Entries Tagged as Politics
CRBRA contingent meets with Congressman Tonko
On October 18th, a diverse group of CRBRA members--representing association leadership, and local home building, construction, and mortgage interests--met with Congressman Paul D. Tonko (D-NY21) at his Albany office, to discuss their views on H.R. 1755, The Home Construction Lending Regulatory Improvement Act--which focuses on restrictions to acquisition, development, and construction (AD&C) loans to builders--and on H. Res. 25, about the continuation of the mortgage interest deduction.
Mike Curtis, a CRBRA director and Vice President of Sales at SEFCU Mortgage Services, compiled this summary explanation of the key issues of concern, especially as pertains to housing industry banking:
Risk Retention (Dodd-Frank)
Risk retention is intended to align the interests of borrowers, lenders, and investors in the long-term performance of loans. This "skin-in-the-game" requirement, however, is not a cost-free policy option. This requirement will increase the cost of loans funded through securitization, without doubt. Congress recognized this fact and asked that regulators define a "Qualified Residential Mortgage" (QRM), with loans fitting this description exempt from risk retention. FHA loans are exempt, as is any loan being sold to Fannie Mae & Freddie Mac while they're in conservertorship. All other loans will require a 20% downpayment (for purchases) or a minimum of 25% equity in the property (refinances). In addition to this, qualifying ratios cannot exceed 28/36 and there can have been zero delinquencies in the past two years. This appears to fly in the face of everything the administration is trying to accomplish to shrink Fannie & Freddie's role, and to stabalize the housing market. I might suggest the definition sound something like "fully documented and fully amortizing". This would remove the riskiest products from the mortgage market and at the same time allow for a robust private-label securitization market to return, thus shrinking Fannie & Freddie's very important role.
Mortgage Interest Deduction
I can't think of a larger tax increase on working families, many of whom relied on this savings when determining if they could afford the mortgage in the first place.
Loan Officer Licensing (SAFE Act)
State regulated lenders are required to have licensed Loan Officers. Federally regulated lenders are only required to have registered Loan Officers. Licensing requires 20 hours of education (plus 11 hours continuing education every year), fingerprints, background checks, personal credit checks, and passing a national exam as well as a state-specific exam. If a Loan Officer fails any of these requirements, including acceptable personal credit, their license will be denied and they must cease originating immediately. However, that same Loan Officer can go back to work for Bank of America the next day! Further, federal charters can recruit from us and have their Loan Officers begin immediately. We have to have someone complete everything mentioned above, submit to the NYS Banking Dept for approval, for which we've been told to expect 120-day turnaround before that Loan Officer begins with us.
Learn more:
Housing Finance Reform
Housing Production Credit Crisis
Tax Reform
The Mortgage Interest Deduction: Background & Statistics
H.R. 1755, the Home Construction Lending Regulatory Improvement Act
H.R. 1755 legislative alert
Author: CRBRA Admin | On: October 24, 2011 | In: Government Affairs · Politics · Members | No Comments
Presidential hopefuls must address housing issues
WASHINGTON, Oct. 20--As noted by the Wall Street Journal, MSNBC and other media outlets, the Republican presidential candidates let a great opportunity slip away during Tuesday night's presidential debate to explain how they would address the nation's housing problems in order to get the housing market and economy back on track, according to the National Association of Home Builders (NAHB).
"There can be no economic recovery without a housing recovery, yet the silence on housing was deafening during the debate," said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. "It is particularly ironic that with the debate setting in Las Vegas, the epicenter of the foreclosure crisis, the candidates chose to duck this topic and other critical housing issues."
Furthermore, Nielsen noted that the absence of specific policy proposals to spur the housing market and promote homeownership is not just limited to the GOP presidential contenders.
"President Obama needs to take an affirmative position on homeownership as well," he said. "The failure of the Administration to put forth pro-housing policies is impeding the economic recovery and hurting job growth and consumer confidence."
In normal economic times, housing accounts for more than 17 percent of the nation's economic output. Building 100 single-family homes generates 305 full-time jobs, $23.1 million in wage and business income and $8.9 million in taxes and revenue for state, local and federal governments.
Though more than 1.4 million residential construction workers have been idled since April 2006, several markets are showing signs of improvement, but policy headwinds are preventing workers from returning to their jobs, keeping home buyers on the sidelines and harming the economic recovery.
Credit conditions remain extremely tight for home buyers and home builders alike, preventing creditworthy borrowers from obtaining affordable home loans and small home building firms from getting construction loans to build even pre-sold homes and create jobs in their communities.
