Top 8 Stories Housing Market is Stabilizing and on its Way to a Recovery, Says FHA Commissioner FHA Plays Vital Mortgage Finance Role, but Private Sector Must Return Improving Liquidity, Reducing Inventory Critical for Stabilization, Say REALTORS® House Committee Passes FHA Reform Bill Draft Consumer Privacy Bill is Released No 4.0% "Sales Tax" on Home Sales in Recently Enacted Health Reform Bill, House Committee Approves Property and Flood Insurance Bills Rural Housing Program Funds Exhausted in Early May - Congress is Working on a Fix

1. Update May 2010 Update
i. Housing Market is Stabilizing and on its
i. Housing Market is Stabilizing and on its Way to Way to a Recovery, Says FHA
a Recovery, Says FHA Commissioner Commissioner
FHA has played a fundamental role in helping stabilize the nation’s ii. FHA Plays Vital Mortgage Finance Role,
housing market; however, FHA reform is critical for keeping the but Private Sector Must Return
housing and economic recovery on the right track. That’s according to iii. Improving Liquidity, Reducing Inventory
David H. Stevens, assistant secretary of the U.S. Department of Housing Critical for Stabilization, Say REALTORS®
and Urban Development and Federal Housing Administration iv. House Committee Passes FHA Reform Bill
commissioner, in an address to several thousand REALTORS® gathered v. Draft Consumer Privacy Bill is Released
at a special three-day real estate summit, “REALTORS® on the Rise: vi. No 4.0% “Sales Tax” on Home Sales in
Stabilizing the U.S. Mortgage Finance Delivery System”, May 11-13, Recently Enacted Health Reform Bill
during the REALTORS® Midyear Legislative Meetings & Trade Expo. vii. Rural Housing Program Funds Exhausted
in Early May – Congress is Working on A
Stevens credited increased home buyer demand, brought about by the Fix
home buyer tax credits, and the federal government’s purchase of viii. House Committee Approves Property and
mortgage-backed securities for helping restore consumer confidence Flood Insurance Bills
and get the economy moving. “Home prices and sales are beginning to ix. NAR Submits Comments on GSE
recover, inventories are down, private capital is beginning to re- Affordable Housing Goals for 2010 & 2011
emerge, investor confidence is coming back and the job market is
showing signs of improvement. These all show renewed confidence in the housing market. We need to finish the job
now and make the housing recovery sustainable and keep the economy on the right track,” said Stevens. Despite the
signs of improving stability, Stevens said that the housing market continues to face challenges, mainly from
unemployment and homeowners with negative equity.
According to Stevens, helping underwater borrowers is critical to stemming the tide of foreclosures, and recently
announced revisions to FHA and the Home Affordable Modification Program will help stabilize home prices and keep
more people in their homes. FHA refinances will help homeowners write down principal balances or modify and
restructure loans into safer, sustainable products. HAMP program changes include a forbearance, or temporary
assistance, for unemployed homeowners while they look for work.
Stevens said FHA continues to play a pivotal role in housing recovery and reemphasized that reform is critical. “After
the housing market crashed, FHA had to step in to play a vital role. Over the past three years, FHA reacted by
increasing its market share dramatically. There would be no housing market recovery without FHA; however, the
program is at risk. We cannot continue to operate under the current construct if we don’t shore up its fiscal situation.
We need to make FHA stronger,” said Stevens.
Stevens asked REALTORS® at the end of the meeting to lend their support for the passage of H.R. 5072, the “FHA
Reform Act of 2010,” which would allow FHA to hold lenders accountable for the loans they underwrite and originate,
and give FHA the flexibility to respond to changes in the marketplace by granting additional authority to adjust the
annual mortgage insurance premium and reduce borrowers’ upfront mortgage insurance premiums. “
ii. FHA Plays Vital Mortgage Finance Role, but Private Sector Must Return
The Federal Housing Administration (FHA) plays a key role in today’s housing market, but changes are necessary to support
recovery in the real estate market and general economy. That was the focus of the “Restoring the Balance of Public and
Private Capital in Mortgage Finance” session on May 13 during the REALTORS® Midyear Legislative Meetings & Trade Expo.
In 2009, more than 50 percent of first-time buyers used FHA to finance their home purchase, and nearly 80 percent of
FHA’s purchase loans were to first-time home buyers. FHA also serves those who need to refinance out of risky adjustable-
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2. rate mortgages or subprime loans with high interest rates. In 2009, approximately 835,000 borrowers refinanced into lower
interest rate FHA-insured loans, saving them an estimated $1.3 billion.
Vicki Bott, deputy assistant secretary for Single Family Housing, U.S. Department of Housing and Urban Development,
acknowledged FHA’s current significance in mortgage financing. “FHA has become a vibrant part of the market, but our goal
is not to build market share, nor is it to retract from the market. We need to support the housing market, but we also
support improving market liquidity and bringing private involvement back to the market,” she said.
