FDIC, CSBS, AARMR Warning about Excessive Debt-to-Income Ratios FDIC's Financial Institution Letter on Excessive Debt-to-Income Ratios Lynn King 202-383-1156, Jeff Lischer 202-383-1117 back to top Business Report NAR Holds Second RESPA Education Session for CE Credit On Thursday, August 23, 2007, NAR, in partnership with the Ohio Association of Realtors® held its second RESPA education session. RESPA attorney Phil Schulman conducted the three hour class to a packed room of Ohio Realtors® in Columbus. The session followed the extremely successful session in April before the Maryland Realtors®. The Ohio Association, led by education director Tim Lockwood, secured CE credit for the course and handled all logistical considerations while NAR secured Schulman and others to present. The next RESPA CE session will be at the "Triple Play" Pennsylvania, New York, New Jersey convention in Atlantic City in December. The next "RESPA Realities - RESPA Enforcement - Don't be a Target" session will be held at the annual convention in Las Vegas on Wednesday, November 14, 2007 at 1:30 p.m. Kenneth Trepeta 202-383-1294, Marcia Salkin 202-383-1092 back to top Joint NAR–Center for Responsible Lending Letter Sent to HUD Encouraging Enhanced Good Faith Estimate 2007 NAR President Pat V. Combs sent a joint letter to Housing and Urban Development (HUD) Secretary Alphonso Jackson on August 8, 2007, encouraging HUD to undertake reform of the Good Faith Estimate (GFE) under Real Estate Settlement Procedures Act (RESPA). The letter, co-signed by Center for Responsible Lending (CRL) President, Michael D. Calhoun, reflects the two organizations’ common approach to RESPA reform and addressing abusive lending practices, in part, through a summary GFE. The letter also states that additional strong legislative and regulatory action will be required. Specifically, the letter recommends a summary GFE that highlights key loan terms and payment information in an easily understandable format. NAR and CRL further recommend that the summary GFE accompany a full GFE that would provide the detail necessary for consumers to understand more fully the services and accompanying fees for which they are being charged. This letter, in addition to encouraging a continuation of HUD’s consensus-building approach to RESPA reform, also serves as a follow-up to a May 18, 2007 meeting between Real Estate Services Advisory Board Chair Steve Brown and NAR staff with then-acting HUD General Counsel Robert Couch (Mr. Couch was confirmed as HUD General Counsel by the Senate on June 13, 2007) where RESPA transparency and other issues were discussed. Joint letter from NAR and CRL to HUD Scott Rinn 202-383-7508, Marcia Salkin 202-383-1092, Kenneth Trepeta 202-383-1294 back to top FTC Encourages Use of Its Products on Privacy and Identity Theft At a meeting at the Federal Trade Commission on August 15, 2007 NAR RIR staff met with FTC Consumer and Business Education Directors and discussed privacy and identity-theft products being produced by the FTC Bureau of Consumer Protection. These products include articles written about steps businesses can take to prevent identity theft and are available for reprinting in NAR publications. Scott Rinn 202-383-7508, Marcia Salkin 202-383-1092 back to top GAO Report Spotlights Agency Reviews of Existing Regulations GAO released a report on July 16, 2007 stating that opportunities exist to improve effectiveness and transparency of agency reviews of their regulations. While the review process generally is seen by agencies and nonfederal parties as useful, the report cites practices such as better pre-planning, prioritization and high-level management support as steps to improve the conduct and usefulness of reviews. NAR regulatory staff monitors the on-going effectiveness of regulations that impact its membership and will continue to request and participate in agency reviews of regulations affecting NAR members. GAO Report Summary Scott Rinn 202-383-7508 back to top Housing Report Hearing on Reforms to Elderly Housing The House Financial Services Housing Subcommittee last week held a hearing on H.R. 2930, the "Section 202 Supportive Housing for the Elderly Act of 2007". The Section 202 program is run by the Department of Housing and Urban Development, and provides affordable rental housing for very low income seniors, in conjunction with support services. H.R. 2930, introduced by Rep. Mahoney (D-FL), would streamline the program and simplify development and preservation of this housing. Committee Chairman Frank (D-MA) and Subcommittee Chair Waters (D-CA) have expressed support for the legislation, and a Committee