Policymakers are also considering mandating 20 percent downpayments for home buyers and abolishing Fannie Mae and Freddie Mac, which would make it even more difficult to obtain an affordable 30-year home loan, the major housing finance tool for most Americans.
Meanwhile, some leaders in Washington are calling for eliminating or drastically reducing the mortgage interest deduction, which would act as a tax on millions of middle-class home owners, place more downward pressure on home values, and further enflame the foreclosure mess.
"Instead of arguing who was to blame for the downturn, all the 2012 presidential hopefuls need to be addressing these housing issues head-on," said Nielsen. "Housing and homeownership are critical to a strong and prosperous nation. If any of these anti-housing policies are codified, it could fundamentally alter the ability of the nation to sustain a middle class that has contributed to a century of economic progress."
Author: CRBRA Admin | On: October 24, 2011 | In: Government Affairs · Politics | No Comments
Senate moves to reinstate higher conforming loan limits
In an important victory for NAHB, the Senate on Oct. 20 approved an amendment to an appropriations bill offered by Sens. Bob Menendez (D-N.J.) and Johnny Isakson (R-Ga.) to reinstate for another two years the higher loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration that expired on September 30th.
The vote was 60 to 38, just meeting the necessary 60-vote threshold required for passage under Senate rules.
The appropriations bill includes spending for the Department of Housing and Urban Development and other federal agencies.
NAHB has been aggressively lobbying for the Menendez-Isakson amendment directly on Capitol Hill and through its grassroots membership.
A “key vote” letter was sent to members of the Senate on October 19th, urging them to support the amendment to spending bill H.R. 2112 to temporarily restore the higher conforming loan limits.
The letter noted that the current lower loan limits will “further restrict overall mortgage liquidity in the marketplace and place further downward pressure on home prices. Restoring the higher loan limits will provide home owners and home buyers with safe and affordable financing while providing a much-needed boost to housing markets all around the country.”
To build support for the amendment, NAHB also sent out a BuilderLink Alert notifying association members that the Senate might consider a measure to reinstate the higher conforming loan limits. Members were urged to contact their senators and call on them to support the Menendez-Isakson amendment.
Effective on October 1st, the loan limits reverted to the lower levels for high-cost areas established under the Housing and Economic Recovery Act of 2008.
The national ceiling for mortgages securitized by Fannie Mae and Freddie Mac or insured by the FHA dropped from $729,750 to $625,500 and the formula for establishing area loan limits became more restrictive, producing decreases for areas in addition to those currently bound by the national ceiling.
A recent NAHB study found that allowing the limits to revert to 2008 levels would make millions of home purchases ineligible for Fannie Mae, Freddie Mac and FHA funding and require them to be financed with higher mortgages interest rates, fees, and downpayments, and more stringent credit standards.
After passage of the Menendez-Isakson amendment, NAHB Chairman Bob Nielsen issued a statement commending the Senate action and noting that “the 60-to-38 vote demonstrates bipartisan support for pro-housing policies that will help our industry to create jobs and spur economic growth.”
He also called on Congress to move soon to ensure that this measure is enacted into law.
“Otherwise,” said Nielsen, “the current drop in mortgage loan limits will reduce housing demand and place downward pressure on home prices in major markets. This will exacerbate the current housing downturn, trigger more foreclosures, impede job growth and endanger the fragile economic recovery.”
As the appropriations process moves forward, NAHB will turn its focus to preserving the loan limits extension, among other priorities, in the HUD appropriations bill.
Author: CRBRA Admin | On: October 24, 2011 | In: Government Affairs · Politics · Members | No Comments
Housing shortage likely if AD&C lending crisis continues
<<< Back: Housing production credit crisis will have harsh consequences
Setting the Record Straight
As the debate over tax reform and the regulatory structure of the housing finance system intensifies, misconceptions about housing and finance are proliferating. Following is the truth about some of the most widespread inaccuracies.
Misconception: Only the wealthy benefit from the mortgage interest deduction.
This pervasive fiction is a commonly cited reason for justifying elimination of the mortgage interest deduction.
Income tax deductions for mortgage interest and real estate taxes primarily benefit middle-class taxpayers with incomes between $50,000 and $200,000. While some groups will argue the contrary, consider this: taxpayers earning less than $200,000 pay about 43 percent of all income taxes. However, they receive 68 percent of the total benefit of the mortgage interest deduction and 77 percent of the total benefit of the real estate tax deduction. Moreover, larger benefits go to larger households and families, such as those with children.
Misconception: In the wake of the recession and housing market downturn, Americans have become disenchanted with homeownership and it is no longer a part of the American Dream.
