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LOCAL ISSUES
Affordable Housing |
Growth, Infrastructure and Revenue Allocation
STATE ISSUES
Mortgage Lender Licensing |
Property Owners’ and Condo Association Act | State Taxation
FEDERAL ISSUES
Banks in Real Estate |
Disaster and Flood Insurance |
FHA Loan Reform | Predatory Lending | Small Business Health Plans
LOCAL/STATE - AFFORDABLE HOUSING
POSITION:
The Northern Virginia Association of Realtors® (NVAR) supports initiatives to help solve Virginia’s housing problems. It is committed to the development and preservation of the nation’s housing stock and to preserving the dream of home ownership to the greatest number of people possible. NVAR is opposed to unreasonable land use restrictions that would lead to increased costs for housing.
DISCUSSION:
A continuing supply of adequate and affordable housing is necessary to sustain healthy economic growth in our region. According to Dr. Stephen Fuller of George Mason University, the region’s increasing job sprawl makes it more difficult to live near work. Thus, people are forced to move further out, once again perpetuating sprawl.
Several localities in the Washington metropolitan region have implementedpolicies that restrict development in a number of ways. Proposals to require large lots, for instance,serve to increase the cost of homes; force people to move further out which exacerbatethe problem of sprawl; and decreases the affordable housing stock. Requiring impact fees or cash profferson new development also increases the cost of already expensive housing. These restrictive tools raise the price of housing and diminish the opportunity for home ownership.
In the past seven years, the Washington area has experienced a dramatic increase in home prices.Despite the recent softening of the real estate market, the region’s housing prices remain 124% higher today than they were in 1999.
However, during the same period, the median income only rose 21%. In 2000, 64% of the housing stock was affordable to median income households; in 2005, the number dropped to just 7 percent. A median-income family would now need to spend 54% of their income to purchase a median-priced home.
The demand for housing in the area is estimated at 47,700 units per year. Even with rising inventory of existing homes, the current housing supply only stands at 32,600, ensuring that the housing affordability crisis will continue.
A worker in the City of Alexandria needs an annual income of $108,858 to afford a condominium at the average assessed value and an income of $58,160 to afford a two-bedroom market rate rental unit.
Arlington County estimates that of the 39,618 affordable units in the county, 2,648 rental units were lost in 2005 – roughly 6% of the multi-family rental stock. In addition, the 2006 average countywide rent increased by roughly $50 per month to $1,480, an increase of 3% over 2005.
The lack of affordable housing greatly affects service workers. In 2005 only 30% of Fairfax County’s police and firefighters lived in Fairfax. The average mortgage payment in the City of Alexandria ($2,265) consumes 81% of an elementary school teacher’s monthly income.
According to a survey conducted by the National Association of Realtors®, 62% of people say that they worry the cost of housing is getting so expensive that teachers, firemen, police and others on whom we depend cannot afford to live in many of the same areas where they serve, protect, teach, or work in.
STATUS:
Since 2004, NVAR has served on the Fairfax County Affordable Housing Preservation Action Committee. One recommendation approved by the committee was dedicating one penny of the local property tax rate to preserve existing affordable housing units. The Board of Supervisors included this measure in their FY 2006 and FY 2007 budgets and leveraged those funds to preserve over 1300 affordable units in the County.
The City of Alexandria also dedicated one penny of the property tax rate for affordable housing in their FY 2006 and FY2007 budgets. As of June 2006, the City has 181 affordable units pledged and $14.3 million in committed monetary contributions. Approximately 60 of these units are located in the Potomac Yard redevelopment project, which uniquely combines ADU units over a newly constructed City fire station.
Arlington County formed an Affordable Housing Roundtable in October 2005 and reached an agreement with developers on affordable housing contributions and density bonus guidelines. In 2006,the General Assembly approved this compromise in SB 273 (Whipple). The bill authorizes the County to establish affordable housing contributions from developers as a condition of the governing body's approval of a special exception application for residential, commercial, or mixed-use projects with a density equal to or greater than 1.0 FAR. Under the bill, the provisions of the ordinance would allow the developer to provide on-site Affordable Dwelling Units, off-site Affordable Dwelling Units, or a cash contribution to the County's affordable housing fund in lieu of providing the units.
