NAR’s Washington Report – October Recap
GSE Affordable Housing Goals: NAR Submits Comments on FHFA’s Proposed Affordable Housing Goals
On October 28, 2014, NAR President Steve Brown submitted comments on the Federal Housing Finance Agency’s (FHFA) proposed rule to establish housing goals for the GSEs for 2015-2017. NAR’s comments support ambitious, but reasonable, affordable housing goals for the GSEs and calls for providing flexibility for the GSEs to meet those goals. In addition, NAR asks that FHFA examine what policies, both at the GSEs and at their lender customers, are producing the very market dynamics that contribute to reduced market forecasts. A GSE is considered to be in compliance with the goal if its performance meets or exceeds either (1) the share of the actual market that qualifies for the particular goal, or (2) the benchmark level for the goal. NAR supports the dual test for goals compliance because it is not reasonable to hold the GSEs to the benchmark test if market conditions significantly erode and make achieving the goals with sustainable mortgages impossible.
Government – Sponsored Enterprises: NAR Supports Efforts To Improve Credit Liquidity
On October 13, 2014, NAR submitted comments on the Federal Housing Finance Agencies proposal to create a Single Security that could be guaranteed by either Fannie Mae or Freddie Mac (the government-sponsored enterprises or GSEs). The multi-year development of a single GSE mortgage backed security (Single Security) is part of the development of the common secondary mortgage market securitization platform being developed by FHFA and the GSEs. NAR has supported the development of the securitization structure, which functions like a utility, since last year. Having a single GSE MBS should increase liquidity of these securities in the market, increasing demand and producing better pricing. In the letter to FHFA Director Mel Watt, NAR President requests FHFA carefully monitor potential pricing inefficiencies to ensure that implementation and issuance of the Single Security benefits borrowers. Most importantly, this process should not impede a borrower’s ability to ‘lock in’ an interest rate ahead of settlement of their home purchase and contribute to lower mortgage rates through increased liquidity a Single Security.
RESPA/TILA Harmonization: CFPB’s 4th RESPA/TILA Webinar
On Tuesday, November 18, 2014 at 2:00 PM EST the Consumer Financial Protection Bureau (CFPB) and the Federal Reserve will hold their 4th webinar on changes to the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA). This webinar will focus on the closing disclosure that will replace the HUD-1 settlement statement. NAR will continue to work with CFPB and industry to implement the rule and educate our members. The rule takes effect August 1, 2015.
RESPA/TILA Harmonization: NAR Comments on RESPA/TILA
On Wednesday October 29, 2014 NAR submitted comments to the Consumer Financial Protection Bureau (CFPB) on changes to the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) rule. CFPB has proposed giving lenders a full day to re-disclose the loan estimate when the loan is locked in. NAR believes the extra time to disclose will give consumers more flexibility in deciding when to lock in loans because lenders will not have to worry about getting the disclosure to the consumer that same day. NAR also promised to continue to work with CFPB and industry to implement the rule which takes effect August 1, 2015.
Real Estate Settlement Procedures Act (RESPA): CFPB/HUD Target Marketing
On September 30, 2014, the Consumer Financial Protection Bureau (CFPB) ordered Lighthouse Title, a Michigan title insurance agency, to pay $200,000 for illegal referrals under the guise of marketing agreements under the Real Estate Settlement Procedures Act (RESPA). Similarly and on the same day, HUD’s Office of Inspector General targeted Cornerstone Home Lending for similar issues. The cases follow on the heels of enforcement actions targeting disclosures and practices under the anti-kickback provisions of RESPA. Tying the value of marketing arrangements to the amount of referrals is a clear problem under RESPA. Likewise, requiring arrangements to be exclusive also raises red flags with regulators. Finally, arrangements where marketing is not commensurate with the amount of compensation will raise further concerns. NAR will continue to work to educate members about their obligations under RESPA and also work with the CFPB to ensure appropriate compliance guidance is issued.
Clean Water Act: EPA: Withdraw The Water Rule
The Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (The Corps) have issued a proposed regulation that would place more water bodies under federal authority, which would result in more property rights violations, more time consuming and expensive permits, more regulatory red tape, and less economic development in communities across the country. Click here to download the template of a letter that describes how this proposed rule would negatively affect property rights, small businesses and economic development. There is also a place in the letter to describe how this rule could impact your business and clients.