Not so, according to recent polls by NAHB, the Pew Research Center and the New York Times/CBS News. In a Pew Research Center survey conducted in March 2011, 81 percent agreed that owning a home is the best long-term investment a person can make. And in a national poll of voters conducted for NAHB in May 2011, 80 percent of home owners said they would advise a family member or a close friend just starting out to buy a home in order to build long-term assets. In a New York Times/CBS News poll in June 2011, 89 percent said that homeownership is an important part of the American dream.
Misconception: Housing is not as important to the American economy as many other industries.
Actually, the downturn in the housing market is one of the largest contributors to the nation’s high unemployment rate. Total employment in residential construction (building and trade contractors for single-family, multifamily, land development and remodeling) is down more than 1.4 million jobs from the peak employment rate of 3.45 million in April 2006. The housing downturn has also contributed to the loss of more than one million other jobs--jobs in manufacturing, transportation, retail sales, engineering and other industries that provide goods and services to the housing industry. Building 100 new single-family homes generates more than 300 jobs.
Misconception: Homeownership advocates say everyone should own a home.
Homeownership isn’t for everyone, but everyone should be able to choose the home they want, whether they rent or buy. And government policies, such as the proposed Qualified Residential Mortgage standard, should not limit homeownership opportunities unnecessarily.
The actions policymakers take today will determine in large part where our children live tomorrow. As the debate over housing policy unfolds, it is crucial to ensure that homeownership remains attainable, that people can choose the type of housing they prefer, and that safe, decent and affordable housing remains an enduring national priority. Any other legacy is unthinkable.
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
Housing production credit crisis will have harsh consequences
<<< Back: Federal government must support the housing finance system
With inventories of new homes nearly depleted in many markets, builders should be gearing up to meet demand, create new jobs and keep the economic expansion moving forward.
Unfortunately, the credit pendulum has swung so far out of balance that many lenders are refusing to make loans for potentially profitable new housing projects. Under pressure from federal banking regulators, they are even calling in performing loans.
Bank lending for residential construction (including acquisition and development of land and construction costs) dropped 69 percent between the end of 2007 and the end of 2010, according to a preliminary NAHB analysis of data from banks regulated by the Federal Deposit Insurance Corporation.
During that time, outstanding acquisition, development and construction (AD&C) lending for one- to four-unit housing development purposes dropped from $203 billion to $63 billion, a much steeper decline than the reduction in the total value of residential construction for which building permits were issued.
Home builders cannot keep their doors open and create jobs in their communities if they cannot get credit to build even pre-sold homes. And builders in the midst of finishing sound projects cannot pay subcontractors and other materials and service providers if lenders will not grant routine loan extensions or if banks require payment-in-full before homes can be finished and delivered.
Unless lenders start making loans to builders for acquisition and development of land and construction of new homes (AD&C loans), the nation will face a severe housing shortage in the near future.
While a large number of foreclosures and distressed properties have flooded the market in recent years, the inventory of homes for sale varies widely from one location to another, and the greatest amount of foreclosure activity has been concentrated in a few specific markets.
Meanwhile, the nationwide inventory of completed newly built homes is extremely low due to the limited amount of new construction that has taken place during the economic recession.
Demand for new homes is driven by household formations, and according to projections by the Joint Center for Housing Studies of Harvard University, demand for new homes between 2010 and 2019 is likely to range from 1.6 million to 1.9 million annually.
Current housing production is falling far short of that need. Builders broke ground on 587,000 new homes in 2010, according to the Census Bureau. And as of July 2011, total private housing starts were 604,000 at an annualized rate, with both single-family and multifamily starts falling well below projected demand.
Moreover, NAHB estimates that approximately 2 million household formations have been delayed as a result of recent economic conditions, and these potential households constitute a “shadow demand” for the nation's housing markets. As the economic picture improves, this demand will also be unlocked, helping to reduce housing vacancy rates and increase the need for new home building.
Next: Housing shortage likely if AD&C lending crisis continues >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
Federal government must support the housing finance system
<<< Back: Abolishing other important tax measures would also harm home owners
Some members of Congress are actively pushing to abolish Fannie Mae and Freddie Mac and end the federal backstop for housing. Absent a federal role to help absorb market risk, private lenders would increase interest rates and fees on all types of available financing options for low- and moderate-income borrowers and for affordable rental housing. The 30-year, fixed-rate mortgage, the major housing finance tool for most Americans, would become increasingly scarce and much more costly, pricing many creditworthy borrowers out of the marketplace.
