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 In This Issue Conventional Residential Lending Report Federal Reserve Board Cuts Rates OFHEO Adjusts GSE Portfolio Cap Formula Housing Report FHA Reform Passes House, Moves in Senate HUD Appropriations Bill Ready for Conference Federal Tax Report Prospects Brighter for Mortgage Cancellation Relief Environment Report Water Resources to be Focus of Upcoming Land Use Forum Business Report HUD Secretary Jackson’s Statement Tracks NAR Policy on RESPA Reform Commercial Finance Report House Passes H.R. 2761 Terrorism Risk Insurance Revision Extension Act Conventional Residential Lending Report  Federal Reserve Board Cuts Rates On September 18, 2007, the Federal Open Market Committee of the Federal Reserve Board (Fed) announced a 0.5% cut in the federal funds rate. The Fed also cut the discount rate another 0.5%, on top of the 0.5% cut it made on August 17, for a total of one percentage point. The federal funds rate is the interest rate on overnight loans between banks, usually to meet reserve requirements. The discount rate is the interest rate charged to banks on short term loans they receive from the Fed. In cutting the rates, the Fed explained that while economic growth has been moderate, "the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time." The Fed also noted it would continue to monitor the financial markets and "will act as needed to foster price stability and sustainable economic growth." NAR President Pat V. Combs issued a statement welcoming the Fed's decision to cut rates because it will "boost a housing market beginning to rebound, help restore consumer confidence in the real estate market, and could give a helping hand to borrowers with adjustable-rate mortgages (ARMs)." The Fed's press release NAR President Pat V. Combs Welcomes Fed Rate Cut Lynn King 202-383-1156, Jeff Lischer 202-383-1117 back to top OFHEO Adjusts GSE Portfolio Cap Formula On September 19, 2007, the Office of Federal Housing Enterprise Oversight (OFHEO) announced that it was modifying the formula for establishing the cap on the dollar amount of mortgage assets that Fannie Mae and Freddie Mac (GSEs (government sponsored entities)) may hold in their retained mortgage portfolios. The announcement states that the change will give the GSEs more flexibility in monitoring their portfolios and enable them to assist subprime borrowers and others having problems refinancing their mortgages in the current mortgage market environment. OFHEO remains concerned about protecting the GSEs' safety and soundness, and emphasizes this throughout the lengthy announcement. OFHEO believes the new flexibility, coupled with the ability of the GSEs to make room under the caps by selling mortgage assets, will, over the next six months, let them purchase or securitize as much as $20 billion of subprime mortgages, refinanced mortgages for those with lower credit scores, and affordable multifamily housing mortgages. NAR President Pat V. Combs issued a statement praising OFHEO’s actions and urging Congress to increase the conforming loan limits for higher cost areas. The GSEs may only purchase mortgages with a principal amount at or below the conforming loan limit, currently $417,000. OFHEO Press Release NAR Press Release on OFHEO Action Jeff Lischer 202-383-1117, Lynn King 202-383-1156 back to top Housing Report FHA Reform Passes House, Moves in Senate On Tuesday, the House of Representatives passed H.R. 1852 the "Expanding American Homeownership Act of 2007" by a strong vote of 348-72. The bill includes provisions to eliminate the 3% downpayment requirement, increase the loan limits, streamline condominium purchases, and eliminates the cap on Home Equity Conversion mortgages (HECMs). During debate, an amendment offered by Reps. Barney Frank (D-MA), Gary Miller (R-CA) and Dennis Cardoza (D-CA) passed on a voice vote. This amendment will increase the FHA loan limits to 125% of median area home price, with a cap of 175% of the conforming loan limit. Such an increase will help FHA be a valuable tool in all areas of the country from Massachusetts, to South Carolina, to Texas, to Nevada, and even in California. NAR issued a full Call to Action to the membership on the bill and the amendment that helped make this victory possible. Thank you to those who responded. On Wednesday, the Senate Banking Committee passed their own version of the bill called the "Building American Homeownership Act." The bill has not yet been introduced, but was written by Senators Chris Dodd (D-CT) and Mel Martinez (R-FL). The Senate bill increases the FHA loan limits to 100% of area median, capped at 100% of the conforming loan limit; reduces the downpayment requirement to 1.5%, streamlines condominium purchases, and eliminates the cap on HECMs. The bill also includes a second title that would reform FHA's manufactured housing bill. Similar legislation, which NAR supports, passed the House in June. It is hoped the Senate will take up the measure in the next few weeks. Megan Booth 202-383-1222, Jerome Nagy 202-383-1233 back to top HUD Appropriations Bill Ready for Conference The House and Senate have both approved the fiscal 2008 HUD budget bill, including significant increases over the President’s budget request. The House bill includes funding for vouchers and all contract renewals