Recently, the Arlington Partnership for Affordable Housing (APAH) purchased the Courthouse Crossing development which was expected to revert to market rate. The new affordability period will be 60 years. In addition, the 51 units that were originally market units will now be committed affordable units.
In 2007, the Virginia General Assembly approved HB 2010 (Suit)/SB 955 (Quayle). HB 2010/SB 955 rewrites Code section 15.2-2305 to increase density bonuses available to developers that provide affordable units to the locality. However, the General Assembly defeated SB 966 and SB 967, measures that would have dedicated revenues to the Virginia Housing Trust fund. Monies from this fund would have been used to support innovative housing projects and low and moderate income housing projects that are located in areas experiencing extreme shortages of such housing.
The 2007 General Assembly did approve study resolutions SJ 366 (Whipple), which directs the Virginia Housing Commission to study state incentives for developments that locate affordable housing near identified employment centers, high-density districts, and transit areas; and SJ 365, which will examine the feasibility of increasing the statutory options and tools that are available to localities to develop more innovative housing policies. Also passed was HB 2727 (Englin)/ SB 968 (Whipple), which allowelderly or disabled tenants in a conversion condominium the ability to assign their purchase rights to a housing authority or non-profit.
LOCAL/STATE – GROWTH, INFRASTRUCTURE and REVENUE ALLOCATION
POSITION:
The Northern Virginia Association of Realtors® (NVAR) supports quality growth and livable communities which ultimately depend on a strong economic sector, sound efficient land use, adequate infrastructure funding and protection of the environment.
NVAR will continue to work with state and local leaders to find solutions that sustain economic prosperity and that protect our high quality of life while addressing real concerns about infrastructure funding. NVAR supports the following:
- predictability in the development process,
- increased density and a mixture of uses in proximity to mass transit facilities and major arterials,
- access to open space and parks,
- affordable housing of various types and prices,
- transportation systems that enhance access to work and services,
- preservation of private property rights,
- market-driven and incentive-based approaches to managing growth, and
- balanced, equitable, and fair financing of infrastructure needs.
Moreover, NVAR recognizes the needs of Virginia’s localities to raise revenue to address critical infrastructure needs. This can best be accomplished by a restructuring of state and local taxes with more state revenue going to localities specifically earmarked for such infrastructure needs. Additional homeowner taxes (i.e. transfer, grantors or recordation taxes), authority for local adequate public facilities ordinances and other unnecessary growth-control measures would only serve to hinder the region’s economic prosperity.
DISCUSSION:
The imposition of growth controls would discourage corporate relocation and expansions, leading to a decrease in job formation, disposable income, and public revenue. This in turn causes graver shortages in the already much needed infrastructure funding for education, transportation and public safety services. Furthermore, growth controls reduce the amount of affordable housing stock forcing urban sprawl.
Many of the localities requesting the strongest “growth control tools” are the same localities spending millions of dollars to bring new businesses to their communities. Many of their proposals which would increase home owner taxes fail to recognize an important fact: home owners already pay a disproportionate share for infrastructure funding through the real property tax. Additional homeowner taxes unfairly target one segment of the population. A dedicated, broad-based funding method is the most equitable and effective method to address these needs as opposed to:
- ADEQUATE PUBLIC FACILITIES: In recent years, legislation has been suggested that would require a mandatory and more detailed Capital Improvement Plan (CIP) if local governments chose to “phase in” the pace of land development by amending their zoning ordinances. Any such legislation used as a no-growth tool would severely damage the economic stability of the real estate and economic development industries.
· IMPACT FEES: Impact fees are based on the premise that developers pay for infrastructure necessitated by new developments, impact fees generally are used to finance infrastructure -- such as roads, sewers, water, drainage, schools, parks and transit systems -- some government services and public services, and, to a lesser extent, affordable housing.