Clean Water Act: SBA Asks EPA to Withdraw Water Rule
The U.S. Small Business Administration, a federal agency responsible for protecting the interests of small businesses, has asked the Administration to withdraw a proposed rule that changes the scope of existing law without Congress’ authority and expand federal regulatory power under the Clean Water Act. In a letter to the U.S. Environmental Protection Agency (EPA) and the Army Corps of Engineers (Corps), the Office of Advocacy of the U.S. Small Business Administration (SBA) raised concerns that the proposed rule “Definition of Waters of the United States under the Clean Water Act” would have “direct, significant effects” on small businesses. The SBA Office of Advocacy stated that the proposed rule was improperly certified by the EPA and Corps, and urged withdrawal of the rule. Changing the scope of federal law is solely the responsibility of Congress, and over the past several Congresses, the legislative branch has repeatedly determined not to expand federal jurisdiction under the Clean Water Act. However, finalization of the proposed rule would allow the Administration to bypass the legislative process in order to achieve its agenda. NAR has been actively engaged in this effort to force the EPA to withdraw this proposed rulemaking and will continue to look for every opportunity and make every effort to oppose this proposed overreach of Clean Water Act authority.
Qualified Residential Mortgage (QRM)/Risk Retention: Regulators Finalize QRM Rule
After three years of strong opposition from NAR, congressional leaders, and consumer and industry groups, the six financial regulators released the final version of the long-awaited qualified residential mortgage (QRM) rule. The six regulators listened to NAR when finalizing the rule which now equates QRM with the “Qualified Mortgage (QM)” standard. As originally proposed, the QRM rule would have narrowly defined QRMs to require a 20 percent down payment. REALTORS® were among the most vocal opponents of the originally proposed QRM rule and forged the broad-based Coalition for Sensible Housing Policy, which includes nearly 50 organizations, to draw attention to the regulations onerous 20 percent down payment requirement and other credit limiting features such as strict debt-to-income limits. The coalition asked for and received an extension of the proposed regulation comment period in 2013. During that time, NAR and its coalition partners gathered the support of 44 U.S. Senators and 282 House members, who wrote to regulators expressing their intent on QRM and opposing the sizable down payment requirement. In synchronizing both definitions, the revised rule encourages safe and financially prudent mortgage financing while also ensuring creditworthy homebuyers have access to safe mortgage financing with lower risk of default. In addition, consistency between both standards reduces regulatory burden and gives mortgage professionals much-needed clarity and consistency in the application of the important mortgage standards required pursuant to Dodd-Frank.
Qualified Mortgage (QM)/Ability to Repay: NAR Comments on Mini-correspondents
On September 30, 2014, NAR wrote to Consumer Financial Protection Bureau (CFPB) director Richard Cordray expressing concern that the CFPB’s guidance on mini-correspondent lenders relating to the Ability to Repay/Qualified Mortgage (QM) rule not be interpreted in a way that would reduce access to credit by unfairly discriminating against smaller lenders. NAR noted that certain provisions of the guidance relating to whom the lender sells its loans to and who it receives its warehouse line of credit from should not be over-emphasized. NAR warned that doing so could reduce consumer choice. It could also concentrate lending even further amongst the largest lenders and banks. NAR continues to work with CFPB to ensure that lenders of all sizes are treated fairly and consumers have access to the credit they want and need from the providers they choose.
National Flood Insurance Program: Regulators Propose Tweaks to Flood Rules
Regulators released a joint proposed rule today that would require lenders to escrow flood insurance payments and eliminate mandatory insurance requirements for structures that are detached from a primary residence. The rule would require lenders to escrow premiums and fees for flood insurance for loans secured by residential improved real estate or mobile homes that are made, increased, extended or renewed after Jan. 1, 2016, unless the lender or the loan qualifies for a statutory exception. The proposal would also require lenders to offer borrowers of outstanding residential loans the option to escrow flood insurance premiums and fees. It would also eliminate a requirement to purchase flood insurance for a structure that is part of a residential property located in a flood zone if the structure is detached from the primary residential structure, and doesn’t also serve as a residence. The proposal was issued by the Federal Reserve, Office of the Comptroller of the Currency, FDIC, National Credit Union Administration and Farm Credit Administration. The comment period will be open for 60 days.
