REALTOR® Insider DC News and Events Report
NAR President Participates in Obama Administration Conference on the Future of Housing Finance
Federal Reserve Board Publishes Proposed Rule under TILA to Enhance Consumer Disclosures
Federal Reserve Board Publishes Proposed Rule on Escrow Requirements for Higher-Priced Jumbo Loans
Federal Reserve Board Requires Notice to Homeowners When Mortgages Are Sold
Federal Reserve Board Issues Final Rule to Limit Loan Originator Compensation
Federal Reserve Board Issues Interim Rule Requiring Disclosures of How Mortgage Payments May Change

Commercial Finance Report
Small Business Lending Fund Bill Signed Into Law

Conventional Residential Lending Report
Congress Extends Loan Limits

Federal Tax Report
New Reporting Requirements for Landlords

REALTOR® Insider DC News and Events Report
NAR President Participates in Obama Administration Conference on the Future of Housing Finance

NAR President Vicki Cox Golder participated in a HUD-Treasury Conference on the Future of Housing Finance held on September 27, 2010, in Cleveland, as a member of the panel titled “Housing Finance Reform and Broader Housing Policy Goals.” She emphasized that “Homeownership Matters” and that there needs to be a government role in housing finance to assure that mortgages are available in all types of markets. She also strongly defended the 30 year fixed rate mortgage and the mortgage interest deduction. The panelists all agreed that the current market, where Federal Housing Administration, Fannie Mae, and Freddie Mac loans comprise more than 90 percent of the market, is not healthy. In a break-out session on managing risk in the financial system, NAR expressed concern that there needs to be more lending to qualified, creditworthy borrowers, consistent with sustainable homeownership, to help the housing markets recover.

NAR’s Homeownership Matters Initiative

Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120

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Federal Reserve Board Publishes Proposed Rule under TILA to Enhance Consumer Disclosures

On September 24, 2010, the Federal Reserve Board (the Fed) published a proposed rule under the Truth in Lending Act (TILA) designed to enhance consumer protections and disclosures. The deadline for comments is December 23, 2010.

The changes would improve consumer disclosures for reverse mortgages, establish rules for reverse mortgage advertising, and prohibit specified unfair practices in the sale of financial products with reverse mortgages.

For all mortgages, the rule would improve disclosures related to a consumer’s right to rescind certain mortgages transactions and clarify the creditor’s responsibilities if the consumer rescinds. It would also ensure that consumers receive new disclosures when the parties agree to modify key terms of an existing mortgage. In addition, consumers would have time to review loan cost disclosures before they are obligated for fees, by requiring lenders to refund fees if a consumer decides to withdraw the application within 3 days of receiving disclosures. The proposed rule would make a number of additional changes.

Fed Announcement
Proposed Rule

Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120

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Federal Reserve Board Publishes Proposed Rule on Escrow Requirements for Higher-Priced Jumbo Loans

On September 24, 2010, the Federal Reserve Board (the Fed) published a proposed rule to revise the escrow account requirements for higher-priced, first-lien “jumbo” mortgage loans. The rule implements a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act that increases the annual percentage rate (APR) threshold used to determine whether a lender must establish an escrow account for property taxes and insurance for first-lien jumbo mortgages. Jumbo loans are those with a principal amount that exceeds the limit for purchase by Freddie Mac ($417,000 or up to $729,750 for high cost areas). Dodd-Frank applies the escrow requirement only if the loan’s APR is 2.5 percentage points or more above the prime offer rate. The current trigger is 1.5 percentage points. The deadline for comments is October 25, 2010.

Fed Press Release
Final Rule

Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120

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Federal Reserve Board Requires Notice to Homeowners When Mortgages Are Sold

On September 24, 2010, the Federal Reserve Board (the Fed) published a final rule in the Federal Register to confirm a change to the Truth in Lending Act (TILA) that requires that consumers be notified within 30 days after the date their mortgage loans are sold or transferred. There are several exceptions. This notice requirement has been in effect since May 20, 2009, and this final rule and an earlier interim rule provide additional clarity. The Real Estate Settlement Procedures Act (RESPA) has a parallel requirement for notice to a consumer when the servicer of the mortgage has changed.

Fed Press Release
Final Rule

Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120

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Federal Reserve Board Issues Final Rule to Limit Loan Originator Compensation

On September 24, 2010, the Federal Reserve Board (the Fed) published a final rule in the Federal Register to protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can arise from loan originator compensation practices. The rule prohibits mortgage brokers and loan officers (loan originators) from being paid more if the borrower accepts an interest rate higher than the lender requires (commonly referred to as a “yield spread premium”). Loan originators may continue to receive compensation based on a percentage of the loan amount. Loan originators that receive compensation directly from a consumer may not also receive compensation from another party. The rule also prohibits loan originators from steering a consumer to accept a loan that is not in the consumer’s interest to increase the originator’s compensation. The final rule takes effect April 1, 2011.