Local governments turn to impact fees to deal with the cost of providing services to a growing population, especially a growing school population. Builders merely pass the cost of impact fees on to the new homebuyers. It is unfair to tax one class of citizens; those who purchase newly constructed homes, for the cost of additionalservices. Additionally, impact fees do not provide a reliable source of income due to the instability of the real estate market. Perhaps most important, impact fees raise the cost of homeownership and reduce the number of people who can qualify for their first home.
· TRANSFER OF DEVELOPMENT RIGHTS (TDR’S): Mandatory TDRs are used by localities as a tool to control growth. A traditionalTDR program allows the use of development rights under local zoning ordinances to be “transferred” from a designated “sending” area to a designated “receiving” area. Landowners in the sending areas are given the opportunity to transfer their development rights to designated receiver parcels in other areas of the locality.
Within the last few years, the General Assembly has explored more narrowly-defined TDR programs. These programs would allow development rights to be voluntarily transferred between specific parcels within a locality. Such limited use parcels can be beneficial for directing development in high growth areas.
NVAR opposes any mandatoryTDR legislation that solely addresses the shifting of population from one area to another without addressing services, tax shifting, economic development and equitable compensation to the landowner.
STATUS:
Numerous transportation impact fee bills were defeated, including HB 1666 (Marshall) statewide, HB 1667 (Marshall) in Loudoun County and HB 1724 (Cole) statewide. The final transportation compromise, HB 3202, gives localities the authority to assess impact fees on by-right development within any locality that has established an urban transportation service district. In addition, the impact fees could be assessed for projects that benefit a development, not just projects that are attributable to the development.
Adequate Public Facilities bills HB 1718 (Marshall), HB 2814 (Sickles), SB 817 (Cuccinelli) and SB 1254 (Herring), which would deny rezoning applications in areas where there is inadequate road infrastructure, died in committee.
Locally, both Loudoun and Prince William Counties approved a one-year freeze on rezoning applications in late 2006. Loudoun also approved by a 5 to 4 vote a plan that reduces the total number of new homes that can be built in Loudoun’s western two-thirds from 37,000 to roughly half that.
NVAR again urges the legislature to reform Virginia’s tax system to give the localities a greater share of state revenues in order to help them deal with infrastructure needs.
STATE – MORTGAGE LENDER LICENSING
POSITION:
The Northern Virginia Association of REALTORS® (NVAR) supports legislation that would require licensing for mortgage loan officers in the Commonwealth of Virginia.
BACKGROUND:
In recent months, concern has risen that the financial well-being of thousands of American homeowners may be in jeopardy due to the growing demands of their mortgages. The danger for such homeowners is found in a combination of sagging home values and “exotic” mortgage loans that many buyers sought during recent years of rapidly rising home values. In the ensuing search for answers, the mortgage lending industry has been heavily scrutinized by lawmakers, the media and the public alike. Critics claim lenders have focused on their own bottom lines and not the best interest of their customers.
Various solutions to this problem have been proposed. One that has gained attention is a “suitability” standard, by which lenders would be required to show that a borrower can meet payments on a loan – both before and after any potential interest rate adjustments. Stockbrokers in the securities industry have been required to follow a suitability standard for decades; however, a suitability standard is subject to much interpretation and has not been tested for applicability to the mortgage industry.
A more straightforward approach is lender employee licensing. While mortgage brokers and mortgage lenders must be licensed in Virginia, other employees of licensed mortgage companies are not required to obtain their own license.
Loan officer licensing will increase the mandatory level of education for lending professionals, which will in turn guarantee lending professionals’ ability to adequately inform customers about loan products. It would also serve to build a higher level of trust between consumers, REALTORS® and the lending industry by ensuring that clients have been guided with sound financial advice.
In addition, loan officer licensing will give the Commonwealth the authority to suspend and revoke licenses for transgressions. Mortgage brokers also could be held responsible for the actions of their loan officers, thus increasing the motivation for brokers to adequately train and advise their employees.
Loan officer licensing will bring the mortgage lending industry more in line with the real estate sales industry, in which brokers and their sales agents must be licensed to practice.
NVAR believes that the mortgage lending industry is, by and large, led by the right ideals and that the prevalence of predatory lending, while dangerous, is restricted to a small contingent of ill-intentioned individuals. However, given the proliferation in the last decade of a wide variety of loan types, the need to ensure that consumers enter into in safe borrowing situations is ever more important.
