Realtors® Oppose High Down Payment Requirement for Qualified Residential Mortgage Exemption

Washington, March 29, 2011

High down payment requirements being proposed by federal regulatory agencies as part of the upcoming rulemaking under the Dodd-Frank Wall Street Reform and Consumer Protection Act will unnecessarily burden homebuyers and significantly impede the economic and housing recovery, according to the National Association of Realtors®.

Six agencies, including the Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency, and the U.S. Securities and Exchange Commission, are developing a proposed risk retention regulation under the Dodd-Frank Act that requires lenders that securitize mortgage loans to retain 5 percent of the credit risk unless the mortgage is a qualified residential mortgage (QRM); FHA and VA mortgages would also be exempted. The purpose is to create strong incentives for responsible lending and borrowing.

“As the leading advocate for home ownership NAR supports a reasonable and affordable cash investment requirement coupled with quality credit standards, strong documentation and sound underwriting,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “A narrow definition of QRM, with an unnecessarily high down payment requirement, will increase the cost and reduce the availability of mortgage credit, significantly delaying a housing recovery.”

NAR believes that Congress intended to create a broad QRM exemption from the 5 percent risk retention requirement to include a wide variety of traditionally safe, well-underwritten products. Congress chose not to include a high down payment among the criteria it specified in the Dodd-Frank Act to guide the regulators in defining a QRM. Strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk.

“We need to strike a balance between reducing investor risk and providing affordable mortgage credit. Better underwriting and credit quality standards have greatly reduced risk. Adding unnecessarily high minimum down payment requirements will only exclude hundreds of thousands of buyers from home ownership, despite their creditworthiness and proven ability to afford the monthly payment, because of the dramatic increase in the wealth required to purchase a home,” said Phipps.

The definition of QRM is important because it will determine the types of mortgages that will generally be available to borrowers in the future. Borrowers with less than 20 percent down could be forced to pay higher fees and interest rates, up to 3 percentage points more, for safe loans that otherwise do not meet too narrow QRM criteria.

NAR is concerned that a narrowly defined QRM will also require severe tightening of FHA eligibility requirements and higher FHA premiums to prevent huge increases in its already robust share of the market, adding additional roadblocks to sustainable home ownership.

“Saving the necessary down payment has always been the principal obstacle to buyers seeking to purchase their first home. Proposals requiring high down payments will only drive more borrowers to FHA, increase costs for borrowers by raising interest rates and fees, and effectively price many eligible borrowers out of the housing market,” said Phipps. “We strongly urge the regulators to consider the negative consequences of setting onerous limits on the availability of credit.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.


Liberty Quarry Final Environmental Impact Report is Released

The Riverside County Planning Department has released the Final Environmental Impact Report (FEIR) for Granite Construction’s proposed Liberty Quarry Project south of Temecula. At 8,500 pages, the document is easily half again as long as the draft EIR released last year. I haven’t slogged through the report yet but preliminary indication is that it backs up the draft EIR findings that Riverside County would benefit economically and environmentally from the proposed quarry location.

That will have no impact whatsoever on quarry opponents who argue that the blasting will disrupt the area, reduce property values, contribute to earthquakes, and produce clouds of deadly silica dust that will entomb our region. To say it’s been an impassioned argument over the past few years would be an understatement. Sadly, it has pitted neighbor against neighbor, city against county and logic against emotion more than once. The Letters to the Editor section of the local paper would dry up if not for the continual missives pro & con on this single subject.

I posted information on this two years ago after our Directors had visited another quarry site and the SDSU Preserve area adjacent to where the new quarry would be located. The Southwest Riverside County Association of Realtors® has not taken a position on the quarry project but has attempted to bring accurate information to our members so they have some background should they choose to make their own informed decision. You can get that background here:

Liberty Quarry & Private Property Rights

SDSU Showcases the Santa Margarita Watershed

Public hearings have been scheduled for the project on April 26 and May 3 at Rancho Community Church (31300 Rancho Community Way) in Temecula starting at 4 pm.

The report is available for your perusal at: Liberty Quarry Final EIR

Few will actually read it, everybody will be quoting the ‘facts’ as they interpret them. And no matter which side prevails in the County’s final decision, we may be assured this will tie up the courts for several more years. Some people have more solid granite between their ears than would be mined from the Liberty Quarry in the next 75 years.

Attack!