Fed Press Release
Final Rule

Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120

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Federal Reserve Board Issues Interim Rule Requiring Disclosures of How Mortgage Payments May Change

On September 24, 2010, the Federal Reserve Board (the Fed) published an interim rule in the Federal Register to implement provisions of the Mortgage Disclosure Improvement Act (MDIA) that require lenders to disclose how borrowers’ mortgage payments can change over time. So consumers will understand risks of payment increases before they decide on a mortgage, the rule requires lenders to include a summary in the form of a table with (1) the initial interest rate and monthly payment, (2) for adjustable rate loans, the maximum rate and payment during the first 5 years and a “worst case” example over the life of the loan, and (3) the fact that consumers may not be able to refinance their loans to avoid higher payments. The rule requires disclosure of other risky features, such as balloon payments and negative amortization loans. The final rule applies to applications received by the lender on or after January 30, 2011.

Fed Press Release
Final Rule

Jeff Lischer 202-383-1117, Tony Hutchinson 202-383-1120

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Commercial Finance Report
Small Business Lending Fund Bill Signed Into Law

On September 27, 2010, President Obama signed into law the Small Business Jobs and Credit Act of 2010 (H.R. 5297). The U.S. Senate voted, 61-38, to pass the bill on September 16, 2010, while the U.S. House approved the measure, 237-187.

Under this bill, which NAR supported, the U.S. Treasury would be authorized to lend up to $30 billion to interested community banks to further expand lending to small businesses. As an incentive for participating community banks to increase small business lending, their interest rate would be adjusted relative to the amount of their small business lending activity. It is estimated that community banks could use the $30 billion lending fund to leverage up to $300 billion in new loans to small businesses. Additionally, the small business lending bill enhances Small Business Administration (SBA) programs and provides $12 billion in tax breaks for small businesses. Below are some of those provisions.

Notable Improvements to SBA loan programs:
* Raises loan limits from $2 million to $5 million for SBA 7a loans.
* Raises loan limits from $1.5 million to $5.5 million for SBA 504 loans.
* Allows use of SBA 504 loans to refinance short-term commercial real estate debt into long-term, fixed rate loans.
* Provides a temporary increase in the SBA’s 7a loan guarantee to 90 percent.
* Eliminates fees for all SBA 7a and 504 loans through December 31, 2010.

Noteworthy tax breaks include:
* An extension allowing first-year depreciation for 50 percent of the basis of certain qualified property.
* Extension of Section 179 expensing and increase of the maximum allowance from $250,000 up to $500,000 for tangible personal property.
* For the first time, investors may expense up to $250,000 of qualified leasehold, restaurant, and 2010 retail property improvement costs.
* Self-employed individuals may deduct health insurance costs for themselves and their families when they compute their self-employment tax, but only for the 2010 tax year. Premiums continue to be deductible for income tax purposes.
* Removes employer-provided cellular phones from “listed property” so their cost can be deducted or depreciated like other business property, without burdensome recordkeeping requirements.

Vijay Yadlapati 202-383-1090, Megan Booth 202-383-1222, Daniel Blair 202-383-1089

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Conventional Residential Lending Report
Congress Extends Loan Limits

Before leaving town Congress passed legislation extending the loan limits for Freddie Mac and Fannie Mae (the GSEs) and FHA. Under the bill, which has been signed by the President, the current loan limits will remain in place through September 30, 2011. Extending the limits now (well before the December 31, 2010 expiration date) was necessary to avoid market uncertainty. NAR championed this issue through letters, visits, and a targeted FPC fly-in.

Megan Booth 202-383-1222, Tony Hutchinson 202-383-1120, Jeff Lischer 202-383-1117

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Federal Tax Report
New Reporting Requirements for Landlords

The Small Business legislation (HR 5297) recently signed into law includes a new revenue provision that will createadditional burdens for anyone who receives rental income. Under current law, property managers are generally required to provide Form 1099 on many of the expenditures they incur as part of their management of rental property. The new law expands this rule so that ANY person who receives rental income (not just property managers) will be required to report all expenditures of more than $600 to anyone from whom they purchase services.

The landlord will file IRS Form 1099 with the IRS and with the person who provided the service. Thus, any landlord who purchases such services as plumbers, yard or garden workers, electricians or any other service will be required to report payments any time the total expenditures/payments to a particular vendor in one year exceed $600. The new requirement goes into effect as a permanent feature of the law starting with expenditures on or after January 1, 2011.

NAR conducted a Call for Action opposing this proposal in May 2010. Congress nonetheless adopted it as part of the “pay fors” of the small business benefits the legislation created.

During 2010 Congress has enacted two different 1099 reporting requirements. A link summarizing those rules is attached.

NAR Issue Brief: Information Reporting IRS Form 1099

Linda Goold 202-383-1083, Samuel Whitfield 202-383-1131

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Last Updated: 10/01/2010 Bira de Aquino

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