Transcript Housing and Economic Recovery Act of 2008 Summary of Key

Congressional Update
Housing and Community Development
110th Congress & Looking Ahead
September 2008
Robert A. Rapoza
Rapoza Associates
1250 Eye Street, NW
Washington, DC
Phone: (202) 393-5225
Email: [email protected]
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
GSE Reform
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Creates an independent Federal Housing Finance Agency
Director to regulate GSEs Fannie Mae and Freddie Mac
Raises GSE loan limits for single family homes up to 115%
of the local area median home price
Raises the permanent loan limit from $417,000 to $625,500
Includes duty to serve underserved markets, rural areas
Requires each entity to develop loan products and flexible
underwriting guidelines to facilitate a secondary market for
mortgages for very low, low, and moderate income families
located in rural areas
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
GSE Reform
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Grants authority to Secretary of the Treasury to increase
existing line of credit to Freddie Mac and Fannie Mae for the
next 18 months
Treasury may buy stock in Freddie Mac and Fannie Mae to
provide confidence in the GSEs and stabilize housing finance
markets. No spending would occur unless the Secretary
certifies that there is an emergency that requires immediate
action. If those conditions are not met, there would not be
any increase in the deficit as a result of the legislation
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
National Housing Trust Fund
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Grants to states for construction, maintenance and preservation
of affordable rental housing for extremely low and very lowincome individuals and families in rural and urban areas
Not more than 10% may be used to increase homeownership for
extremely low and very low-income families
All assistance must benefit very low-income families (incomes
not greater than 50% AMI), requires at least 75% of assistance
to benefit extremely low-income families (incomes not greater
than 30% AMI)
HUD must establish a needs-based formula for grant distribution
within 12 months and all funds must be used or committed
within 2 years of availability
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
Capital Magnet Fund
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Will be capitalized with 35% of the affordable housing
allocation provided by set aside of GSE profits
Grants may be used for development, preservation,
rehabilitation or purchase of affordable housing for extremely
low, very low and low-income families
Eligible grantees include certified CDFIs and non-profit
organizations with development or management of affordable
housing as one of their principal purposes
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
FHA Modernization
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Expands FHA program, provides authority to insure up to
$300 billion in mortgages to keep at least 400,000 families
from losing their homes
To participate, lenders and mortgage investors must take
losses by reducing the loan principal
In exchange for an FHA guarantee on the mortgage,
borrowers must share any profit from the resale of a
refinanced home with the government
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
FHA Modernization
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Expands opportunities for seniors to tap into equity in their
home through FHA reverse mortgage loans
Increases loan limit for the program, reduces and caps lender
fees for reverse mortgage loans
Strengthens consumer protections by limiting the sale of other
financial products in conjunction with FHA reverse mortgage
loans
Protections for taxpayers’ dollars include higher refinancing
fees that establish an FHA reserve to cover possible losses
from defaults on the government-backed mortgages
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
Emergency Assistance to Distressed Communities
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$180 million to counseling intermediaries for pre-foreclosure
counseling
$3.92 billion in CDBG funds to communities hardest hit by
foreclosures
Funds go to State and local governments to purchase foreclosed
homes, at a discount, and rehab or redevelop property for resale
or rent
 financing mechanisms can include loan loss reserves and
shared-equity loans for low- and moderate-income
homebuyers
 land banks for foreclosed homes, demolition and/or
redevelopment of blighted structures or vacant property
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
Emergency Assistance to Distressed Communities
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Priority to communities with greatest need:
- greatest % home foreclosures
- highest % homes financed by subprime loans
- greatest likelihood of rise in rate of home foreclosures
Foreclosed and rehabilitated homes to be sold or rented to
moderate-income individuals and families whose incomes do
not exceed 120% of the area median income.
At least 25% of the funds targeted to house low-income and
very low-income persons and families whose incomes do not
exceed 50% of area median income
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
Housing Preservation
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Amends Housing Act of 1940 to provide that there be timely
approval of requests to transfer ownership or control of
Section 515 housing projects that also utilize Low Income
Housing Tax Credits or tax exempt housing bonds
USDA will consult with IRS to simplify procedures that need
to be taken by multifamily projects where both agencies
provide assistance.
