Category Archives: REALTOR

What a Government Shutdown Means for REALTORS®

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2018 Federal Government Shutdown

What a Government Shutdown Means for REALTORS®

Congress has failed to approve a Continuing Resolution (CR) providing funding for most government operations. Therefore, spending authority for most of the government expired at midnight on January 19, 2018. Until legislation providing for funding is signed into law, many offices and programs of the federal government are now shut down. This means many, but not all, government programs, including some that impact federal housing and mortgage programs, have been suspended or slowed due to the lapse in government funding. The Office of Management and Budget (OMB) requires each agency to have contingency plans in place. The information below is based on NAR staff review of agency contingency plans for the current shutdown and past experience with previous shutdowns and near-shutdowns.

NFIP National Flood Insurance Program

An extension of the National Flood Insurance Program (NFIP) was attached to the CR that Congress failed to pass. This means that for the duration of the shutdown, the NFIP will not be able to issue new or renew flood insurance policies. However, existing policies will not be affected until 30 days after their expiration date. Homebuyers will also be able to assume existing policies and claims will continue to be processed and paid as usual. For more detailed information, FEMA’s latest guidance to insurance companies can be found here(link is external).

Federal Housing Administration

HUD’s Contingency Plan states that FHA will endorse new loans in the Single Family Mortgage Loan Program except for HECM loans. It will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities including paying claims and collecting premiums. FHA Contractors managing the REO/HUD Homes portfolio can continue to operate. Loss mitigation programs will continue to operate. You can expect some delays with FHA processing due to short staffing. (See the HUD Contingency Plan for Possible Lapse in Appropriations(link is external) for more info.)

Government Sponsored Enterprises

During previous shutdowns, Fannie Mae and Freddie Mac have continued normal operations, just as their regulator, the Federal Housing Finance Agency, since they are not reliant on appropriated funds. Fannie and Freddie are expected to announce relaxed procedures that would permit closings to go forward without federal verification of Social Security numbers and IRS tax transcripts. However, lenders would still have to obtain federal verification of both before the GSE’s will accept loans for purchase. Any relaxed requirements would not apply to loan modification re-financings.

Rural Housing Programs

The U.S. Department of Agriculture will not issue new rural housing Direct Loans or Guaranteed Loans. Scheduled closings of Direct Loans will not occur. Scheduled closings of Guaranteed Loans without the guarantee previously issued would be closed at the lender’s own risk.

VA Loan Guaranty Program

The VA loan guaranty program will be operational. The VA has determined that housing is an “essential service.” In addition, VA projects that “95.5% of VA employees would either be fully funded or required to perform excepted functions during a shutdown” (Download the VA Contingency Plan here(link is external) for more info.)

Internal Revenue Service

The IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts (Form 4506T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted. We have received indications that many loan originators are adopting revised policies during the shutdown, such as allowing for processing and closings with income verification to follow, as long as the borrower has signed a Form 4506T requesting IRS tax transcripts. On loans requiring a Form 4506T Fannie Mae and Freddie Mac are expected to adopt relaxed provisions allowing closings but subject to tax transcript verification before the GSE’s purchase the loans.

Social Security Administration

The Social Security Administration is closed and has suspended most customer service functions. According to the SSA Contingency Plan, verifying Social Security numbers through the Consent Based SSN Verification Service will also be suspended during the shutdown, a further complication for mortgage processing. As with IRS income verification, policies vary among lenders, with many choosing to exercise forbearance during the shutdown period subject to subsequent verification. Fannie Mae and Freddie Mac are expected to adopt policies to allow for closing subject to subsequent verification and before GSE purchase of the loan.

For more information contact:

Dean Henderson, CRMS
(661)726-9000

FHA Condo Loan Law Passed

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condos1It will soon get easier for condominium buyers to obtain Federal Housing Administration (FHA) loans.

Last week the Presdient signed into law H.R. 3700, also known as the Housing Opportunity Through Modernization Act, that will require regulators to rewrite several rules that determine FHA eligibility for condo developments.

Current rules disqualify buyers from seeking FHA loans if less than 50 percent of the condominium units are owner-occupied. The law lowers that requirement to a 35 percent owner-occupied ratio.

FHA also would have to relax a hard rule banning transfer fees when a condo is sold to allow condominium associations to collect fees that support community improvements. That policy is consistent with Fannie Mae and Freddie Mac’s existing policy.

The agency also must simplify its re-certification process. As it stands, developments must undergo a rigorous certification hurdle every two years.

FHA overseer, the U.S. Department of Housing and Urban Development, must make some of the changes within 90 days, according to the National Association of Realtors. Other changes will be proposed through rule making.