FHA Programs (Federal Housing Administration): FHA Letter on Note Sales
On October 16, 2014, President Steve Brown sent a letter to the FHA Commissioner in response to member concerns about the Single Family Note Sales Program (SFLS). Many REALTORS® are concerned that the program is auctioning large pools of mortgages to the highest bidder, in some cases without considering the investor’s ability to achieve homeownership preservation and affordable housing goals. NAR provided recommendations to improve FHA’s pre-foreclosure sales process as well as place additional controls on the SFLS program to prioritize keeping owner-occupants in these homes.
FHA Programs (Federal Housing Administration): FHA Property Flipping Waiver
On Friday, October 3, 2014, NAR President Steve Brown sent a letter to the FHA Commissioner urging FHA to extend the property flipping waiver that allows FHA financing on single family properties that are being resold within 90 days of the previous acquisition. NAR has seen the positive effects of the waiver where property rehabilitation and resale of these homes has increased the availability of safe and affordable homes in many communities.
FHA Programs (Federal Housing Administration): Coalition Letter on FHA 203(K)
On September 26, 2014, the National Association of REALTORS®, along with the National Association of Homebuilders and the Mortgage Bankers Association, sent a letter to the Federal Housing Administration (FHA) in response to proposed changes to the 203(k) Rehabilitation Mortgage Insurance Program. The 203(k) program provides financing to renovate older and damaged homes. The coalition provided several recommendations to maintain the viability of the program and allow the revitalization of properties that might otherwise continue to deteriorate.
Rural Housing Programs: FY 2015 Rural Housing Funds
Funding for Rural Development’s Single Family Housing Guaranteed Loan program is now available for fiscal year (FY) 2015. The funding received is based on a Continuing Appropriations Resolution, 2015 (P.L. 113-164, H.J. RES.124). Loans that were issued Conditional Commitments “subject to” commitment authority will be obligated on the Agency’s Guaranteed Loan System (GLS). If the loan has closed, the lender may submit their request for Loan Note Guarantee, together with their closing package. Ensure the lender certification on Form RD 1980-18 “Conditional Commitment for Single Family Housing Loan Guarantee” is dated on or after the obligation date provided by Rural Development. Lenders using the Agency’s Automated Lender Loan Closing/Administration transaction will complete the certification upon submission of the loan closing and payment of the guarantee fee. Questions regarding this notice may be directed to the Single Family Housing Guaranteed Loan Division, at 202-720-1452.
Unmanned Aerial Systems: NAR Meets With FAA on UAVs
NAR recently met with Federal Aviation Administration (FAA) officials to discuss NAR’s concerns and perspectives regarding the upcoming proposed rulemaking to regulate small Unmanned Aerial Vehicles (UAVs). NAR encouraged the FAA to expedite this proposed rulemaking and quickly develop a regulatory framework for commercial use of UAV technology that addresses public safety and privacy concerns, but permits a commercial UAV industry to flourish and allows Realtors to safely use the technology if they choose to do so. FAA officials stated that they were moving forward with the proposed rulemaking for publication in November, 2014, and are very interested in integrating this technology into the national airspace.
Interstate Land Sales Act: Bill Amending Condo Sales Requirements Signed
On September 26th, 2014, the President signed into law H.R 2600, a bill to amend the Interstate Land Sales Full Disclosure Act (ILSA) to clarify how the Act applies to condominiums. The Senate approved the measure by unanimous consent as one of the last items considered before it adjourned for the election recess. H.R. 2600 (Grimm, R-NY; Maloney, D-NY) is the companion bill to S. 2101, introduced by Senators Schumer (D-NY) and Heller (R-NV). The House approved H.R. 2600 by a vote of 410-0 late in 2013. The measure takes effect 180 days from the date of the bill’s signing. As amended, the ILSA will treat the sales of condominiums still under development in the same manner as condo sales in completed projects. By doing so, the bill closes the loophole that allowed buyers to use a technicality to rescind otherwise valid real estate contracts due to personal financial reasons or “buyer’s remorse”. The ILSA protects consumers from purchasing property that is not as advertised by requiring extensive disclosures by project developers. If ILSA disclosure requirements are not fully met, the purchaser may revoke the purchase contract. During the recent economic downturn, as markets softened and some high rise condominium developers lowered their asking prices, some early buyers, who had paid higher initial offering prices for units, used the ILSA’s reporting requirements as the basis to rescind valid real estate contracts.