markup is expected later this month. Megan Booth 202-383-1222 back to top President Announces New Foreclosure Initiative FHASecure On August 31, 2007, President Bush announced a new initiative called FHASecure, which will give the Federal Housing Administration (FHA) flexibility to help more families keep their homes in light of the decline of the subprime market and impending interest rate adjustments affecting numerous borrowers in both the subprime and Alt-A markets. The FHASecure program will help people who have not made all of their payments on time because of rising mortgage payments but who otherwise have good credit. The initiative is a temporary program requiring that loan applications be signed no later than December 31, 2008. On September 4, 2007, the US Department of Housing and Urban Development (HUD) released Mortgage Letter 2007-11 further detailing the program. The President called on Congress to change a key housing provision of the Federal Tax Code to ensure people are not penalized when they refinance their homes. Current tax law counts cancelled mortgage debt on primary residences as taxable income. The President then announced a foreclosure avoidance initiative to help homeowners refinance by working with housing counseling organizations. The President also pushed Congress to pass the broader FHA reform bill. NAR applauded President Bush’s statement of support for giving homeowners greater flexibility to refinance their loans through the FHA. At a white house conference call on the initiative, the administration specifically signaled out NAR for our timely support of the initiative. NAR has been advocating regulatory changes to the FHA program. On April 9, 2007, NAR sent a letter to Alphonso Jackson, Secretary of Housing and Urban Development, asking that FHA waive the requirement that a homeowner’s mortgage be current to refinance into an FHA loan product. NAR also supports legislation that would give FHA greater flexibility by increasing loan limits, eliminating the statutory 3 percent minimum cash down payment, allowing FHA flexibility to provide risk-based pricing, and revising the condominium program. NAR Press Release Supporting President's Announcement President Bush Discusses Homeownership Financing HUD Mortgage Letter 2007-11 on FHASecure Initiative and Guidance Megan Booth 202-383-1222, Jerome Nagy 202-383-1233 back to top Environment Report NAR Testifies at House Hearing on Catastrophic Property Insurance Bill NAR testified on September 6 in support of the Homeowners' Defense Act of 2007 (H.R. 3355) before a joint hearing of the House Committee on Financial Services Subcommittee on Housing and Community Opportunity and Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises. Vince Malta, 2006 President of the California Association of REALTORS® and Vice-Chair of NAR's Public Policy Coordinating Committee testified on behalf of NAR that H.R. 3355 is "a solid first step in ensuring the availability and affordability of homeowners insurance in at-risk markets." He further testified that Congress must develop a comprehensive natural disaster policy that will mitigate exposure to the risks of natural disasters and foster the availability and affordability of insurance for residential and commercial properties. He added that the private sector, government, and individual property owners must work together to address the current insurance situation. The Homeowners' Defense Act was introduced August 3 by Representatives Ron Klein (D-FL) and Tim Mahoney (D-FL). The bill has 36 co-sponsors, all Democrats, although a number of Republicans have expressed interest in supporting the bill. The bill has two key elements: (1) A National Catastrophe Risk Consortium and (2) a program to make liquidity and catastrophic loans to state or regional reinsurance programs after a natural catastrophe. Both of these programs would enhance a state’s ability to institute disaster mitigation activities, support the availability and affordability of insurance, and help states and property owners recover faster after a disaster strikes. The bill has the support of Committee Chairman Barney Frank (D-MA) and may be debated and voted on by the Committee on Financial Services before the end of September. House leadership has expressed support for the bill and promised a vote by the full House after it is passed in committee. View witness testimony and webcast of hearing Mark Washko 202-383-7526, Russell Riggs 202-383-1259, Helen Devlin 202-383-7559 back to top Go to archived weekly reports >> Last Updated: 09/21/2007 Bira de Aquino |
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