Complicating the situation, the federal government is looking to trim back the Federal Housing Administration’s participation in the market, which would further limit the availability of low downpayment mortgages. And in the wake of the financial crisis, FHA, Fannie Mae and Freddie Mac have become the primary sources of financing for rental housing.
Even with the current high level of federal support, fewer mortgage products are available now than in the past, and these loans are being underwritten on much more stringent terms. At present, almost a quarter of all borrowers who apply for loans are turned down, according to the Federal Reserve. As the private market assumes a greater role in the mortgage marketplace, maintaining an appropriate level of government support is essential to preserve financial stability, promote investor confidence and ensure liquidity and stability for homeownership and rental housing.
Next: Housing production credit crisis will have harsh consequences >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
Abolishing other important tax measures would also harm home owners
<<< Back: The Low Income Housing Tax Credit helps provide affordable rental housing
As for other homeownership-related tax code provisions, abolishing the deduction for state and local property taxes would not only depress home values and raise taxes for home owners, it would also shrink the local tax base of many communities, causing already cash-strapped state and local governments to further cut jobs and essential services.
Repealing the capital gains exclusion on the sale of a principal residence would saddle home owners with a 15 percent (or the applicable capital gains rate) tax on the profit from the sale of their homes, hampering their ability to enter the move-up market or to fund a secure retirement.
For members of the baby boom generation looking to retire, this would be especially harmful. It would wipe out a significant portion of their housing wealth just when they need it most.
Proposed Qualified Residential Mortgage Requirements Could Delay or Prevent Homeownership
Six federal agencies are proposing a national standard that would require a minimum 20 percent downpayment, which would keep homeownership out of reach of most first-time home buyers and many middle-class households. About 62 percent of first mortgages taken out to purchase a home last year would not have qualified under this standard because they had downpayments of less than 20 percent, according to LPS Applied Analytics, a mortgage data firm, as reported in The Wall Street Journal.
Borrowers unable to make a 20 percent downpayment or to obtain FHA financing would be expected to pay a premium of up to two percentage points for a loan in the private market to offset the increased risk to lenders, according to NAHB economists. This would annually disqualify about 5 million potential home buyers, resulting in 250,000 fewer home purchases each year. Such a drastic cutback would have a disproportionate impact on minorities and low-income families struggling to achieve the dream of homeownership.
Moreover, low-downpayment loans have been originated safely for decades, and low downpayments are not what drove the housing lending crisis, according to the Center for Responsible Lending, a non-profit, non-partisan research and policy organization. “Low downpayment home loans have been a significant and safe part of the mortgage finance system for decades, bearing little resemblance to subprime and other alternative mortgage products that crashed our economy. And responsible low downpayment loans are also a key to the
recovery of our nation’s housing market and economy.”
The Administration and federal regulators need to offer a new plan that ensures a safe and healthy mortgage market, lowers the risk of default and keeps homeownership affordable for working American families.
The Center for Responsible Lending estimates that it would take 14 years for the typical family to save enough money for a 20 percent downpayment on a median-priced single-family home.
Next: Federal government must support the housing finance system >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
The Low Income Housing Tax Credit helps provide affordable rental housing
<<< Back: The threat to housing
The Low Income Housing Tax Credit (LIHTC) is the most successful affordable rental housing program in our nation’s history. However, it has also been targeted by lawmakers. Eliminating the LIHTC would bring production and rehabilitation of affordable rental housing to a standstill.
Since its inception, the program has enabled the production of more than two million affordable apartments. More than 40 percent of the nation’s renters are already paying at least 35 percent of their household income toward rent, and they need affordable options. The LIHTC serves households earning 60 percent or less of the area median income with rents restricted to keep the units affordable.
The program creates approximately 90,000 new full-time jobs, adds $6.8 billion in income to the U.S. economy and generates approximately $2 billion in federal taxes each year. In recent years, the LIHTC has produced about 75,000 new apartment homes annually. The program is essential to address the shortage of affordable housing options in our cities and towns.
Next: Abolishing other important tax measures would also harm home owners >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
The threat to housing
<<< Back: New home construction and remodeling can generate millions of jobs
Washington policymakers are threatening to eliminate our nation’s long-standing commitment to homeownership, which would have repercussions for generations to come. This broad-based attack on homeownership is being waged in the tax, legislative and regulatory arenas. Such a radical policy shift would negatively affect every family in every community across the land.
Millions of first-time home buyers and middle-class households would be left out in the cold with only the faintest hope of ever owning a home, the production of affordable rental and new single-family housing would grind to a halt, and countless jobs would be lost.