The Congressional Budget Office estimated that the law would boost FHA-guarantee lending by $8 billion between 2017 and 2021, as more condo buyers would be eligible.

The law will also allow the U.S. Department of Agriculture (USDA) to delegate to preferred lenders its approval authority for USDA loans, and the agency to charge a $50 fee to lenders per loan for using the automated underwriting system.

The bill was unanimously approved by the House in February and by the Senate earlier in July.

For more information call:
Dean Henderson, CRMS
Financial Independence Mortgage
(661) 726-9000

Fiscal Cliff Deal Impact on Real Estate Market

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H.R. 8

The mortgage industry can breathe a sigh of relief with the final fiscal cliff deal bringing back a popular tax break on mortgage insurance premiums and debt forgiveness for borrowers who go through a short-sale or some other type of debt reduction.

A topic that is still up for discussion and likely to surface later in the year is whether the popular mortgage interest tax deduction will be part of a long-term deficit reduction plan.

Still, the deal passed by the Senate and House on Jan. 1 is one that leaves room for hope in the housing market.

The American Taxpayer Relief Act of 2012 (H.R. 8) apparently extends a law that expired at the end of 2011, which allowed for the deductibility of mortgage insurance premiums, according to a research report from Isaac Boltansky with Compass Point Research & Trading. The law now applies to fiscal years 2012 and 2013.

“The law dictates that eligible borrowers who itemize their federal tax returns and have an adjusted gross income (AGI) of less than $100,000 per year can deduct 100% of their annual mortgage insurance premiums,” Compass Point said.

The following are more items in H.R. 8 that are of interest to housing market:

Business Tax Items

• Permanently extends the 2001/2003 tax rates for adjusted gross income levels under $450,000 ($400,000 single); good for small business and home builders, 80% of whom are pass-thru entities who pay taxes on the individual side of the code

• Permanently extends the Alternative Minimum patch; again, good for small business owners who are frequently at risk of paying AMT

• Permanently sets the parameters of the estate tax; positive for family-owned construction firms; codifies the 2010 $5 million exemption amount (indexed to inflation) and a 40 percent estate tax rate

• Extends present law section 179 small business expensing through the end of 2013; offers cash flow and administrative cost benefits for small firms

• Extends the section 45L new energy-efficient home tax credit through the end of 2013; allows a $2,000 tax credit for the construction of for sale and for-lease energy-efficient homes in buildings with fewer than three floors above grade

Homeowner Tax Items

• Extends through the end of 2013 mortgage debt tax relief; important rule that prevents tax liability from many short sales or mitigation workouts involving forgiven, deferred or canceled mortgage debt

• Deduction for mortgage insurance extended through the end of 2013; reduces the cost of buying a home when paying PMI or insurance for an FHA or VA- insured mortgage; $110,000 AGI phaseout remains

• Extends the section 25C energy-efficient tax credit for existing homes through the end of 2013; important remodeling market incentive, although the lifetime cap remains at $500.

• Reinstates the Pease/PEP phaseouts for deductions; for married taxpayers with AGI above $300,000 ($250,000 single), the Pease limitation reduces total itemized deductions by 3 percent for the dollar amount of AGI above the thresholds. This is a negative change for some high cost areas, but should only have small impacts. Example, a married household with $350,000 AGI would be $50,000 above the limit and must reduce their Schedule A total by $1,500 raising their taxes by about $500. Only a share of that would be due to the MID.

Multifamily Tax Items

• Extends the 9percent LIHTC credit rate for allocations through the end of 2013; absent the credit fix, the LIHTC program would suffer a loss of equity investment for affordable housing projects

• Extension through the end of 2013 of base housing allowance rules for affordable housing

Also noteworthy are items that are not in H.R. 8, including an itemized deduction cap or a defined fast-track tax reform process. Nonetheless, the return of the Pease rules suggests that items like the mortgage interest deduction will be under debate in 2013.

The resolution of the fiscal cliff now gives way to a series of mini-cliffs due to the need to raise the debt ceiling, establishing government spending levels and deal with the sequester. Over the long run, the future of housing demand, and interest rates in particular, will be affected by how Congress and the President solve the nation’s long-run deficit challenges.

For More Mortgage Information Contact:
Dean Henderson, CRMS
(661) 726-9000

The 2012 Election’s Impact on Our Real Estate Market

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How can we expect the results of the recent 2012 election to effect our local real estate market?  Real Estate is the engine that drives not only our local economy but the global economy as well.  How our elected officials handle the Real Estate industry will determine the direction of our economic prosperity.  Check out this analysis from the RE Source guys:

For more information on the Antelope Valley Real Estate Market call:
Dean Henderson, CRMS
661-726-9000