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Real Estate Services Update: June 2011

Real Estate Services Update: June 2011

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Published by: narwebteam on Jan 11, 2012
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QRM Comment Deadline Extended; QRMPodcast
On June 6, 2011, the deadline for commenting on the proposedQualified Residential Mortgage (QRM) regulation was extendeduntil August 1 by the six federal regulators involved in therulemaking. The extension was made at the strong urging of NARand a large coalition raising concerns about the QRM rule. Theproposed rule implements a provision of the Dodd-Frank Act thatrequires lenders that securitize mortgage loans to retain 5% of thecredit risk unless the mortgage is a QRM or is otherwise exempt (forexample, FHA mortgages are also exempt).A podcast recorded by NAR staff on the QRM issue is featured in the Alaska Association of REALTORS® Update News Letter. The podcastexplains NAR's concerns with the QRM rule which includes a 20%downpayment, low debt-to-income ratios, and other strict creditcriteria. NAR believes the high down payment and low debt-to-income proposals are unreasonable, are not necessary to assure asafe mortgage, and would cause serious harm to consumers. Non-QRM mortgages are likely to result in significantly higher rates andfees being imposed on otherwise creditworthy borrowers, includinglow and moderate income borrowers, who maintain good creditand seek safe loan products.
House Approves 1-Year Extension of theNational Flood Insurance Program
On June 2, 2011, the House approved a 1-year extension of the National Flood Insurance Program (NFIP) in theHomeland Security Spending bill for 2012, H.R. 2017. However, the Senate would still have to approve the legislationand it is not clear at this time if and when that would occur. To improve the chances that Congress will reauthorizeNFIP authority before the Sept. 30, 2011, deadline, NAR is supporting any and every effort to extend the program foras long as legislatively possible but above all, avoid another lapse of the NFIP. For this reason, on May 27, 2011, NAR joined a broad coalition of real estate, financial and insurance representatives in writing the entire House of Representatives also urging immediate consideration and passage of H.R. 1309, the Flood Insurance Reform Act(Biggert, R-IL; Waters, D-CA). This bill would extend and fiscally strengthen the NFIP for five years and was approvedMay 13, 2011 by a unanimous, bipartisan vote of the House Financial Services Committee. The Coalition letter,which NAR helped organize, urged congressional leaders to schedule a floor vote on the bill at the first available opportunity.In the Senate, initial discussions and planning have begun to introduce its version of the 5-year reform legislation, withthe first hearing for FEMA's Administrator Fugate scheduled on June 9, 2011. NAR will continue to make every effortto reauthorize this critical program before the deadline.
NAR Urges House to Consider Impact of Housing on the Economy
On June 2, 2011, the House Budget Committee held a hearing on the "Taxpayer Exposure in the Housing Markets."The hearing focused on the costs of Freddie Mac and Fannie Mae in conservatorship, and the so-called "hidden costs"of FHA. The Committee reviewed a proposal for analyzing FHA by a different accounting model - one which wouldshow FHA costing the government money, versus the traditional model which shows FHA as making money for thefederal government. In a letter to the Committee
,NAR argued that when looking at the costs of the various programs,they should also consider the overall impact on our nation's economic health. Furthermore, NAR argued that the
June 2011
QRM Comment Deadline Extendedii.
House Approves 1-Year Extension of NFIPiii.
NAR Urges House to Consider Impact of Housing on Economyiv.
NAR President Testifies Against Changes toFHAv.
Senior Democrat Addresses MID & Deductionsvi.
Fannie Mae Announces DelinquencyDirectivesvii.
Reduced Premiums Announced for FederalHigh Risk Insurance Programviii.
Bank of America to Accept FHA Mortgageswith Credit Scores Under 600ix.
NAR Submits Statement on RegulatoryFairnessx.
Treasury Department Holds HAFA Summitxi.
White House, Congress Propose Data BreachDisclosuresxii.
Improve Client Communications withIfbyphonexiii.
zipLogix Introduces New Online DocumentStorage Toolxiv.
How Can I benefit from Print on Demand?
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revised model was not an appropriate measure for FHA, and using such a model would not allow for an evencomparison across all federal programs. It is expected that the Budget and Appropriations Committees will use thetraditional evaluation of FHA, which shows the program generating a $4.4 billion surplus in FY12, when they debatethe Appropriations bills.
NAR President Testifies Against Changes to FHA
During the week of May 23, 2011, the House Financial Services Committee put forth a "discussion draft" on FHAreform. The draft has a number of good provisions (providing increased lender enforcement, other risk avoidancetools, etc). However, there are several provisions that we STRONGLY oppose. The first would raise the FHAdownpayment for all borrowers to 5%, and prohibit the financing of all closing costs and the Upfront MIP. The secondwould change the whole calculation of the loan limits by making it 125% of median home price by county. It wouldeliminate the MSA rule
which raises all counties within an MSA (metropolitan statistical area) to the highest limit inthat area, and it would eliminate the FHA floor of $271,050 (which means low cost counties would go to 125% of median
under $100k in many areas). It would make the high cost limit $625,500.NAR President Ron Phipps testified on this proposal on May 25, 2011, before the House Financial Services Subcommittee on Insurance and Housing. He strenuously opposed those two changes, saying "What our economyneeds is less government interference, and more market activity." Seven of the nine panelists at the hearing expressesserious concerns with the proposal, which the Subcommittee Chair confirmed was simply one of several proposalsthey are reviewing, with much more discussion to come. NAR continues to work with the Committee staff to urgethem to withdraw these harmful provisions. More hearings will come before any legislation is offered.
Senior Democrat Addresses MID and Other Deductions