STATUS:
The State of Maryland began licensing mortgage loan officers in 2005. Under this law, Maryland considers all loan officers paid by 1099 tax forms to be independent contractors not covered by the company’s business license. Mortgage companies are prohibited from hiring unlicensed independent contractors.
The Maryland Commissioner of Financial Regulation is charged with monitoring the activities of licensees and investigating complaints. The Commissioner is granted broad investigative and subpoena powers to allow for access to files and other documentation.
Though Virginia ranked 39th in the nation in the rate of foreclosures in 2006, NVAR urges the General Assembly to take a proactive approach to the predatory lending trend. With similar legislation in Virginia, the Commonwealth could join its neighbor and stand out as a leader on this issue.
STATE – PROPERTY OWNERS’ AND CONDO ASSOCIATION ACT
POSITION:
The Northern Virginia Association of REALTORS® (NVAR) supports a comprehensive review of the provisions of the Virginia Condominium Association Act (Condo Act) and the Property Owners’ Association Act (POA Act).
BACKGROUND:
These two acts govern the activities of homeowner and condo associations. They grant certain powers to associations regarding the appearance of the property, allowance of accessory structures or signs, resale documents and other matters. The law has been amended piecemeal over the years without any comprehensive review since its creation.
Recently, NVAR has been made aware of several association practices that would appear to overstep the authority granted in the POA and Condo Acts and serve only to enhance the revenue of the association. NVAR recommends that the General Assembly pay particular attention to these two new requirements.
The first such practice involves charging transfer fees. Homebuyers are charged these fees when first moving into the association which, to date, have ranged from $250 to $500. Raising assessments across the board seems to be a more equitable method of raising funds for community improvements that all enjoy, rather than charging only new residents.
The second practice requires real estate licensees to purchase For Sale signs directly from the association. Agents have already invested in signage that bears the company name, color and logo that can be used virtually anywhere else in Virginia. Rather than using signs that are readily available, agents must now order signs that are specific to the neighborhood and await their delivery. Since these signs are typically only available from the association’s designated vendor, they can also be significantly more expensive than the standard For Sale sign. Some associations are then willing to charge a “storage fee” to Realtors who would like to keep these signs at the association for future use.
STATUS:
Over the years, the General Assembly has made many changes to the POA and Condo Acts but has not conducted a comprehensive review of the regulations. NVAR is supportive of a General Assembly study of the Acts and will actively work with legislators to explore these topics.
STATE—STATE TAXATION
POSITION:
The Northern Virginia Association of Realtors® (NVAR) supports broad-based predictable funding methods that are equitable and efficient for state and local governments to raise revenue in order to meet critical infrastructure needs.
DISCUSSION:
The Commonwealth of Virginia and her localities continue to grapple with a shortage of funds to address critical infrastructure needs. NVAR supports a balanced approach to taxation and supports consideration of alternatives to reduce the impact of local governments’ reliance on property taxes.
NVAR opposes any increase in recordation fees or the imposition of a transfer tax. Increasing recordation fees places an additional burden on homebuyers and sellers at the time of settlement and places an unreasonable burden on real property owners. Where an increasing number of families already cannot afford to buy a home, and increase in costs is cause for concern, further exacerbating the state’s affordable housing crisis. Virginia and her local governments already extract hundreds of dollars in recordation taxes on a typical transaction for sales, financings, and refinancings.
In addition, real estate taxes are an unstable and unpredictable source of revenue. Home sales are cyclical, and when a downturn in the housing market occurs, revenues from recordation taxes fall, creating added pressure for a tax increase.
STATUS:
HB 3202, the transportation compromise bill from the 2007 General Assembly, provided Northern Virginia localities the ability to levy a series of local taxes and fees through the Northern Virginia Transportation Authority. Those fees include: a $.40 per $100 increase in the Grantor’s Tax, a 2% rental car tax, a 2% transient occupancy tax, a $10 vehicle safety inspection fee, a 5% sales tax on auto repairs, a $10 regional vehicle registration fee and an initial 1% new vehicle registration fee. Each locality would also have the option to raise a commercial real estate tax of up to $.25 per $100, a local vehicle registration fee or a real estate impact fee. The revenues from these fees would be dedicated to transportation and transit improvements in Northern Virginia if approved by those localities.
