Housing Bill Passes Congress

(Washington, D.C., July 30, 2008)  President Bush signed HR3221, The American Housing Rescue and Foreclosure Prevention Act, into law today. Congress passed the legislation last week following President Bush’s withdrawal of his threat to veto the measure.   
HR3221 is the most comprehensive response yet to the U.S. mortgage crisis. Proponents say that it will help families facing foreclosure keep their homes, help other homeowners avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process.  

Sweeping action by the federal government appears to be the only viable means to shore up a shaky home sales economy rocked by a salvo of negative market indicators.

The home sales industry lobby in Washington, D.C., has been pressing hard for strong, innovative but measured action from Congress to reverse the homes sales slump that is exerting a serious drag on the entire domestic economy.  

ASHI is working with a coalition of influential homes sales industry interests in Washington, D.C., petitioning Capitol Hill for specific actions to ensure liquidity, restore stability and stimulate sales in a moribund home sales market. 

Congress has responded. ASHI applauds congressional leaders for including one of the key provisions that ASHI has requested: a temporary homebuyer tax credit, a powerful financial incentive to lure new homebuyers — and new customers — back to the homebuying market soon, rather than wait on the sidelines for a market bottom.   

ASHI and its coalition partners have argued that stable home valuations underpinned by robust home sales markets are a cornerstone of personal wealth, economic health and well-being of the nation, values that are worthy of extraordinary government action to protect them.

But in addition, ASHI also has argued that action is necessary to help many thousands of home sales service providers  — mostly small-business owners like ASHI members — who depend on a vibrant home sales economy for their livelihoods. Congress needs to act to help small businesses related to home sales, as well as the homeowners they serve.  

Members of Congress have been convinced by these arguments and have adopted them in their policy statements supporting the rescue bill.

House Financial Services Committee Chairman Barney Frank (D-MA) said that HR3221 “will begin to lay the groundwork for a turnaround in the housing market and hopefully in the broader economy as well.”

Rep. Richard Neal, chairman of the Ways and Means Subcommittee on Select Revenue Measures, said “the tax provisions in this bill are an appropriate mix of incentives … to help the housing and real estate industry regain their footing. And they offer struggling homeowners a life-line. This bill offers hope that if we can get this industry moving again and provide security for distressed homeowners, perhaps we can get the economy back on track.”  

The bill is broad and comprehensive, but the major business goal for ASHI and home sales industry interests is to entice buyers back to the market sooner and to ensure the availability of financing for those buyers. Money is at the heart of the problem. HR3221 looks to the tax code and mortgage relief to get customers thinking about buying homes again.      

The bill gives first-time homebuyers a temporary, refundable tax credit that works like an interest-free loan of up to $7,500, to be paid back over 15 years, to spur home buying.  This provision is inspired by a similar one sought by the coalition including ASHI, the National Association of Realtors®, the National Association of Home Builders and other organizations active on the Hill.  

Another tax incentive targets prospective homebuyers who claim the standard deduction on their personal income taxes. They will be able to claim an additional $500 ($1,000 for a joint return) standard deduction for property taxes in 2008.

Further, the bill provides Community Development Block Grant (CDBG) funds to allow local governments to buy, restore and return foreclosed properties to the market in good condition and help prevent long-term economic blight in neighborhoods wracked with multiple foreclosures.

The package includes many provisions to modernize and expand the availability of FHA-backed funding to buy homes. Taken in the whole, these provisions do much to expand the pool of affordable mortgage funding to qualified homebuyers, with greater assurances, safety, disclosures and access to capital than homebuyers have today. (See a detailed summary of bill highlights below.)

The rescue bill has been highly controversial and is not without detractors. Many, including some ASHI members, have criticized any attempt to enact an expensive taxpayer-funded bailout to help irresponsible borrowers and lenders. President Bush threatened to veto a costly bailout bill that would reward risky behavior and relieve speculators at the expense of taxpayers.