Bott joined panelists Steve Adamo, president and CEO, Weichert Financial Services; Scott Griffith, ERA Griffith Realty; and
David Katkov, president and EVP, PMI Mortgage Insurance Co. Realtors® voiced their concerns with current lending
challenges, including limited liquidity in the resort and second-home market and appraisal concerns related to the Home
Valuation Code of Conduct. Panelists acknowledged there was still progress to be made, but that FHA had played a valuable
role in averting larger problems.
“Thank God FHA was there,” said Katkov. “FHA stepped in, as they should, but as the market heals, the balance should be
restored.” Katkov described an ideal mortgage insurance balance as 50-60 percent private sector, 35 percent FHA, with the
remaining portion covered by loans guaranteed by the Veterans Administration.
Decreasing the current loan limits would reduce the availability of mortgages in 612 counties in 40 states, plus the District
of Columbia. The resulting average limit reduction of more than $50,000 would have a dramatic impact on liquidity and
could halt the housing recovery, according to NAR.
iii. Improving Liquidity, Reducing Inventory Critical for Stabilization, Say REALTORS®
Restoring balance in the U.S. mortgage finance system is essential to stabilizing the real estate market, according to
REALTORS®, public policy officials and others who gathered at the “REALTOR® Town Hall Meeting: Strengthening and
Stabilizing the U.S. Mortgage System” session on May 11 during the REALTORS® Midyear Legislative Meetings & Trade
Expo.
According to the 2010 NAR Member Profile, 34 percent of REALTORS® reported that the most important factor in
limiting their clients’ ability to buy a home was difficulty in obtaining a mortgage. Panelists and participants at the
session agreed that fixing the current mortgage finance system will be necessary for a meaningful housing recovery.
Panelists offered their perspectives on the current state of the real estate market, mortgage financing, and what
needs to happen to ensure a recovery. Veteran broadcast journalist Forest Sawyer moderated the session.
Panelists agreed that the balance of public-private involvement in the mortgage financing process is an issue that must
be addressed. “The best thing about the market today is that it’s not the market yesterday,” said Nicolas Retsinas,
director of Harvard University’s Joint Center for Housing Studies. Retsinas remarked that REALTORS® have the
opportunity to match up first-time buyers with distressed properties, but many Realtors® expressed frustration with
the cumbersome foreclosure and short sales process.
Phyllis Caldwell, chief, U.S. Department of the Treasury’s Homeownership Preservation Office, agreed that this is an
important issue. “What we’ve learned through the Home Affordable Modification Program is that modifications are
very hard. Modifications may not be for everyone, and we’re looking at other ways we can help homeowners avoid
foreclosure,” she said. Caldwell noted that, with labor mobility at an all-time low, more must be done to help people
sell their homes in a short sale, if necessary, to allow them to move to areas where more jobs are available.
Other panelists included James Glassman, former undersecretary of state for Public Diplomacy; Alfred DelliBovi,
president and CEO, Federal Home Loan Bank of New York; J. Lennox Scott, chairman and CEO of John L. Scott Real
Estate; and Jack Shakett, executive, Credit Loss Mitigation Strategies, Bank of America.
iv. House Committee Passes FHA Reform Bill
On May 6, 2010, the House Financial Services Committee favorably reported H.R. 5072, the "FHA Reform Act of 2010."
This bill, sponsored by Reps. Waters (D-CA) and Capito (R-WV), will complete several changes FHA needs to insure the
solvency of the mutual insurance fund. In October, HUD released an audit that showed their capital reserves had fallen
below the Congressionally-mandated level of 2%. In response, FHA announced a number of changes to the program to
strengthen its financial position. This bill includes authority for FHA to increase the annual premium. To date, FHA has
increased the up-front premium, because they lacked authority to increase the annual. Once this law has passed, FHA
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3. plans to reduce the up-front premium and raise the annual instead. In addition, the bill includes a number of lender
enforcement provisions.
NAR was successful in defeating a series of amendments by Rep. Garrett (R-NJ) that would have increased FHA's
minimum downpayment requirement, prohibited financing of the upfront premium, or decreased FHA's guarantee.
The bill moves next to the House Floor.
v. Draft Consumer Privacy Bill is Released
On May 4, 2010, Rep. Rick Boucher (D-VA) and Rep. Cliff Stearns (R-FL) unveiled a long-awaited draft proposal to
protect the privacy of consumers' personal data on the internet, as well as offline. Under the comprehensive draft
proposal, any entity that collects covered information about individuals would be required to provide a clear,
understandable privacy policy that explains how that information is collected, used, and disclosed.
Covered information would include a person's name, postal and e-mail address, telephone number, a "preference
profile," and any "unique persistent identifier," such as an Internet Protocol address. Generally, entities would be
allowed to gather such information about individuals unless they have affirmatively opted out. However, express opt-
in consent would be required to collect sensitive data, such as medical records, financial accounts, Social Security
numbers, and location information.
The Federal Trade Commission would adopt rules to implement and enforce the measure. Similar state laws would be
preempted, and no private right of action would be provided. NAR will work with the bill authors to address REALTOR®
concerns to produce a bill minimizes the regulatory burden on REALTORS®.
vi. No 4.0% “Sales Tax” on Home Sales in Recently Enacted Health Reform Bill
Contrary to reports and newspaper articles circulating widely on the Internet, there is not a 4.0% "sales tax" or
"transfer tax" on the sale of a home included in the recently signed health care reform bill. The analysis underlying
these reports is incorrect and fails to take into account the interplay of the bill's provisions with already existing real
estate tax laws that remain unchanged.