Other measures were introduced to provide localities with additional revenue. HB 2262 (Rust) would have returned 17.5% of income tax revenues back to the localities, while HB 2193 (Hull) would have equalized city and county taxing authority. Both bills failed. Also failing to pass was HB 2611 (Watts), which would have allowed localities to impose a local income tax at a rate of either 0.50% or 1% upon the Virginia taxable income of individuals, trusts, estates, and corporations provided the personal property tax rate does not exceed $0.01 per $100 of value on personally owned motor vehicles.
NVAR will continue to push for broad-based funding sources and oppose any additional increases in the state’s real estate fee structure.
FEDERAL - BANKS IN REAL ESTATE
POSITION:
The Northern Virginia Association of Realtors® (NVAR)maintains its long-standing position that supports the separation of finance and commerce, concerning federal banking.
DISCUSSION:
Pending before the House and Senate is NAR-supported legislation prohibiting the Federal Reserve Board and the U.S. Department of Treasury from authorizing real estate brokerage and management powers for national banks and financial holding company subsidiaries. The bills, H.R. 111 and S. 413, The Community Choice in Real Estate Act, are an outgrowth of a joint proposal issued January 2001 by the Fed/Treasury seeking to circumvent congressional intent and reclassify real estate brokerage (including relocation services) and property management as financial activities under the Gramm-Leach-Bliley Act (GLB Act).
In 1999, Congress passed reforms to the banking laws that removed prohibitions on the cross-ownership of banks, securities firms and insurance companies. The GLB Act did not authorize financial holding companies or financial subsidiaries of national banks to act as real estate brokers or managers, but permit banks to engage in any activity that is financial in nature or incidental to a financial activity. The GLB Act also required the Federal Reserve and the Treasury to agree on which new financial activities can be operated in financial holding companies and financial subsidiaries.
NVAR believes that if commercial banks were allowed to get into real estate, there would be a negative impact on local communities across America, putting both competition and the nation’s economic health at risk. The U.S. economy depends on a strong real estate market and a healthy banking industry. However, attempts by the Federal Reserve and Treasury to redefine real estate as a financial activity would have harmful effects resulting in less competition, higher costs for consumers, and unfair competitive advantages for banks.
STATUS:
As it has since 2002, Congress has enacted one-year bans, that have prevented the Treasury Department from issuing a final rule permitting national bank conglomerates to engage in real estate brokerage and management.
H.R. 111, the Community Choice in Real Estate Act, was introduced in January, 2007 in the House by its sponsors Congressmen Paul Kanjorski (D- Pa.) and Ken Calvert (R-Calif.). Fifty cosponsors were added on the first day of Congress.
Senate Companion S.413 is cosponsored by senators on both sides of the aisle: Jeff Bingaman (D-N.M.), Sherrod Brown (D-Ohio), Richard Burr (R-N.C.), Maria Cantwell (D-Wash.), John Ensign, (R-Nev.), Russ Feingold (D-Wis.), Tom Harkin (D-Iowa), Joe Lieberman (I-Conn.), Richard Shelby (R-Ala.), Bernie Sanders (I-Vt.) and Olympia Snowe (R-Maine).
On April 17, 2007, the U.S. Supreme Court announced a decision in the case of Watters v. Wachovia. This decision validates the Office of the Comptroller of the Currency’s preemption of state banking laws with regard to bank operating subsidiaries. NVAR continues to believe that Congress did not authorize the OCC to exempt these mortgage lenders and other state-chartered corporations, wholly owned by national banks, from complying with certain state laws.
This represents the sixth consecutive year that authorizing legislation has been introduced permanently barring national banks from engaging in real estate brokerage and management activities.
NVAR will continue the push to enact the Community Choice in Real Estate Act to ensure that consumers have as many choices as possible when purchasing a home.