for Section 8 vouchers and project-based assistance; it also includes 4,000 new vouchers for the non-elderly disabled and homeless veterans. The bill also provides a $228 million increase for community development block grants (CDBG), and $120 million for HOPE VI projects, rejecting the Administration's call to eliminate the program. The Senate also passed a budget higher than that in the Administration's request. It provides a total of $38.7 billion for HUD, an increase of $2.12 billion over the FY07 funding level. They provide $3.77 billion for CDBG, $100 million for HOPE VI, and full funding for Section 8 vouchers and contract renewals. It also includes a $380,000 for additional funding to HUD to help with LEP translations. Also included in the bill is a provision that would provide up to $200 million for foreclosure prevention and counseling. Senator Charles E. Schumer, D-NY, originally requested $100 million, but Senate Banking Committee Chairman Christopher Dodd, D-CT, and Senator Christopher Bond, R-MO, introduced an amendment to double the funds, which would go to government-approved agencies that work with borrowers to prevent foreclosure. The Dodd-Bond amendment, which passed by voice vote, would allow the Secretary of Housing and Urban Development to require a matching contribution by the counseling firms of up to 25% of the award. In addition, the Senate included $25 million for the American Dream Downpayment program. No similar funding was provided in the House. A conference on the two bills should happen in October, but the President is expected to veto any bill that goes above his spending levels. Megan Booth 202-383-1222 back to top Federal Tax Report Prospects Brighter for Mortgage Cancellation Relief The House Ways and Means Committee will meet, most likely on September 26, to mark up mortgage cancellation tax relief. In a rare departure from custom, the bill will likely move as freestanding legislation, rather than as a provision of a larger bill. If adopted, the provision would have no cap and no income limits. It would be a permanent rule. (President Bush proposed only temporary relief.) As presently contemplated, the relief would apply to mortgage debt forgiven on or after January 2007. The revenue estimate for the provision is $1.4 Billion over 10 years. A "pay-for" has been identified that will tighten, but not eliminate, a benefit of current law. Linda Goold 202-383-1083, Jeff Lischer 202-383-1117, Helen Devlin 202-383-7559 back to top Environment Report Water Resources to be Focus of Upcoming Land Use Forum "Water Resources and Development in the West" is the theme of the upcoming Land Use, Property Rights and Environment Forum at the Annual Conference in Las Vegas. The Forum will convene on Tuesday, November 13, at 11:00 am, in the Venetian Hotel. Discussion will focus on how sustained economic development can occur with limited water resources. Confirmed speakers at the Forum include:
back to top Business Report HUD Secretary Jackson’s Statement Tracks NAR Policy on RESPA Reform While testifying in a September 20, 2007 hearing on "Legislative and Regulatory Options for Minimizing and Mitigating Mortgage Foreclosures,” HUD Secretary Alphonso Jackson revealed for the first time that HUD has been working on a revised HUD-1 Settlement Statement that will match up better with the Good Faith Estimate (GFE). NAR has long-advocated that the GFE and the HUD-1 should be matched-up to improve consumer understanding and choice during the confusing mortgage process and that financial terms should be easily confirmed at the time of settlement. Specifically, NAR has urged HUD to provide a Summary GFE that tracks the HUD-1 so that consumers can shop and make informed decisions prior to closing, and then easily confirm that the consumer’s loan and pricing decisions are transparently transferred to the HUD-1 at closing. The Secretary’s statement indicates that HUD’s RESPA reform efforts are moving in the direction NAR has long-advocated on behalf of consumers. Scott Rinn 202-383-7508, Marcia Salkin 202-383-1092 back to top Commercial Finance Report House Passes H.R. 2761 Terrorism Risk Insurance Revision Extension Act The House of Representatives, by a vote of 312-110 passed the Terrorism Risk Insurance Revision Extension Act. The bill extends the terrorism risk insurance program for 15 years, phases in NBCR coverage (nuclear, biological, chemical radiological), and eliminates the distinction between foreign and domestic acts of terrorism. In short, the legislation takes a comprehensive approach in ensuring the long term continued availability and affordability of terrorism coverage - often a vital component in financing commercial real estate. In addition, the legislation requires that Treasury prepare a report every two years on the pricing and availability of terrorism coverage, and also specifically port on its effect on commercial real estate. The legislation also establishes a blue ribbon commission, which would include a commercial real estate professional, to provide long term private market recommendations. The Senate is likely to consider similar legislation in the near future. Tom Heinemann 202-383-1090 back to top Go to archived weekly reports >> Last Updated: 09/21/2007 Bira de Aquino |
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