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 In This Issue Business Report NAR Comments on FCC Definition of Broadband Commercial Finance Report IRS Issues Final REMIC Rules Federal Tax Report IRS Says 1.4 Million Taxpayers Have Used Tax Credit Housing Report House Passes Legislation to Increase FHA Multifamily Loan Limit for Elevator Buildings FHA Modernization Bill Passes the House FHA Delays Implementation of New Condominium Rules NAR Calls for Enhancements to FHA Appraisal Rules FHA Enhances Credit Policies, Announces Position of Chief Risk Officer Business Report  NAR Comments on FCC Definition of Broadband On September 8, NAR filed a comment letter with the Federal Communications Commision (FCC) in its proceeding to develop a national broadband plan. NAR supports the FCC's efforts because the business of real estate is increasingly conducted online. Streaming video, virtual tours and voice-over-internet-protocol are just some of the technologies that are commonly used by REALTORS® today. In the future, new technologies will be adopted that will only increase our members' reliance on the availability of efficient, cost-effective access to broadband services. Moreover, broadband access is a significant feature considered by consumers when purchasing a home. A 2006 Commerce Department study found that real property values are 6 percent higher in communities where broadband is available. NAR asked the FCC to consider several high-level principles with respect to defining broadband. See the letter in the link provided below. NAR Comment Letter to FCC Melanie Wyne 202-383-1234, 202-383-7508, Ken Wingert 202-383-1196 back to top Commercial Finance Report IRS Issues Final REMIC Rules On September 15, the U.S. Department of Treasury issued highly anticipated final guidance for commercial mortgage loans held by a Real Estate Mortgage Investment Conduit (REMIC). REMICs are a vehicle by which commercial mortgages are securitized. Previously, borrowers with loans securitized through a REMIC were unable to significantly modify their property to meet changing market trends. These constraints limited the attractiveness of securitizing commercial loans as well as the flexibility of borrowers to meet debt obligations as market trends change. Last April, NAR, as part of an industry coalition, submitted comments to the IRS in response to notice 2007-17 seeking input on improvements to the REMIC regulations. This final rule (Revenue Procedure 2009-45) provides guidance regarding modifications to certain mortgage loans without triggering an IRS challenge to the tax status of the REMIC. The guidance permits a change in the terms to be negotiated if, based on all the facts and circumstances, and after meeting the threshold for a qualified loan, the holder or servicer reasonably believes there is a "significant risk of default" of the loan upon maturity of the loan or at an earlier date, and that the modified loan will present a "substantially reduced risk of default." These guidelines will apply to loan modifications effected on or after January 1, 2008. Additionally, the Department of Treasury issued final regulations (TD 9463) expanding the list of exceptions that will not be considered "significant modifications" of an obligation held by a REMIC. Effective September 16, 2009, this expanded list of exceptions include modifications that release, substitute, add, or otherwise alter a substantial amount of the collateral so long as the obligation continues to be "principally secured by an interest in real property." The Department of Treasury has also issued a request for comments (Notice 2009-79) on what additional guidance, if any, is needed regarding modifications of commercial mortgage loans held by investment trusts. These updated IRS guidelines should provide much needed flexibility for owners with properties utilizing REMICs and facilitate better communication and planning between the servicer and the borrower. Lisa Brechtel 202-383-1090 back to top Federal Tax Report IRS Says 1.4 Million Taxpayers Have Used Tax Credit The IRS has released IR-2009-083 reporting that about 1.4 million taxpayers have filed (or amended) their 2008 income tax returns claiming the $8000 first-time homebuyer tax credit. This is roughly consistent with NAR's projections that about 1.8 million taxpayers will claim the credit. NAR also estimates that at least 355,000 of eligible sales would not have occurred without the credit. The IRS release also reminds taxpayers of the importance of getting to closing before the December 1 expiration of the credit and publicizes a YouTube video it has prepared to help taxpayers understand the basics of the credit. NAR continues its full court press to extend the credit into 2010. This intense campaign will have major grassroots components to secure an extension of the credit as soon as possible to avert a slowdown in the market. NAR's FHA and the First Time Homebuyer Tax Credit Flyer In Depth: 2009 First-Time Home Buyer Tax Credit Linda Goold 202-383-1083, Megan Booth 202-383-1222, Jerome Nagy 202-383-1294 back to top Housing Report House Passes Legislation to Increase FHA Multifamily Loan Limit for Elevator Buildings The House passed, by unanimous consent, H.R. 3527, the "the FHA Multifamily Loan Limit Adjustment Act of 2009." H.R 3527, introduced by Reps. Weiner (D-NY) and Gary Miller (R-CA) , would increase the FHA multifamily loan limits for elevator buildings. In FY07 and FY08, FHA insured a total of only three multifamily buildings with elevators nationwide. The costs of constructing high rise multifamily buildings is significantly more than the costs of garden style apartments, but can provide many more opportunities for families looking to rent. H.R. 3527 will provide FHA with the tools it needs to facilitate the construction and rehabilitation of apartments. The bill now moves to the Senate. Megan Booth 202-383-1222 back to top Housing Report FHA Modernization Bill Passes the House The House passed, under unanimous consent, H.R. 3146, the "21st