What was included in the health bill is a provision that imposes a new 3.8% Medicare tax for some high income
households that have "net investment income." Any revenue collected by the tax is dedicated to the Medicare
hospital insurance program. This new tax will only apply to households with Adjusted Gross Income (AGI) of more than
$200,000 for individuals or more than $250,000 for married couples. Since capital gains are included in the definition
of net investment income, an additional tax obligation might result from the sale of real property.
In the case of the sale of a principal residence, the existing $250,000/$500,000 exclusion from capital gains on the sale
of a principal residence remains unchanged. Consequently, even when the AGI limits are met, the new tax would not
be applied to all capital gains that result from the sale of a home. Rather, it would only apply to any home sale gain
realized in excess of the $250K/$500K existing primary home exclusion that pushes the filer's AGI over the
$200K/$250K adjusted gross income limit.
The new Medicare tax will not take effect until January 1, 2013. For more information on the new Medicare tax,
please consult NAR's Health Reform Q&A on this and other provisions of the new health reform law located at:
www.realtor.org/healthreform
vii. Rural Housing Program Funds Exhausted in Early May – Congress is Working on A Fix
At the end of April, the US Department of Agriculture (USDA) Rural Development announced that the Single Family
Housing Guaranteed Loan Program will likely be exhausted by May 7, 2010. Previously, USDA believed the program
would be exhausted by April 30, 2010. Depending on Congressional activity, the Agency may consider issuing
conditional commitments.
Recently, the House of Representatives passed HR 5017, the "Rural Housing Preservation and Stabilization Act of
2010", sponsored by Reps. Kanjorski (D-PA) and Capito (R-WV). The bill allows the Secretary of Agriculture to increase
the upfront premium for 502 single-family loan guarantees up to 4 percent in order to make the program self-
sufficient. This fee may be rolled into the loan. The fee increase was necessary because the program has exhausted all
funding. On April 27, 2010, Senator Bennett introduced S. 3266, the companion bill to HR 5017. The bill was referred
to the Senate Committee on Banking, Housing, and Urban Affairs.
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4. viii. House Committee Approves Property and Flood Insurance Bills
On April 27, 2010, the House Committee on Financial Services approved several property insurance reform bills which
will now move to the floor of the full House of Representatives for consideration:
H.R. 2555: "Homeowners' Defense Act" (Klein, D-FL) would provide for a federal reinsurance and loan
guarantee program to help stabilize insurance rates for states that implement mitigation and building code
programs and meet stringent credit-risk requirements. Without stable funding alternatives, states must
maintain artificially inflated rates to hedge against risk in an increasingly volatile global reinsurance market.
H.R. 5114: "Flood Insurance Reform Priorities Act" (Waters, D-CA) would:
o Extend authority for the National Flood Insurance Program (NFIP) for a full 5 years, a step that would
end the current month-to-month approach that has resulted in 7 extensions since September of 2008.
Unless re-extended, NFIP authority will expire on May 31.
o Increase the maximum coverage limits which have not been updated since 1994.
o Reform and ensure continuation of a program which is now $20 billion in debt, including phasing-in
actuarial rates over a 5-year timeframe for older properties which have been paying less than the
market rate. For the commercial properties and non-primary residences, the phase-in would begin 3
years after enactment. The phase-in for primary residences would begin once a property is sold. The
bill also extends a pilot program to mitigate properties with severe repetitive losses.
H.R. 1264: "Multiple Peril Insurance Act" (Taylor, D-MS; Scalise, R-LA) would offer property owners windstorm
coverage under the NFIP. According to the Congressional Budget Office, the bill would collect sufficient
premiums to offset the claim payments and not contribute to the federal budget.
While NAR has been urging Congress to enact a forward-looking national policy which would reduce the cost to
taxpayers of post-disaster federal assistance, NAR did communicate its strong concern with proposed reforms to the
NFIP, especially the move to impose "actuarial" rates on older properties, at a hearing held prior to the bill's mark-up.
ix. NAR Submits Comments on GSE Affordable Housing Goals for 2010 and 2011
On April 12, 2010, NAR President Vicki Cox Golder submitted a letter to the Federal Housing Finance Agency (the
regulator of Fannie Mae and Freddie Mac) commenting on its proposed affordable housing goals for Fannie and
Freddie for 2010 and 2011. The letter generally supports the proposed goals as consistent with NAR's support for
reasonable affordable housing goals that are consistent with sustainable homeownership. The goals are designed to
avoid encouraging "uneconomic or high-risk activities" by Fannie and Freddie.
Monday, May 24 Wednesday, May 26 Wednesday, June 2
April Existing-Home Sales Commercial Forecast Pending Home Sales Index
Real Estate Services Staff
Ken Trepeta – Director, ktrepeta@realtors.org
Kara Beigay – Communications Manager, kbeigay@realtors.org
Patricia Tarhon – Project Coordinator, ptarhon@realtors.org
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