In response, proponents of the bill added provisions to limit the cost of the bill, exclude speculators and investment homes from the relief programs, and protect the taxpayers as much as possible while helping restore liquidity and stability to the housing markets.

The recent news that Fannie Mae and Freddie Mac might face solvency problems, with catastrophic consequences for the entire U.S. economy, prompted the White House to rescind its veto threat on July 23 and accept provisions in the bill providing the mortgage giants an unlimited line of credit if needed. With the White House reversal, the House passed the bill later the same day and the Senate followed suit days later.

With the President’s signature this morning, HUD, the Department of the Treasury and other federal agencies are expected to begin implementing the act immediately.

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American Housing Rescue & Foreclosure Prevention Act

Selected highlights affecting ASHI members

Tax provisions to spur homebuying and expand
refinancing opportunities

• Gives first-time homebuyers a refundable tax credit that works like an interest-free loan of up to $7,500 (to be paid back over 15 years) to spur home buying and stabilize the market. The credit will begin to phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).
• Provides taxpayers who claim the standard deduction with up to an additional $500 ($1,000 for a joint return) standard deduction for property taxes in 2008.

Stabilizing neighborhoods hurt by the foreclosure crisis

• Provides $4 billion in emergency assistance (CDBG funds) to communities hardest hit by the foreclosure and sub-prime crisis to purchase foreclosed homes, at a discount.
• Foreclosed and rehabilitated homes would be sold or rented to moderate-income individuals and families — whose incomes do not exceed 120 percent of the area median income.
• Provides $180 million for pre-foreclosure counseling, to be distributed in grants by the Neighborhood Reinvestment Cooperation (NeighborWorks) – with 15 percent targeted for low-income and minority homeowners and neighborhoods, and $30 million in grants for legal counseling to assist homeowners in foreclosure.

FHA housing stabilization and homeownership retention

• Provides mortgage refinancing assistance to keep at least 400,000 families from losing their homes, to protect neighboring home values, and to help stabilize the housing market at no cost to American taxpayers.
• Expands the FHA program so many borrowers in danger of losing their homes can refinance into lower-cost government-insured mortgages they can afford to repay.
• Protects taxpayers by requiring lenders and homeowners to take responsibility. In order to participate, lenders and mortgage investors must take significant losses by reducing the loan principal.
• Contains critical protections for taxpayers’ dollars, including higher refinancing fees to cover possible losses from defaults on these government-backed mortgages.
• Only primary residences are eligible: No speculators, investment properties, second or third homes will be refinanced.
• Provides $180 million for financial counseling and legal
• assistance to help families stay in their homes.

Strengthening regulations of the GSEs

• Raises the GSE loan limits for single-family homes to create affordable mortgage loans for moderately priced homes by allowing GSE loans up to 115% of the local area median home price, and to make GSE loans effective in high-cost areas by raising the permanent loan limit from $417,000 to $625,500.

Backstopping Fannie Mae and Freddie Mac to shore up the housing market

• Allows the Secretary of the Treasury to increase the already existing line of credit to Freddie and Fannie for the next 18 months, as well as giving the Treasury Department standby authority to buy stock in those companies to stabilize housing finance markets. Taxpayers should be first in line for being paid back, before other shareholders. There should be restrictions on dividends for shareholders and on compensation for the executives of the GSEs until taxpayers are fully reimbursed.

Preventing future abuses and crises

• Establishes a nationwide loan originator licensing and registration system that will set minimum standards for loan originator licensing, substantially improving the oversight of mortgage brokers and bank loan officers.
• Establishes improved mortgage disclosure requirements that will help ensure that mortgage borrowers understand their mortgage loan terms.

FHA modernization

• Raises FHA loan limits to create affordable mortgage loans for moderately priced homes by allowing FHA loans up to 115% of the local area median home price, and to make GSE loans more available in high-cost areas by raising the permanent loan limit from $362,790 to $625,500.

