SAN DIEGO — Securing an extension and expansion of the homebuyer tax credit was a dicey proposition — and a feat not likely to be repeated, a top lobbyist with the National Association of Realtors told members at their annual meeting in San Diego.
"You have no idea how nip and tuck it was on the credit," Linda Goold, NAR’s director of tax policy, told Realtors packed into a meeting room at the Grand Hyatt Hotel. "There were days when we could not imagine how it would happen."
The extended tax credit, equal to 10 percent of a home’s purchase price, remains capped at $8,000 for first-time homebuyers, though income limits were raised (see Inman News story). Congress also expanded the program to allow homeowners who have been in a principal residence for at least five of the last eight years to claim a tax credit of up to $6,500 if they sell that home and buy another. President Obama signed the bill Nov. 6.
NAR staffers also briefed Realtors on the status of forthcoming incentives for short sales under the Obama administration’s Making Home Affordable initiative, an extension of higher loan limits for loans backed by FHA, Fannie Mae and Freddie Mac, and efforts to mitigate the impact rules for appraisals implemented on May 1 by Fannie and Freddie.
Perhaps no issue was of greater interest than the three versions of health care reform moving through Congress, which all include language that NAR views as beneficial for Realtors with individual or small group coverage.
There was considerable resistance to raising the income limits for claiming the credit and expanding it to include existing homeowners with a track record of five years or more in that home, Goold said.
NAR’s chief lobbyist, Jerry Giovaniello, was on the phone constantly with Sen. Johnny Isakson, the Georgia Republican and former real estate broker who was among the biggest proponents of extending the tax credit, she said.
In the end, lawmakers "made us promise, practically in blood, that we would not come back," Goold said. She said NAR agreed that, "barring market surprises," Realtors would not seek another extension of the tax credit.
"So make it work," Goold said. She also had a warning for Realtors: "Do not yourself, or do not let your clients, dream up schemes with family members," she said — an allusion to home sales in which the tax credit was claimed on sales of homes to children.
In approving an extension of the tax credit, Congress specified that homebuyers under 18 are not eligible to claim the credit, and that it can’t be claimed by homebuyers who purchase a property from their parents or grandparents, or vice versa.
Short-sale incentives
Guidelines necessary to implement a program announced by the Obama administration in May to streamline short sales and provide incentives for lenders and borrowers should be out any day, said Jeff Lischer, managing director of regulatory policy.
NAR has been expecting the program guidelines since June, but they have been held up by legal issues that have supposedly been resolved, Lischer said.
"Supposedly the lawyers are now happy — we don’t know what is holding it up," he said.
Lischer said that the short-sale incentives — including payments to second-lien holders who agree to allow short sales to move forward — won’t be a cure-all, but that they should make a difference. …CONTINUED
Loan limits
While extension of the homebuyer tax credit hogged the headlines, the real estate and lending industry has also been pushing for a one-year extension of the higher loan limits on loans backed by the Federal Housing Administration, Fannie Mae and Freddie Mac.
The temporary limits — which allow FHA, Fannie and Freddie to insure or guarantee loans of up to 125 percent of the median home price in high-cost markets, to a maximum of $729,750 — were set to expire at the end of the year.
NAR Senior Policy Representative Megan Booth said that one of the most significant features of the higher limits is that the Department of Housing and Urban Development (HUD) is continuing to use median home prices from 2006 in determining the 125 percent limit.
"You may not have noticed that home prices have changed a little" since then, Booth said.
A NAR analysis showed there would be a "dramatic, dramatic drop" if more current home prices were used in setting the limit. But if homeowners are in a market where home prices have gone up, Booth said, HUD will use the more current price.
One downside of the limits being temporary is that HUD will not consider appeals of the loan limit for a specific market.
NAR is working to make the higher loan limits permanent, which would restore the appeal process previously in place, Booth said.
While the FHA announced Thursday that its capital reserve ratio has fallen below statutory minimums — in part because it’s insuring more and bigger loans — (see story) — Booth noted that the capital reserves are an additional cushion on top of other reserves and that FHA is not expected to need a taxpayer bailout.
Nevertheless, there are bills pending in Congress that would raise minimum downpayment requirements on FHA loans. A bill pending in the House would raise FHA minimum downpayment requirements from the current 3.5 percent to 5 percent, while pending Senate legislation would increase the minimum to 10 percent.
Appraisal rules
Realtors have been up in arms about the Home Valuation Code of Conduct since Fannie and Freddie implemented the new rules governing appraisals implemented in May.
Jerome Nagy, senior policy representative, said NAR was concerned when, this summer, FHA Commissioner David Stevens indicated FHA would also adopt the rules. After NAR met with Stevens, FHA announced new appraisal guidelines that will go into effect Jan. 1 that address some of the group’s concerns.
Although FHA is adopting components of the Home Valuation Code of Conduct (see story), it’s also included guidance on geographic competency of appraisers, appraisal portability and hiring appraisal management companies that should address some of the problems Realtors have had with Fannie’s and Freddie’s rules, he said. Nagy said he hopes Fannie and Freddie will adopt similar guidance to ensure uniformity.
Nagy also noted that HR 3044, a bill that would put an 18-month moratorium on enforcement of the Home Valuation Code of Conduct, now has 121 sponsors, and that HR 3126, legislation to create a Consumer Financial Protection Agency, includes language that would require the agency to draft new rules for appraisals that would supercede the code (see story). …CONTINUED
HR 3126 has also been amended, at NAR’s behest, to exclude Realtors from the definition of groups providing financial services and which would be subject to oversight by the new agency, said senior policy representative Tony Hutchinson.
Health care
Health care reform is a topic of great interest to Realtors, many of whom have individual or small group coverage. Marcia Salkin, NAR’s managing director of public policy, said three bills now moving through Congress all make significant changes to health insurance underwriting and rating rules that build on proposals put forward by NAR.
Salkin said current underwriting and rating rules vary greatly from state to state, with few limits on what insurers can and can’t do.
The three health care bills moving through Congress — one approved by the House Saturday, and two that have emerged from separate Senate committees — would all provide individuals, the self-employed and small businesses the right to health coverage with characteristics of larger group coverage, she said.
Insurers would not be allowed to turn down or deny renewals to individuals, or take pre-existing conditions into account when setting rates.
But in a wide-ranging question-and-answer session, some Realtors worried that health care reform might leave them worse off.
Newport, R.I.-based Realtor Steve Larson said he worried that many provisions being discussed — including the so-called "public option" — could damage the existing health care system and drive up costs. Larson questioned whether NAR should be advocating on those issues.
Jane Quill, a member of the Northern Virginia Association of Realtors, said that her doctor at Kaiser Permanente told her that "if this plan goes through, many of the health plans, including Kaiser, would be out of business."
Quill wanted to know, "Is there some reason that instead of dealing with the entire health care system, we can’t deal with the 15 percent that has problems? Don’t destroy what we already have," she said.
Salkin said that there are many differing proposals for a public option, and NAR has not taken a position on that particular issue. NAR officially opposes a single-payer health care system like Canada’s, she said.
The impetus for health care reform in Congress is that 47 million Americans are uninsured, and those who have coverage "are facing incredible premium increases" — 15 percent on average for those with individual and small group policies, Salkin said.
Looking ahead to next year, Giovaniello said the big battle in 2010 will be deciding the fate of Fannie Mae and Freddie Mac, which because of heavy losses are now operating under government conservatorship.
"By the time we meet next year, we are going to have to reinvent Fannie and Freddie," Giovaniello said. The process will begin in earnest after President Obama’s State of the Union address, he said.
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