Century FHA Housing Act of 2009". This bill, introduced by Reps. Adler (D-NJ) and Lee (R-NY), provides additional resources to FHA to upgrade technology and hire additional qualified staff. The bill also makes some improvements in the areas of risk management, and provides flexibility for FHA to promote foreclosure prevention programs. This will ensure millions of Americans can maintain the dream of homeownership without requiring another emergency bailout. There is not yet a companion bill in the Senate. Jerome Nagy 202-383-1233, Megan Booth 202-383-1222 back to top Housing Report FHA Delays Implementation of New Condominium Rules Mortgagee Letter 2009-19 provided guidance on the new approval process for condominium projects for mortgages insured by the Federal Housing Administration (FHA). The rule effectively places condominium projects in FHA's 203(b) Single Family Program. This new approval process was effective for all case numbers assigned on or after October 1, 2009. However, the new effective date is for case numbers assigned on or after November 2, 2009. The site condo and manufactured housing condo project changes that have already taken effect are not affected by this delay. On July 31, 2009, NAR President Charles McMillan sent a letter to FHA Commissioner David Stevens recommending enhancements to the new condominium rule. Mr. McMillan also discussed NAR's recommendations at a meeting with the Commissioner on September 8, 2009. NAR is calling for: 1) a reduction in the owner-occupancy requirement, 2) eliminating or increasing the FHA concentration limit, 3) reducing the pre-sale requirement, and 4) clarification of the reserve study requirement. NAR Letter to FHA on New Condominium Rule Enhancements Mortgagee Letter 2009-19: Condominium Approval Process – Single Family Housing Jerome Nagy 202-383-1233, Megan Booth 202-383-1222 back to top Housing Report NAR Calls for Enhancements to FHA Appraisal Rules As a follow up to a September 8, 2009, meeting with Federal Housing Administration (FHA) Commissioner David Stevens, NAR President Charles McMillan sent a letter to the Commissioner recommending enhancements to FHA appraisal policy. As FHA considers implementing components of the Home Valuation Code of Conduct (HVCC), NAR recommends that lenders be prohibited from using an appraisal report from any appraisal management company (AMC) where the lender or the lender's affiliate maintains an ownership stake. Further, FHA should ensure that AMCs have appropriate quality control procedures in place. NAR also recommends implementing a mechanism for complaints similar to the Independent Valuation Protection Institute (IVPI) that was to be implemented along with the HVCC. NAR also recommends eliminating the appraisal requirements for declining markets and aligning FHA appraisal requirements with those adopted by the GSEs. This will provide consistency across the real estate industry without causing harm to markets that are showing signs of improvement. Recommendations include eliminating the requirement for a second appraisal in certain markets and allowing appraisers to use comparable sales that are up to 12 months old in all markets, including declining markets. NAR Letter to FHA Recommending Enhancements to Appraisal Rules Jerome Nagy 202-383-1233, Chere LaRose-Senne 312-329-8455, Megan Booth 202-383-1222 back to top Housing Report FHA Enhances Credit Policies, Announces Position of Chief Risk Officer Federal Housing Administration (FHA) Commissioner David H. Stevens announced plans to implement credit policy changes that will enhance the agency's risk management functions. FHA will hire a Chief Risk Officer for the first time in the FHA's history. Commissioner Stevens said "to be clear, the fund's reserves are sufficient to cover our future losses, so the FHA will not require taxpayer assistance or new Congressional action. That said, given the size and scope of the FHA and its importance to today's market, these risk management and credit policy changes are important steps in strengthening the FHA fund, by ensuring that lenders have proper and sufficient protections." FHA is implementing new policies in a mortgagee letter that will be effective January 1, 2010. The mortgagee letter will require audited financial statements by supervised mortgagees, modify the streamline finance process, and enhance appraiser independence. The streamline refinance process will include new requirements for seasoning, payment history, income verification, and demonstration of net tangible benefit to the borrower; provide for collection of credit score information when available; and to cap maximum loan-to-value (LTV) ratio at 125 percent. FHA will reaffirm existing policy on appraiser independence and geographic competence. Mortgage brokers and commission based lender staff will be prohibited from ordering appraisals. FHA's appraisal validity period will be reduced from six months to four. Through the rulemaking process FHA will make changes to mortgagee approval and participation process. Lenders seeking approval to originate, underwrite, or service an FHA loan must meet the eligibility criteria for a supervised or non-supervised mortgagee. Mortgagees with this approval status must assume liability for all the loans they originate and/or underwrite. FHA plans to propose to increase the net worth requirement for approved mortgagees to approximately $1,000,000 up from the current $250,000 threshold. In a statement by President Charles McMillan, NAR applauds the recommended credit policy changes. Mr. McMillan said "The Federal Housing Administration is very important to the housing market". With this announcement, "FHA has taken some timely steps to protect taxpayer money." NAR Statement on Enhanced Credit Policy Announcement HUD Announcement on Credit Policy Changes, Addition of Chief Risk Officer Jerome Nagy 202-383-1233, Megan Booth 202-383-1222 back to top Go to archived weekly reports >> Last Updated: 09/18/2009 Kara Beigay |
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