Congressional Update Housing and Community Development 110th Congress

1
Congressional UpdateHousing and Community
Development 110th Congress Looking Ahead

• September 2008
• Robert A. Rapoza
• Rapoza Associates
• 1250 Eye Street, NW
• Washington, DC
• Phone [phone]
• Email bob_at_rapoza.org

2
Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• GSE Reform
• 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

3
Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• GSE Reform
• 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 

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Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• National Housing Trust Fund
• Grants to states for construction, maintenance
  and preservation of affordable rental housing for
  extremely low and very low-income 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

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Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• Capital Magnet Fund
• 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

6
Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• FHA Modernization
• 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

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Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• FHA Modernization
• 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

8
Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• Emergency Assistance to Distressed Communities
• 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

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Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• Emergency Assistance to Distressed Communities
• 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

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Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• Housing Preservation
• 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.

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Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• Tax-Related Provisions
• 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

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Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• Housing Tax Incentives
• 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

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Housing and Economic Recovery Act of 2008(P.L.
110-289) Summary of Key Provisions

• Housing Tax Incentives
• 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

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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

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Federal Opportunities in FY09

• CDFI Fund Fiscal Year 2009 Round (54 million)
• October 1, 2008 CDFI Certification Application
  deadline
• October 29, 2008 CDFI Program Application
  deadline
• OCS CED and JOLI awards
• FY09 announcement later this year
• Green Jobs Act

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Candidates on Community DevelopmentSen. Obama
Will Increase Access to Capital for Underserved
Businesses

• strengthen SBA programs that provide capital to
  women and minority-owned 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)

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Candidates on Community DevelopmentSen. McCain
Will Foster Rapid and Clean Economic Growth

• 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