Preserving the American dream for our nation’s veterans 

• Increases VA Home Loan limit, as was done in the stimulus package, for high-cost housing areas so that veterans have more homeownership opportunities.

• Helps returning soldiers avoid foreclosure and stay in their homes by lengthening the time a lender must wait before starting foreclosure.

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Special Report:  ASHI Lobbying for You in Washington D.C.

Day Two

Randall G. Pence, Esq., Capitol Hill Advocates, Inc.

More than ever, Washington, D.C., is bustling with activity that will affect every ASHI member in the country. Mortgage/foreclosure/housing issues are at the top of the government agenda. Lobbyists for the home sales industries are canvassing official Washington, advocating solutions that are tailored to benefit their particular industries.   

ASHI is fully engaged in this competitive environment. It is working behind the scenes to influence federal policies that will certainly affect the profitability and future business opportunities for home inspectors. ASHI is concentrating its strongest efforts on niche issues on which it can have the greatest impact. It is focusing its resources in ways designed to achieve maximum effect by leveraging its strategically cultivated relationships with stakeholder coalitions and with targeted government entities.
 
In late June, ASHI President Brion Grant joined Randall Pence of Capitol Hill Advocates, ASHI’s federal lobbyist, for a fast-paced series of lobbying meetings to help show the ASHI flag on Capitol Hill and in selected federal agencies – even in the executive office of the president.
 
Last month, we reported on the first day of our lobbying expedition through the key corridors of power in the nation’s Capitol, corridors that most citizens rarely see.

As you read about our activities on day two, bear in mind that leaders in government have no practical experience with home inspection; they need ASHI’s expert input to craft intelligent legislation and regulations affecting home inspection. ASHI is happy to fulfill this advisory role. But ASHI’s overriding mission is advocacy:  promoting the home inspection profession and lobbying to protect the interests of ASHI members.

Day Two

CAPITOL HILL, OFFICE OF U.S. REP. NYDIA VELAZQUEZ , CHAIRWOMAN OF THE HOUSE COMMITTEE ON SMALL BUSINESS; June 25, 11:00 A.M.:

ASHI has a private meeting with Rep. Nydia Velazquez, D-N.Y., to thank her for her sponsorship of HR4776, to brief her on the society’s efforts to drum up support and to strategize about next steps to move the legislation. ASHI recommends that her excellent staff run the traps around town to determine if any key organizations might mount opposition to HR4776. 

ASHI also thanks her for her leadership of the House Small Business Committee, investigating several issues of importance to ASHI members, such as the need for affordable health insurance for small business/self-employed individuals.
  
ASHI advises that future oversight hearings on the RESPA proposal may be advisable, and asks the following be considered:

a) The packaging provision be eliminated;

b) If the packaging provision cannot be eliminated, then it should specifically exempt home inspectors;

c) If home inspectors cannot be specifically exempted, then RESPA should require full disclosures of the potential conflicts of interest to ensure home inspectors who do not participate in packaging programs do not suffer an unfair disadvantage and that homebuyers are fully aware of the situation.       

CAPITOL HILL, OFFICE OF U.S REP. MELISSA BEAN, CHAIRWOMAN OF THE HOUSE SUBCOMMITTEE ON TAX AND FINANCE; June 25, 11:25 A.M.: 

ASHI thanks and congratulates Rep. Melissa Bean, D-Ill., for recently cosponsoring HR4776. In addition, ASHI applauds her leadership on key tax issues confronting small businesses/the self-employed. ASHI advises that she support the recent SBA recommendation for a better and more reliable home office deduction in the federal tax code. The society and the congresswoman share views over the impact that rising health care premiums are having on small businesses, the current condition of the home sales market, and the impact that a temporary tax credit to buy a home could have in helping bring buyers back to the market.  

Photo: Cong. Melissa Bean (middle) discusses Small Business Tax Policy with Randall Pence (left) and Brion Grant (right).

