The Washington Report

In This Issue

Commercial Finance Report
SEC Publishes NAR TIC Exemption Request for 30 Day Comment Period
Senate Passes Legislation Extending Terrorism Risk Insurance Program
Sweeping Appraisal Legislation Incorporated into Broader Mortgage Reform Bill, Passes House

Conventional Residential Lending Report
NAR Comments on Proposed OFHEO Guidelines for Calculating Conforming Loan Limits for Fannie Mae and Freddie Mac

SEC Publishes NAR TIC Exemption Request for 30 Day Comment Period

On November 16, 2007, the Securities and Exchange Commission published NAR's Tenant In Common securities exemption request for a 30 day comment period pursuant to Government Paperwork Reduction Act requirements. NAR's exemption request would permit commercial real estate professionals, with substantial commercial experience, to earn a real estate advisory fee from the brokerage of TIC interests sold as a security provided they:

enter into an amended buyer agent agreement that spells out specific securities related limitations, fees, and services provided;
do not advertise the availability of TIC securities;
not change broker dealer suitability requirements.

The commercial real estate professional, upon presentation of the amended buyer agent agreement to the lead broker dealer, would then be able to earn an advisory fee. The SEC requested information on whether NAR's definition of substantial commercial experience was sufficient and if the buyer agent agreement requirement would prove to be burdensome. The comment due date is December 17th. NAR will be coordinating comments from its members.

Text of the exemption request

Tom Heinemann 202-383-1090

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Senate Passes Legislation Extending Terrorism Risk Insurance Program

On November 16, 2007, the Senate passed H.R. 2761 The Terrorism Risk Insurance Revision Extension Act by unanimous consent. The Senate version of the bill extends the terrorism risk insurance program for seven years, eliminates the distinction between foreign and domestic acts of terrorism, and mandates a study on how best to ensure the availability of nuclear, biological, chemical, and radiological coverage. The bill also contains a reset provision that would set insurance rates back to pre-event levels following an terrorist event, and contains a payback provision on claims that exceeds $100 billion. There significant differences with the House passed bill, which extends the program for 15 years and does include NBCR coverage. Those differences will likely be resolved during conference. It is expected that a terrorism insurance conference bill will be passed by the end of the year, as the current legislation authorizing the program expires at the end of the year. With out a terrorism risk insurance program in place, coverage will likely become unavailable or unaffordable to commercial property owners.

Tom Heinemann 202-383-1090

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Sweeping Appraisal Legislation Incorporated into Broader Mortgage Reform Bill, Passes House

On November 15, 2007, the House passed H.R. 3915 the Mortgage Reform and Anti-Predatory Lending Act. The provisions of H.R. 3837 the Escrow, Appraisal and Mortgage Services Improvement Act (EAMSIA) were incorporated into H.R.3915 as part of a manager's amendment.

The appraisal provisions:

require that an appraisal be made available to the consumer prior to closing,
mandate property visits for mortgages covered by the Homeowners Equity Protection Act (HOEPA),
require the appraisal subcommittee to hold open meetings and publish detailed reports,
amend the Truth in Lending Act to prohibit mortgage originators from improperly influencing the appraisal process -- which is defined as collusion, intimidation, coercion, bribery etc.
amend FIRREA to prohibit those with an interest in the real estate transaction from improperly influencing the appraisal process, with the following exceptions: a) to correct errors, b) to request the appraiser consider additional information, and c) to provide substantiation,
set Appraisal Qualification Board guidelines as the minimum criteria for state licensing, increases regulatory authority of the Appraisal Subcommittee in sanctioning, reciprocity, and information sharing,
require that only licensed appraisers review appraisals submitted to appraisal management companies and to clarify that these firms and their employees are also subject to the improper influence language of the bill.

The Senate Banking Committee is working on a companion bill. Timing for introduction and consideration is uncertain.

Tom Heinemann 202-383-1090

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NAR Comments on Proposed OFHEO Guidelines for Calculating Conforming Loan Limits for Fannie Mae and Freddie Mac

On November 20, 2007, NAR President Dick Gaylord submitted comments to the Office of Federal Housing Enterprise Oversight (OFHEO) on its proposed draft guidance for calculating conforming loan limits (CLLs). OFHEO regulates Fannie Mae and Freddie Mac to assure they operate on a safe and sound basis. CLLs cap the dollar amount of mortgages that Fannie and Freddie may purchase. Consistent with NAR's position on an earlier OFHEO proposal, the letter questions whether OFHEO has statutory authority to require reductions in CLLs. In addition, NAR continues to believe that reducing CLLs is not good public policy because it intensifies downturns in weak housing markets by reducing the flow of affordable credit.

NAR letter to OFHEO
OFHEO proposed guidance

Jeff Lischer 202-383-1117, Lynn King 202-383-1156

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Last Updated: 11/21/2007 Bira de Aquino