 Sander Levin (D-MI), the senior Democrat on the House Ways and Means Committee, presented a major address tothe Center for American Progress to explore issues related to tax reform. He noted the importance of and the need fortax reform, but questioned whether Congress could or would make the kinds of cuts that would reduce the maximumtax rate to 25% as some have suggested.Levin noted that four major so-called "tax expenditures" would have to be cut or eliminated in order to broaden thebase sufficiently to bring the top rate that low. These include health insurance exclusions, housing incentives,retirement savings incentives and education incentives. Levin pointed out that these four elements of the codeprovide enormous benefits to the middle class. He questioned whether the middle class (or those aspiring to themiddle class) should lose these incentives solely to achieve a particular goal for tax rates. Tax rates have a history of going up and going down, so if the rates went back up, then middle income families would have lost considerablebenefits.Mr. Levin also emphasized how remarkably different the economy is from what it was in 1986 when the last majorreform occurred. In the past 25 years the economy has become globalized, new technologies have exploded and thepolitical climate has changed significantly. Congress itself has changed personnel. Only three members of the HouseWays and Means Committee and only two members of the Senate Finance Committee participated in the 1986reforms.
Fannie Mae Announces Delinquency Directives
On June 6, 2011, Fannie Mae an updated servicing guide that requires servicers to implement processes for contactingdelinquent borrowers and offering foreclosure alternatives, and setting deadlines for resolving escalated cases. Thenew requirements begin the implementation of consistent mortgage loan servicing and delinquency managementrequirement described in FHFA's April 28, 2011, directive to Fannie Mae and Freddie Mac. Servicers must implementthe revised requirements no later than September 1, 2011. Under the new rules, loan servicers are directed todevelop a uniform standard for communicating with homeowners (and encouraged to provide a single point of contact), determine why the borrowers have missed payments and their ability to pay, and educate borrowers onforeclosure prevention options.
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In response to a foreclosure prevention solicitation letter, borrowers must complete a Borrower Response Package. Acomplete package must include:
A completed Uniform Borrower Assistance Form;
Income documentation (no more than 90 days old);
Hardship documentation; and
An IRS Form 4506-T signed by the borrowerReal estate agents should familiarize themselves with these forms to assist clients in submitting a completed package.Additional information on the directive and servicers' responsibilities can be found on Fannie Mae's website.
Reduced Premiums Announced for Federal High Risk Insurance Program
On May 31, 2011, the Obama administration announced changes that will make a federal high risk pool healthinsurance program more affordable and accessible for Americans who have been denied coverage because they aresick. Created by last year's healthcare law, the Preexisting Condition Insurance Programs (PCIP) is meant to provide temporary coverage to sick Americans until 2014, when insurance companies will no longer be allowed deny coverageto people who are sick. Eligibility is limited to those who have been denied enrollment by an insurer or offeredcoverage at twice the price of what a healthy enrollee might pay and who have been uninsured for six months ormore.The changes announce include (1) premium reductions of as much as 40% in some of the 23 participating states and(2) the elimination of a requirement that applicants to provide proof that they had been turned down for coverage inthe traditional insurance markets. Starting July 1, 2011, applicants only must provide a letter from a doctor or nursesaying they've had a medical condition, disability, or illness in the past year.For more information on whether the PCIP is available in your state and the premium charges for these plans, pleasego to http://www.pcip.gov or by call (866) 717-5826.
Bank of America to Accept FHA Mortgages with Credit Scores Under 600
 Bank of America Home Loans recently changed underwriting standards for the FHA loans it provides through its mortgageloan officers for FHA purchase mortgages. Bank of America will increase its flexibility on FICO score requirements and allowborrowers with minimum FICO scores of 580 to apply for loans, assuming they meet certain debt-to-income requirements.Agents with questions about Bank of America's underwriting criteria for FHA loans should contact a Bank of AmericaMortgage Loan Officer.
NAR Submits Statement on Regulatory Fairness
On May 24, 2011, the Small Business Administration's Office of the National Ombudsman held a hearing on NationalRegulatory Fairness for Small Business. The hearing focused on the impact federal regulatory enforcement andcompliance actions have on small businesses. NAR provided comments on several rules that directly impact real estate agents and brokers which, in some cases, create a disincentive for real estate professional to provide assistance toconsumers. Though supportive of regulatory efforts to protect consumers and curb abuses, the growing regulatorycompliance required of real estate professionals will harm the ability of real estate agents to operate in an efficientmanner as trusted advisors to their clients on both the purchase and sale of their homes. NAR remains concerned thatthe cumulative effects of additional layers of regulatory compliance are detrimental to both the housing industry andconsumers.
Treasury Department Holds HAFA Summit
On May 9, 2011, the National Association of REALTORS® along with representatives from the California, Illinois, andNevada Associations, met with lenders, mortgage insurance companies, the Treasury Department and other federalagencies to identify issues impeding the success of the HAFA program. Panelists provided an overview of eligibility anddocumentation requirements for their respective HAFA and proprietary short sale programs, procedures forestablishing property values and for appealing property valuations, and problems with subordinate liens which remain

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