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Commercial Real Estate Lending

NAR Comments on SEC Concept Release
NAR Supports Covered Bonds Legislation
NAR Supports Loan Flexibility Legislation

Government - Sponsored Enterprises

Fannie and Freddie Release Details on HARP 2
Freddie Mac Amends Mandatory Short Sale Affidavit Policy
Freddie Mac HomeSteps Winter Sales Promotion

Housing Issues Update

FY11 Audit of FHA is Released

Mortgage Loan Limits

Congress Restores Loan Limits for FHA

National Flood Insurance Program

Congress Re-extends Flood Insurance to Dec. 16

Tax Reform

Legislation Takes on Interstate Sales Tax Collections

Visa - Seasonal Workers

Passed Appropriations Bill Prohibits Funding for Implementation of H -2B Regulation

Commercial Real Estate Lending

NAR Comments on SEC Concept Release

On November 7, 2011, NAR signed a letter with 12 real estate organizations regarding a request for public comment (Concept Release) from the Securities and Exchange Commission (SEC) on the treatment of asset-backed issuers as well as mortgage real estate investment trusts (REITS) and other mortgage-related pools under the Investment Company Act of 1940. NAR is concerned that the Concept Release could signal impending regulatory burdens for mortgage REITs and would inhibit the prospect of a restart of non-agency mortgage securitization and negatively impact credit capacity for real estate. While the concept release does not propose any specific rules, it states that the SEC is reviewing various interpretive issues as to how Section 3(c)(5)(C) of the Investment Company Act of 1940 is and should be applied and requests input on those issues.

Vijay Yadlapati, vyadlapati@realtors.org, 202-383-1090

Commercial Real Estate Lending

NAR Supports Covered Bonds Legislation

On Wednesday, November 9, NAR sent a letter to the Senate Banking, Housing, and Urban Affairs Committee supporting S. 509, the “United States Covered Bond Act of 2011.” NAR believes this legislation can offer increased liquidity and safety of our commercial and residential secondary mortgage markets by creating a statutory framework for a covered bond market. NAR has consistently supported legislation that would lead to a U.S. market for covered bonds, and will continue to work with key members of Congress to move toward this goal.

NAR also signed onto a coalition letter in support of S. 509.

Vijay Yadlapati, vyadlapati@realtors.org, 202-383-1090

Commercial Real Estate Lending

NAR Supports Loan Flexibility Legislation

On November 16, 2011, NAR sent a letter to the House Financial Services Subcommittee on Financial Institutions and Consumer Credit urging them to approve H.R. 1723, the “Common Sense Economic Recovery Act of 2011,” introduced by Representative Posey (R-FL). The bill would allow for regulatory flexibility that would create more options for handling maturing commercial real estate loans, such as term extensions, modifications, and workouts. Currently, regulatory scrutiny is preventing many commercial lenders from taking actions that could avoid defaults, even for performing properties.

NAR supports allowing commercial lenders flexibility to take steps that prevent defaults, and will continue to work with Congress to promote H.R. 1723 and other steps that might help ensure the commercial real estate market does not hamper the already weak economy.

Vijay Yadlapati, vyadlapati@realtors.org, 202-383-1090

Government - Sponsored Enterprises

Fannie and Freddie Release Details on HARP 2

On November 15, 2011, Fannie Mae and Freddie Mac (the government sponsored enterprises, or GSEs) announced changes to their mortgage refinance programs to reflect enhancements to the Home Affordable Refinance Program (HARP) that give more “under water” borrowers an opportunity to refinance their loans. The revised program, known as HARP 2, continues to be available only for borrowers with loans purchased by Fannie Mae or Freddie Mac on or before May 31, 2009. In addition to reducing risk for lenders who refinance eligible mortgage loans, changes to the HARP program include:

  • Eliminating the 125% loan-to-value (LTV) ratio cap for fixed-rate mortgages with terms up to 30 years.
  • Reducing risk-based fees for borrowers and eliminating these fees altogether if they refinance into a mortgage loan with a term of 20 years or less.
  • Requiring that borrowers receive a benefit from refinancing in the form of either a reduced monthly mortgage payment (principal and interest) or a more stable product, such as a fixed-rate mortgage instead of an adjustable rate mortgage.
  • Extending the program expiration date to December 31, 2013.