FEDERAL – DISASTER AND FLOOD INSURANCE
POSITION:
NVAR supports Federal regulations to allow property owners and prospective buyers to purchase disaster and flood insurance to protect their property.
DISCUSSION:
The intensity of natural disasters in recent years has made the acquisition of adequate insurance for residential and commercial properties very difficult in some areas. Insurers are declining to write policies, canceling existing policies, and increasing premiums and deductibles on existing policies. The inability to obtain affordable insurance is a serious threat to residential real estate, impacting the purchase of single family homes, condos, co-operatives and rental units.
Without a federal natural disaster policy, all taxpayers will pay significantly more for future disasters (through government assistance to areas affected by future disasters) unless property owners in disaster-prone areas are able to obtain insurance. Congress’ comprehensive approach to natural disaster policy should also promote mitigation measures, ensure insurance availability and strengthen critical infrastructure.
In addition, the flooding events associated with the hurricanes in 2005 have brought renewed attention to the National Flood Insurance Program (NFIP). Claims from these hurricanes, expected to top $25 billion, exceed the total amount of claims paid in the history of the program, and have made the program fiscally unsound. Though not scheduled to be reauthorized until 2008, the NFIP may run short of funds to pay claims by September 2007.
A uniform policy for administering the flood insurance program should be adopted, eliminating the existing double standard which denies insurance coverage for certain flood prone areas, such as coastal barriers, wetlands, and other environmentally sensitive areas, yet retains coverage for the remainder of the United States subject to flooding.
The federal flood insurance program should also impose "full risk" premiums for flood insurance on repetitive loss structures that have repeatedly (i.e., more than two occurrences) suffered insured flood losses and have declined a reasonable offer of mitigation funding from FEMA, except in states which have been granted a federal exemption.
STATUS:
Rep. Barney Frank (D-MA), Chairman of the Committee on Financial Services, spoke at a March 15 press conference regarding natural disaster legislation. His appearance signaled support for two Florida freshmen, Reps. Ron Klein (D-FL) and Tim Mahoney (D-FL), and their efforts to develop legislation to be considered by the Committee on Financial Services at some point later this year. The Subcommittee on Oversight and Investigations of the House Committee on Financial Services held a hearing on March 28 regarding insurance issues including payment of claims after the 2005 hurricanes.
On March 26, Representatives Frank, and Judy Biggert (R-IL), Ranking Member of the Subcommittee on Housing and Community Opportunity, introduced legislation to reform the National Flood Insurance Program (NFIP). H.R. 1682, the "Flood Insurance Reform and Modernization Act of 2007," is similar to legislation that the House passed in June 2006 by a vote of 416-4.
FEDERAL-FHA LOAN REFORM
POSITION:
The Northern Virginia Association of Realtors® (NVAR) supports efforts to increase the Federal Housing Administration’s (FHA) conforming loan limits and reform the FHA mortgage insurance program.
DISCUSSION:
FHA mortgages are used most often by first-time homebuyers, minority buyers, low- and moderate-income buyers, and buyers who cannot qualify for conventional mortgages because of high loan-to-value or payment-to-income ratios. Despite the successes of the FHA program, too many potential homeowners in underserved populations continue to be left out from the American dream of owning a home.
FHA’s market share has dwindled because its loan limits, inflexible down-payment requirement, and fee structure have not kept pace with the current mortgage marketplace. If FHA had been a viable mortgage alternative, many homebuyers would not have explored non-traditional mortgages, many of which are very risky. The existing down payment requirement does not meet today’s mortgage realities, where most first-time homebuyers put down two percent or less.
FHA is not a useful product in high cost areas of the country because its maximum mortgage limits have lagged behind the median home price in many communities. As a result, working families such as teachers, police officers and firefighters are unable to find and purchase housing in the communities where they work.
In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005, down 95 percent from 109,000 in 2000. Raising the loan limit in high-cost areas from 87 to 100 percent of the conforming loan limit and in lower-cost areas from 48 to 65 percent of the conforming loan limit would allow additional homebuyers to take advantage of FHA loans.