NEAR CAPITOL HILL, WASHINGTON COURT HOTEL; 12:00 P.M.: 

ASHI shifts gears for lunch and adopts a stance as a political force. Through its Political Action Committee – INSPECTPAC, ASHI joins with a small group of other PACS as a sponsor of a special fundraising luncheon to support the re-election of Rep. Velazquez.  The congresswoman has had a stunning career in the House of Representatives.  She is well-regarded by her colleagues in the House and among interest groups like ASHI for the breadth of her issue portfolio, her leadership qualities and her endless energy in expanding the scope of the House Small Business Committee.  INSPECTPAC has a strong interest in helping to re-elect talented, pro-small-business members of Congress like Velazquez. ASHI enjoys its good relationship with the chairwoman and is building similar relationships with others on Capitol Hill.   
     
OFFICE OF SINGLE FAMILY DEVELOPMENT, DEPT. OF HOUSING AND URBAN DEVELOPMENT HEADQUARTERS; 1:30 P.M.: 

ASHI meets with staff at HUD to build relationships with new HUD staff and to discuss HR4776. After answering questions and bringing the staff up to date on Hill action regarding the bill, ASHI offers to enter into a detailed drafting discussion with HUD to determine whether the department might be inclined to support the bill, or whether HUD might request changes acceptable to ASHI in exchange for HUD support.

Expressing appreciation of the joint HUD-ASHI effort to create HUD’s “For Your Protection-Get a Home Inspection” document, which HUD offers prospective homebuyers, ASHI proposes a similar collaboration between the two to develop a highly-focused HUD training module on home inspection for its housing counseling programs. 

The HUD staff raises questions about program development costs and complexity.  In order to keep project costs low, ASHI offers to provide in-kind services to develop training materials that would be distributed across the country by HUD. The society would welcome the opportunity to draft any government materials describing home inspection. ASHI asserts that it is willing to eliminate certain procedural aspects of the bill in order to obtain HUD support on the central purpose of the legislation, and further proposes outreach and public education programs to make the fruits of an enhanced home inspection counseling program available to all homebuyers, whether or not they obtain HUD counseling. 

The staff agrees to take the bill under consideration for possible collaboration. Staff members even mention the intriguing possibility that HUD might consider implementing it through administrative action.

In closing, ASHI suggests that some of the documents it previously helped HUD develop, specifically the “For Your Protection…” document, and “Ten Questions to Ask Your Home Inspector,” should appear more prominently on the HUD Web site.  HUD staffers agree that this might be a good idea and will look into a more prominent Web site placement for the home inspection messages. ASHI wants everyone in the home sales market to know that HUD recommends obtaining a home inspection.    

NATIONAL ECONOMIC COUNCIL; EXECUTIVE OFFICE OF THE PRESIDENT OF THE UNITED STATES, WHITE HOUSE COMPLEX; 3:00 P.M.: 

ASHI meets with National Economic Council staff to brief on HR4776 and to seek support from the Bush Administration Domestic Policy operation. After explaining the bill in detail, ASHI makes the point that HR4776 would be a good consumer protection issue for the White House to support, especially in light of White House opposition to key parts of the mortgage/ foreclosure bailout bill currently under consideration in the Senate. 

ASHI briefs the staff on the merits of home inspection, the unique relationship between the home inspector and the homebuyer, the confusion that exists among homebuyers and the need for improved education for homebuyers regarding the facts and merits of home inspection. 

The staff listens with interest and agrees to run the traps within the National Economic Council to determine whether HR4776 is a bill that the administration might support. 
   
In closing the meeting, ASHI further mentions its two key concerns on the RESPA proposal, recommending against the packaging proposal and recommending in favor of a special question line on the HUD-1 and GFE forms to require homebuyers to consider obtaining a home inspection as early as possible. 

If you are a member of ASHI, you should know that you have a Washington lobbyist looking out for your interests in Washington, D.C.

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