The changes will become effective for mortgage loans with application dates on or after December 1, 2011. To be eligible, borrowers may not have had any mortgage delinquency in the last six months nor had more than one 30-day or more delinquency in the last 12 months (months 7-12). As under the original HARP program, the current LTV ratio must exceed 80% for the borrower to qualify. Borrowers with a GSE loan may contact their existing lender or any other mortgage lender that agrees to handle a HARP 2 refinancing. Servicers will implement the program over the coming months.

Jeff Lischer, jlischer@realtors.org, 202-383-1117
Charles Dawson, cdawson@realtors.org, 202-383-7522
Tony Hutchinson, thutchinson@realtors.org, 202-383-1120

Government - Sponsored Enterprises

Freddie Mac Amends Mandatory Short Sale Affidavit Policy

On November 18, 2011, at the request of NAR and the American Land Title Association (ALTA), Freddie Mac amended its policy regarding its mandatory short sale affidavits. The purpose of the affidavits is to prevent fraud by requiring the buyer, the seller, the real estate brokers, the escrow/closing agent, and any transaction facilitator to make various certifications (including that the short sale is an arm’s length transaction and the buyer will not resell within 120 days unless there are substantial improvements). Servicers are required to implement the changes by January 1, 2012, but are encouraged to do so immediately. Each servicer covered by the policy must update its forms to comply with the revised policy. NAR members are encouraged to make sure they are signing an updated form and, if presented with an old form, are well-advised to request the servicer to update or allow amendments to the form before they sign, to avoid potential liability issues.

Here are the key changes:

  • The certification is made based on “the best of each signatory’s knowledge and belief.” Freddie has retained the statement that a signatory making “a negligent or intentional misrepresentation” agrees to indemnify the servicer and Freddie Mac for losses. The addition of the knowledge standard significantly reduces this liability.
  • Only a signatory who makes a negligent or intentional misrepresentation, based on the best of his or her knowledge and belief, is responsible for indemnifying the servicer and Freddie Mac for any loss. No signatory is responsible for the certification of any other signatory.
  • Although Freddie Mac is requiring all signatories to sign one affidavit, the amended policy no longer allows the affidavit to be an addendum to the sales contract. NAR members are advised not to sign a document implying they are parties to the sales contract.

NAR appreciates Freddie Mac’s willingness to listen to the serious concerns raised by REALTORS®.

Jeff Lischer, 202-383-1117
Charles Dawson, 202-383-7522
Tony Hutchinson, 202-383-1120

Government - Sponsored Enterprises

Freddie Mac HomeSteps Winter Sales Promotion

Freddie Mac is offering selling agent and homebuyer incentives in connection with the sale of homes it owns in 35 states (including DC). To qualify, initial offers must be submitted in HomeSteps Connect between November 15, 2011, and January 31, 2012, and closing must occur on or before March 15, 2012. Only owner-occupant primary home purchasers are eligible to receive up to 3% Freddie-paid closing costs and a 2-year home warranty. The selling agent may receive a $1,000 bonus. There are detailed requirements for qualifying. Members should go to the Freddie Mac HomeSteps site to learn about the necessary conditions.

Jeff Lischer, jlischer@realtors.org, 202-383-1117
Charles Dawson, cdawson@realtors.org, 202-383-7522
Tony Hutchinson, thutchinson@realtors.org, 202-383-1120

Housing Issues Update

FY11 Audit of FHA is Released

FHA's FY2011 audit was released last week. It showed FHA's total cash reserves increased by $400 million over last year for a total reserves of $33.7 billion. The excess reserves remain below the Congressionally mandated 2% ratio, but the audit expects them to return to that level by FY14. Despite some news reports, FHA does not need a bailout. FHA's total delinquency rate is now at the lowest level in more than five years. The audit states that “Both the economic value and the IIF (insurance in force) of the Fund are expected to increase each year over the next seven years.”

