Congress Takes On Real Estate Issues

The real estate industry is facing monumental issues in Congress and the regulatory agencies that govern mortgage financing. These issues will impact REALTORS®’ ability to do business and serve clients. The one million plus REALTORS® can impact the outcome of these issues – but only if you make your voice heard. Stay posted on these issues and alert to national Calls to Action. These issues include: Mortgage Interest Deduction Government Sponsored Enterprise (GSE) Reform Increased GSE Down Payments and Fees National Flood Insurance Program Conforming Loan Limits FHA Down Payments Home Warranties Mortgage Interest Deduction (MID): The scenarios most commonly mentioned include caps on the value of the deduction, limitation to mortgages on a single property and elimination of deductibility of equity lines. The recent Republican budget proposal will likely include some form of MID reduction. The tax deductibility of interest paid on mortgages is a powerful incentive for home ownership and has been one of the simplest provisions in the federal tax code for more than 80 years. Recent progress has been made in bringing stability to the housing market and any changes to the MID now or in the future could critically erode home prices and the values of homes by as much as 15%, according to NAR research. Governmental Sponsored Enterprise (GSE) Reform: Some in Congress have proposed eliminating Fannie Mae and Freddie Mac in the next two years. The administration has proposed three possible options for the enterprises. According to NAR, cutting back significantly on Fannie and Freddie’s involvement in the mortgage market will (1) reduce housing access and affordability for those who are able to become homeowners, (2) create higher profits for America’s big banks, (3) create more “too big to fail” banks, leading to greater consumer risk and taxpayer exposure and (4) hurt the economy and hinder job creation and growth. Increased GSE Down Payments and Fees: The Obama administration has proposed a gradual increase in GSE down payment requirements to 10%. The administration has also called for raising the fees Fannie and Freddie charge in order to make the cost of securitizing through the GSEs closer to the cost of securitizing through investment banks. National Flood Insurance Program (NFIP): This program has been extended several times and now expires September 30th (for the 10th time in 2 years.) Flood insurance is required in nearly 20,000 communities nationwide. NAR endorses efforts to renew and strengthen the long-term viability of the NFIP for at least 5 years; improving the accuracy of flood insurance rate maps used to determine which properties require flood insurance; continued inclusion of comprehensive coverage for non-primary residences (e.g., rental properties and second homes); and reforms that provide “full risk” premiums for most repetitive loss structures in many states. Conforming Loan Limits: Unless extended, the higher conforming loan limits of $729,750 will expire September 30th, thus making the purchase and sale of homes within more expensive markets that much more challenging. While NAR has worked successfully in the past to extend the limits, NAR is not optimistic that the limits will be extended again. On October 1st, the maximum loan limit drops to $625,500, even in the most expensive housing markets in the country. There is even some talk in Congress of further reducing the conforming loan limit. What’s more, lenders will likely enact this rule sooner so they are assured of compliance by the expiration date. FHA Down Payments: The administration and some members of Congress would like to raise FHA down payment requirements to 5% from 3.5%. Home Warranties: HUD’s interpretive ruling on home warranty fees last summer has created confusion amongst the brokerage community and lost revenue. The lack of clear guidance has also opened home warranty companies and brokerages to liability. NAR and VAR are taking a variety of steps to address these issues within Congress and the Virginia delegation, respectively. Watch for updates on these issues from NAR and VAR.