In the wake of the worst financial crisis since the Great Depression, it makes sense to encourage prudent underwriting and effective consumer education to make sure that buyers select homes they can afford and mortgages they can pay over the long term. But it does not make sense to attack the mortgage interest deduction that is so important to the American middle class, or to tighten credit so much that many households that can afford homeownership simply cannot qualify for a mortgage. Such ill-advised actions would devalue housing and prolong the nation’s economic pain for years to come.
An Unjustified Attack on the Mortgage Interest Deduction
One of the primary targets of this unjustified attack on homeownership is the mortgage interest deduction (MID).
This cornerstone of American housing policy has been in place since the inception of the tax code nearly 100 years ago and supports the aspirations of families at all income levels to become home buyers. Americans overwhelmingly oppose any action by Congress to tamper with the mortgage interest deduction, according to the results of an NAHB poll conducted in the spring of 2011. However, many lawmakers have expressed a willingness to eliminate or curtail this vital housing tax provision.
Cutting the tax benefits associated with owning a home would impose a huge tax increase on millions of middle-class home owners and send shockwaves through the economy. Eliminating or limiting the MID would further depress home values, leaving more home owners with mortgages larger than the value of their property and fueling even more foreclosures.
A study by the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, found that limiting the deduction to a 28 percent maximum tax rate--as the Administration proposed--would cause housing prices in large metropolitan areas to fall by as much as 10 percent. At a time when stabilizing housing prices is of paramount importance to restoring the economy, a deliberate action by the nation’s elected leaders would devalue homes and force even more home owners underwater.
The mortgage interest deduction primarily helps middle-class home owners and is consistent with the principles of a progressive income tax. The deduction is most valuable for younger households who tend to be recent home buyers with large mortgages, small amounts of home equity and growing families. IRS data indicate that the largest deduction dollar amounts go to people aged 35 to 44. As a share of household income, the largest amounts go to those aged 18 to 34. Almost 75 percent of the total deduction is claimed by those under age 55; those aged 35 to 44 claim 30 percent.
John Weicher, director of the Center for Housing and Financial Markets at the Hudson Institute, characterizes the proposal to eliminate the mortgage interest deduction as “bad economic policy” that would create a new bias in the tax code. Weicher served as assistant secretary for housing and federal housing commissioner at the U.S. Department of Housing and Urban Development from 2001 to 2005.
A Home Owner is a Landlord and a Tenant
"Your house is an asset, an investment, as well as a place to live. A home owner is both an investor and a consumer, both a landlord and a tenant, someone who owns a house and is renting it to himself or herself. Like any other business person, a landlord can deduct business expenses. For rental housing, these include interest on the mortgage, property taxes, maintenance expenditures, and depreciation on the property. At the same time, the landlord has to pay tax on the rent he or she receives, after deducting these business expenses. A home owner/investor has the same business expenses, but can’t deduct all of them. The home owner can deduct mortgage interest and property taxes, but not maintenance or depreciation. The home owner also doesn’t have to pay taxes on the rental value of the home. So home owners have a tax advantage over landlords because owners don’t pay taxes on the rental value of their home; and landlords have tax advantages over home owners because they can deduct maintenance and depreciation, and home owners can’t. But home owners and landlords are treated equally with respect to mortgage interest and property taxes. Both can deduct these expenses." -John Weicher, Hudson Institute
Next: The Low Income Housing Tax Credit helps provide affordable rental housing >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
New home construction and remodeling can generate millions of jobs
<<< Back: Housing is a key element in the nation’s economy
It’s also important to note that the employment effects of new home construction and remodeling extend far beyond the actual structure. About half of the jobs created by building new homes are in construction. They include framers, electricians, plumbers, finish carpenters and all of the other workers who contribute to preparing the land and building the home. The rest are in housing-related industries that produce building materials and provide services to both home builders and home buyers. They include:
- Furniture, lighting and appliance industries
- Metal products industries
- Plastics and carpeting production
- Architecture and engineering
- Real estate agents, brokers and appraisers
- Wood products industries
- Concrete, gypsum and paint production
- Manufacturing construction equipment and other products
- Selling, moving and storing products
- Management, administration, government and law
- Finance and insurance
Perhaps more than any other consumer product, housing is “Made in America.”
New homes and apartments don’t arrive here on container ships from other countries, and most of the products used in home construction and remodeling are manufactured here in the United States.
More than 1.4 million jobs in residential construction have been lost since employment peaked at 3.45 million in April of 2006, according to the Bureau of Labor Statistics. To date, less than two percent of those jobs have been restored.
Next: The threat to housing >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
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