Other problems arise through FHA’scurrent mortgage insurance structure, in which there is a standard premium amount for all borrowers regardless of credit history. Creating a new, risk-based insurance premium structure would allow FHA the flexibility to charge a lower premium for low-risk borrowers, and to charge higher-risk borrowers a slightly higher premium, while still protecting the soundness of its Insurance Fund.
STATUS:
Representatives Judy Biggert (R-IL) and Spencer Bachus (R-AL) introduced a bill identical to the one that passed the House last year by a vote of 415-7. H.R. 1752 would 1) increase the FHA loan limits nationwide and in high cost areas; 2) eliminate the 3 percent down-payment requirement on FHA loans; 3) extend the loan term to 40 years; 4) allow FHA to risk-based price their products; 5) eliminate the cap on the number of reverse mortgages that FHA can insure; and 6) streamline usage of the FHA condominium loan program.
On the same day, Representatives Maxine Waters (D-CA) and Barney Frank (D-MA) introduced their own bill, H.R. 1852, which includes similar reforms for loan limits, down-payment, loan term, reverse mortgages and condos, but puts some caps on fees can be charged to high-risk borrowers for FHA loans, and includes an Affordable Housing Fund using FHA reserves.
NAR testified on April 19, 2007, before the House Financial Services Subcommittee on Housing and Community Opportunity that the FHA must change to reflect consumer needs and demands, and provide many borrowers with a safer alternative to riskier mortgage products that are on the market today.
FEDERAL – PREDATORY LENDING
POSITION:
NVAR supports federal legislation or regulation that represents a balance for continued valid uses of subprime loans for borrowers that don't qualify for prime loans with lower interest rates, while avoiding abusive lending practices.
DISCUSSION:
Abusive and predatory lending practices are rapidly becoming a issue of concern for our nation's communities. While predatory lending is a constant in subprime markets, not all subprime loans are predatory. In fact, responsible subprime lenders have played an important role in helping millions of consumers achieve homeownership.
Unfortunately, some lenders abuse their role and take advantage of vulnerable borrowers by charging extremely high interest rates and loan fees, using aggressive sales tactics to steer consumers into unnecessarily expensive loan products, and advertising very low "teaser" interest rates that steeply increase after the first few years of the loan. The consequences of abuses in the subprime market are higher foreclosures leading to increased vacancy rates which, in turn, can cause all homes in the neighborhood to lose value.
There is a need for strong federal policies to address predatory lending in the subprime mortgage market. Responsible mortgage lenders and consumer advocates recognize the urgent need to curb abusive lending practices that harm homebuyers and homeowners. In that regard, federal legislation should promote the elimination of lender profit incentives, such as excessive points and fees on loans, while preserving state consumer safeguards.
NVAR supports stronger anti-predatory lending legislation and regulations, including many enhancements of the Home Ownership and Equity Protection Act (HOEPA). In addition, the National Association of Realtors® has developed brochures that agents can offer to clients that will help homebuyers understand their financing options.
STATUS:
On January 22, 2007, the FDIC issued a Financial Institution Letter on predatory lending. It reminds banks to treat consumers fairly, comply with legal requirements, and underwrite loans appropriately.
On March 8, 2007, the federal bank regulators published a proposed Statement on Subprime Mortgage Lending, inviting public comment by May 7, 2007. The proposed Statement addresses emerging issues, including appropriate underwriting standards, risk management, consumer education, and related topics.
In March 2007, the federal banking regulators published a proposed Statement on Subprime Mortgage Lending designed to improve underwriting, risk management, and consumer education by federally insured banks and thrifts. Comments on this proposal are due by May 7, 2007.
FEDERAL-SMALL BUSINESS HEALTH PLANS
POSITION:
Small business people and independent contractors struggle to find quality, affordable health care for their employees and families. The Northern Virginia Association of Realtors® (NVAR) supports small business health plan legislation that will give small business and self-employed workers the same right to quality, affordable health insurance as corporate employees and union members.
DISCUSSION:
The number of Americans lacking health insurance coverage has increased steadily in recent years to 46 million nationwide. More than half of the 46 million uninsured Americans are self-employed, own small firms, or work for small employers.