NAR Realtor Party Political Survival Initiative – A Penny for your Thoughts.

It’s entirely probable you’ve heard about the new NAR Realtor® Party Political Survival Initiative introduced at the AE Institute this past Sunday. While NAR has not made a broad announcement of the program yet, our AE’s are returning from their meetings this week with information on the initiative and word has been getting out from Inman, from the blogs, and of course on Realtor.org itself.

According to NAR, the initiative was launched partially in response to last years Supreme Court decision, the celebrated Citizens United Case. As forecast, that decision stands as a game changer in the lobbying world granting corporations the same rights as individuals to contribute to political campaigns. The price of doing business has just gone up and if you want to stay at the table with the serious players, you’d better step up your game.

That’s what NAR is proposing by instituting a mandatory $40 dues increase effective 2012. The issue will be voted on at NAR’s Mid-Year Legislative meetings in May.

The following is a post by NAR stating their reasons for launching the initiative. I would encourage you to read it. I have also included the slide show presented to our AE’s in Dallas this past Sunday. I have no doubt this will be hotly debated as we approach our May meetings and I encourage you to make you opinions knows to me, to your local associations as well as your state and NAR Directors. Make sure to note that 2/3 of the funds raised will be channeled back to your state and local associations for local purposes.


Why did NAR create the REALTOR® Party Political Survival Initiative?
•  In January of 2010, the Supreme Court ruled in the case of Citizens United vs. the Federal Election Commission.
•  The ruling states that corporate dollars—so-called soft dollars—can be used to fund independent expenditure campaigns.
•  This not only changes the way elections are financed at the national level, but it also overturns restrictions that allowed only hard dollars—those funds contributed for political purposes by individuals, rather than corporations—to be used in 23 states.
•  This means political fundraising as we have known it for the past 100 years just shifted dramatically.
•  Corporate funds/dues can now be used to shape opinions about candidates in ALL 50 states.
•  It is a game changer of gigantic proportions.
•  It is as if the goal posts on a 100 yard football field were expanded to now cover 140 yards.
•  In order for “The Voice for Real Estate” to have the impact it has had for the past 100 years in terms of political advocacy, the REALTOR® organization is stepping up its game.
•  No one has spoken with more power or as passionately about protecting private property rights and fighting for opening the door to the American Dream of Home Ownership than the REALTOR® Family.
•  To maintain and grow our political power in this new landscape, NAR launched the REALTOR® Party Political Survival Initiative.
•  The REALTOR® Party Political Survival Initiative did not just happen overnight.
•  It was the result of nearly a year of careful study and consideration.

What does the REALTOR® Party Political Survival Initiative mean for members?
•  The proposal is for a dedicated dues increase of $40.00.
•  The increase would take effect in the 2012 budget year.
•  Because it is “dedicated” to this initiative, it would be used exclusively to fund political advocacy efforts.
•  In the past, NAR has already contributed funds to this initiative out of its operating budget.
•  But to undertake the initiative at this level and give it a best chance for success, greater additional funding is needed.
•  The increased dollars will be dedicated solely to advocacy purposes as outlined by the Political Survival Initiative.
•  If this dues increase is approved, over 50% of NAR budget would be devoted to political advocacy, which consistently ranks among members as the #1 benefit they receive from NAR.

What are the benefits of the Political Survival Initiative?
•  The most powerful benefit is it will keep the REALTOR® organization as one of the most influential advocacy groups in America.
•  There are monumental issues coming down the pike that will affect members in their daily businesses, such as the future of mortgage finance and keeping housing affordable in America.
•  We must have the power to shape this pivotal moment for the American Dream of Home Ownership.
•  Most importantly, these dollars will be available to state associations and local boards.
•  2/3rds of the dollars raised will be returned back to states to be used in support of local candidates and issue campaigns, and for other political advocacy needs—to help shape the opinions of candidates on real estate-related issues as they work their way up as elected leaders.
•  It will combine NAR funds with state/local funds to increase our political power
•  It will create early relationships with state and local lawmakers/policymakers
•  It will shape the political make-up of state or local governing bodies.
•  NAR President Ron Phipps often comments that “now is our time.”
•  With this initiative, REALTORS® are seizing the moment for home ownership.
•  We are doing this NOT ONLY because of the Citizens United Supreme Court decision, but because our core competency is our grass roots advocacy; it’s where we need to be investing today so our future advocacy efforts will be successful tomorrow.
•  We need to be grooming our “REALTOR® Champions” at the state / local levels now, before some of them progress to become elected leaders at the federal level.
•  The political press in Washington has already noted the emerging clout of the REALTOR® Party.
•  A recent article in Politico said: “REALTORS®… are going to want to be politically effective, and a large measure of their influence is that they are present everywhere.”
•  Now is our time to seize the day.


