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.