Jerome Nagy, jnagy@realtors.org, 202-383-1233
Megan Booth, mbooth@realtors.org, 202-383-1222

Mortgage Loan Limits

Congress Restores Loan Limits for FHA

Last week Congress passed legislation that would restore the FHA mortgage loan limits back to 125% (instead of 115%) of local area median home price, and with a cap of $729,750 (instead of $625,500). In other words, the limits are back where they were in September. The legislation will retain these limits through December 31, 2013. Congress did not restore the limits for Freddie Mac and Fannie Mae, so they will stay at 115% of median up to $625,500.

The newly restored limits take affect immediately, but most lenders will probably await a Mortgagee Letter from FHA confirming the new limits, which is expected shortly. Many thanks to all the REALTORS® who participated in our Calls-for-Action on this issue!

NAR sent a letter to House and Senate on the matter. A coalition letter was also sent to the House and Senate.

Megan Booth, mbooth@realtors.org, 202-383-1222
Tony Hutchinson, thutchinson@realtors.org, 202-383-1120
Jerome Nagy, jnagy@realtors.org, 202-383-1233

National Flood Insurance Program

Congress Re-extends Flood Insurance to Dec. 16

On Nov. 17, 2011, Congress extended National Flood Insurance Program (NFIP) authority through Dec. 16, 2011. The measure was a part of H.R. 2112, the so-called minibus conference report combining three annual spending bills with another stopgap funding measure for the rest of the federal government. NAR is urging Congress to use the additional time to complete work on a 5-year NFIP re-authorization bill (H.R. 1309) to provide certainty and avoid further disruption to real estate markets.

Austin Perez, aperez@realtors.org, 202-383-1046
Daniel Blair, dblair@realtors.org, 202-383-1089
Russell Riggs, rriggs@realtors.org, 202-383-1259

Tax Reform

Legislation Takes on Interstate Sales Tax Collections

Senator Mike Enzi (R-WY), along with a bipartisan g roup of nine Senators, has introduced legislation that would create explicit authority for state governments to collect sales taxes on Internet sales for goods that are delivered into their states. This is sometimes referred to as the "Amazon" issue.

The legislation has been referred to the Senate Finance Committee. No action has been scheduled on it; consideration is unlikely to occur before the end of the year because of the deficit reduction efforts that dominate the agenda. Similar legislation has been introduced in the House and referred to the House Judiciary Committee.

Linda Goold, lgoold@realtors.org, 202-383-1083
Ken Wingert, kwingert@realtors.org, 202-383-1196

Visa - Seasonal Workers

Passed Appropriations Bill Prohibits Funding for Implementation of H -2B Regulation

On November 17, the Senate approved legislation that combines a minibus spending bill and a continuing resolution extension that keeps the government funded through December 16. This bill contains language that prohibits the Department of Labor from using any funds through 2012 to implement a regulation that would harm the H-2B program. The measure passed 70-30, hours after it passed the House, 298-121. President Obama is expected to sign the measure. The bill would keep the government funded through December 16; the current continuing resolution expires Friday at midnight.

The actual language is as follows:

None of the funds made available by this or any other Act for fiscal year 2012 may be used to implement, administer, or enforce, prior to January 1, 2012,the rule entitled "Wage Methodology for the TemporaryNon-agricultural Employment H-2B Program" published by the Department of Labor in the Federal Register on January 19, 2011 (76 Fed. Reg. 3452 et seq.).

NAR is a member of the H-2B Workforce Coalition, which is composed of H-2B program stakeholders and users, that opposed the regulation and supported this appropriations rider. This coalition will continue to work on a longer term strategy for passing a permanent prohibition on this regulation.

Russell Riggs, rriggs@realtors.org, 202-383-1259