Rapidly rising health insurance premiums and small profit margins have made it increasingly difficult for small businesses and the self-employed to afford health insurance. Since 2000, small group health insurance premiums for single coverage have increased 72% and small group family coverage has increased 78%. While all small businesses have found it difficult to find affordable health insurance, REALTORS® have been even more challenged. Typically, REALTORS® are self-employed, independent contractors--the smallest of small businesses.
In most states, the self-employed are relegated to the state's individual insurance market, where applicants can be turned down for medical reasons and there are few limitations placed on the premiums that companies can charge. As a result, today, twenty-eight percent of the 1.3 million members of the National Association of REALTORS® - more than one in four REALTORS® - have no health insurance coverage. REALTORS® have cited cost as the primary reason they have no health insurance.
In addition, NAR has determined that many of the insured Realtors® today are insured by a spouse’s insurance plan.
Small Business Health Plans (SBHPs), also known as Association Health Plans, are one approach to stemming the rise in the number of uninsured workers. SBHPs will allow small businesses, including sole proprietor firms, through their professional or trade associations to purchase health coverage or, alternatively, self-insure. By allowing large numbers of firms to band together, small business owners and employees will benefit from the same economies of scale, purchasing clout, and administrative efficiencies enjoyed the successful Fortune 500 company and union insurance plans.
A survey released in March 2006 shows that 89 percent of voters favor legislation that would allow self-employed workers and small- business employees to band together through a trade or professional association to negotiate lower health insurance costs. The survey found that more than a third of all voters say they are dissatisfied with the health care system and a majority are dissatisfied with the cost of their health care plans and the lack of selection of health care plans that are available to them. In addition, the survey found that the 25 percent of those who work in America’s smallest companies (companies with less than 10 employees) are having the most difficulty with health care coverage. Nearly half of these voters say the health care system is not meeting the needs of them or their families and almost one quarter have gone without health insurance coverage at some point over the last three years.
By allowing associations to lower administrative costs and avoid some state regulations, the Congressional Budget Office estimates that small businesses obtaining insurance through SBHPs will enjoy premium reductions of between 9 and 25 percent. The CBO estimates that an additional 330,000 workers and their families would be able to obtain health insurance through SBHPs.
STATUS:
On Wednesday, March 15, 2006, the Senate Health, Education, Labor and Pensions (HELP) Committee approved S.1955, the Health Insurance Marketplace Modernization and Affordability Act of 2006. Cosponsored by Senators Enzi (R-WY) and Ben Nelson (D-NE), the bill authorizes the creation of fully-insured small business health plans (SBHPs) by trade associations. This was the first time in the 11 year history of smallbusiness/association health plan legislation that the Committee has voted on a SBHP bill.
In January 2007, Senator Edward Kennedy (D-Mass.), chairman of the U.S. Senate Health, Education, Labor and Pension Committee, and ranking member Michael Enzi (R-Wyo.) brought together various organizations, associations and individuals to talk about the health insurance challenges facing the nation today. Providing affordable health insurance was also a featured proposal of President Bush’s State of the Union Address on January 24.
On Friday, March 23, 2007, the Senate Budget Committee unanimously approved an amendment to the Senate Budget Resolution (S.Con.Res.21) that provides the necessary financial foundation for any proposal to create a market-based pooling plan for small business healthcare insurance. The amendment, sponsored by Senator Mike Enzi (R-WY) and cosponsored by Senators Ben Nelson (D-NE), Edward Kennedy (D-MA), Dick Durbin (D-IL), Blanche Lincoln (D-AR), Max Baucus (D-MT), Charles Grassley (R-IA), Ken Salazar (D-CO), John Thune (R-SD), and David Vitter (R-LA), creates a funding reserve fund that could be used in the event that the Senate develops a bill to allow market-based small business health care pooling plans. While this is not a legislative fix for the problems faced by the small business and self-employed community, it is a very public commitment by the major Senate players in the healthcare debate to work together on a new proposal to find healthcare coverage for small business.
We urge Congress to pass this legislation and level the playing field for affordable health insurance.
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