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
Tax-Related Provisions
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First-time homebuyer refundable tax credit 10% of purchase
price, up to $7,500 (to be paid back over 15 years).
- The credit phases out for taxpayers with adjusted gross
income $75,000 or more ($150,000 or more for a joint return)
Taxpayers that claim standard deduction receive up to an
additional $500 ($1,000 for a joint return) for property taxes
in 2008
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
Housing Tax Incentives
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Increases by $0.20 the per capita amount of LIHTCs each
state can allocate for 2008 and 2009
Increases the small state minimum by 10%
Adopts fixed 9% credit rate through 2013 for new
construction and rehab projects not financed by tax-exempt
bonds
Allows state agencies to designate particular buildings for
130% basis increase treatment as if they were in difficult
development areas
Housing and Economic Recovery Act of 2008
(P.L. 110-289) Summary of Key Provisions
Housing Tax Incentives
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Energy efficiency and historic nature added to project criteria
to be taken into account when making credit allocations
Modifies rural area median income definition to be greater of
area median income or national non-metro median income
Temporarily increases volume cap for tax-exempt mortgage
revenue bonds by $11 billion; bonds may be used to refinance
subprime loans, provide loans to first-time homebuyers and to
finance the construction of low-income rental housing
Eliminates recapture bonds; eliminates “below-market federal
loans” from definition of a federally subsidized property
Exempts Housing Bonds from AMT, allows interest on rehab
credit and LIHTC to be exempt from AMT
Status of FY 2009 Appropriations Bills
House Committees have approved 5 of 12 spending bills
Commerce-Justice-Science
Homeland Security
Energy & Water
Financial Services
 Military Construction-VA – passed the House 8/1
Senate Committees have approved 9 of 12 spending bills
Ag-Rural Development-FDA State & Foreign Ops Homeland Security
Commerce-Justice-Science
Labor-HHS-Ed
T-HUD
Energy & Water
Mil-Con-VA
Financial Services
Federal Opportunities in FY09
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CDFI Fund Fiscal Year 2009 Round ($54 million)
October 1, 2008 CDFI Certification Application deadline
October 29, 2008 CDFI Program Application deadline
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OCS: CED and JOLI awards
FY09 announcement later this year
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Green Jobs Act
Candidates on Community Development
Sen. Obama Will: “Increase Access to Capital for
Underserved Businesses”
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strengthen SBA programs that provide capital to women and minorityowned businesses, outreach programs that help business owners apply for
loans, and encourage growth and capacity of these firms
strengthen Community Development Financial Institutions (CDFIs), which
are engaged in innovative methods to provide capital to urban businesses
establish federal investment program to help manufacturing centers
modernize and help Americans learn the new skills they need to produce
green products
invest in job training and transition programs to help workers and
industries adapt to clean technology development and production
create competitive grant program for states and localities that implement
energy efficiency building codes
create a Green Jobs Corps to match disconnected and disadvantaged youth
with job skills for a high-growth industry
(Source: www.barackobama.com)
Candidates on Community Development
Sen. McCain Will: “Foster Rapid and Clean Economic
Growth”
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energy policies will rely on setting good incentives for firms, entrepreneurs,
and households, a portion of cap-and-trade auction proceeds will reduce
impacts on low-income American families
keep homeowners facing foreclosure in their homes through “HOME Plan”
Holders of a sub-prime mortgage taken after 2005 who live in their home
(primary residence only), can prove creditworthiness at the time of the
original loan, are either delinquent, in arrears on payments, facing a reset or
otherwise demonstrate that they will be unable to continue to meet their
mortgage obligations, and can meet the terms of a new 30 year fixed-rate
mortgage on the existing home can trade burdensome mortgages for
manageable loans that reflects home's market value
bolster groups like Neighborworks America that provide mortgage
assistance to homeowners in their communities