It's the Spending, Stupid

By Jon Coupal

“Government is like a baby,” Ronald Reagan was fond of saying. “An alimentary canal with a big appetite at one end and no sense of responsibility at the other.”  If the former California governor were observing Sacramento today, he would probably add that our state government functions more like “triplets,” and has been doing so for more than ten years.

Back at the beginning of the millennium, the California treasury was overflowing due to capital gains tax receipts from what has become known as the “dot.com bubble.”  Almost everyone in the state understood that these tax producing profits were the result of a short-term business cycle, and the excessive flow of tax revenue would not be a permanent condition.  Unfortunately, there were a small group of Californians who did not understand these basic economic principles, including the majority in the state Legislature and Governor Gray Davis.

These officials responded to the increased revenue by spending it all and committing Californians to pay for expensive long-term programs, like radically increased pensions for government workers, that now have state and local governments facing nearly a half-trillion dollars in unfunded liabilities.

This profligate approach to governing was a contributing factor to the successful recall of Davis.  However, governor Schwarzenegger, and the party-hearty lawmakers that continued to dominate the Legislature carried on like there was never a problem.  When the state came up short, they used accounting gimmicks that allowed them to carry on spending as if there were no tomorrow.

Between 2003 and 2007, spending increased by one-third.  Then the housing bubble burst, and these same suspects imposed the largest tax increase in the history of all 50 states.  They had learned their lesson, they said, and pledged to taxpayers they would use the two years of massively higher taxes to buy time to reorganize and reform their spending ways.  Two years later, and in spite of California families having paid about two-thousand dollars in extra taxes, the state is now facing a $26 billion shortfall.  The “spendaholics” have fallen off the wagon, again.

All of this could have been avoided if the malefactors, who clearly lack self-control, had been compelled to work under a hard spending cap.

Because the politicians that control the Legislature and our current governor – the Department of Finance shows that Governor Brown’s budget will grow 31% by 2015 – are still in a state of denial regarding spending, there is an urgent need to take measures to restore a strict spending limit on state government.

This is why Senator Tony Strickland has introduced Senate Constitutional Amendment No. 10, sponsored by the Howard Jarvis Taxpayers Association, that would impose a firm spending cap on lawmakers.  The expenditure limit includes General Fund and special funds, and contains no exemptions for education or local government funding.  It creates a reserve of up to 10% of spending; this reserve can only be tapped to backfill revenue shortfalls in the current budget year and to fund non-fiscally related emergencies.  Funds could only be used by a Declaration of the Governor and two-thirds vote of the Legislature.  Half of the excess revenues beyond the 10% cap would be used to pay off existing debt.

Back when Bill Clinton was running for president, a big sign that read, “It’s the economy, stupid” was placed on his campaign office wall.  In an ideal world every member of the Legislature would be required to post a sign on their office wall that said, “It’s the spending, stupid.”  Sen. Strickland’s SCA 10 is the taxpayers’ way of sending this message.


Short Sale Webinar Presented by Bank of America

Join us on March 23 at 1 p.m. or March 24 at 10 a.m. for a free webinar on Bank of America’s Cooperative Short Sale Program.  Bank of America will be rolling out its new program for expediting short sales, as presented by B of A’s Consumer Credit Executive Kimberly Dawson.  Topics to be covered in this one-hour session include:
How cooperative short sales will expedite the short sale process;
What the agent’s role will be;
Whether B of A will pay relocation assistance; and
Who the agent can contact for assistance or to escalate the process.
Space to attend this webinar may run out very quickly, so register now at http://www.car.org/education/webinars/bofawebinars/.  Once you have registered, you should immediately receive a confirmation email, which you will need to join the webinar on March 23 or 24.  If you have any questions, please contact C.A.R.’s Special Projects Coordinator Lindsey Moss at (213) 739-8217 or email her at lindseym@car.org.


MID Under Attack Soon? Watch your email inbox.

The Mortgage Interest Deduction (MID) may be under attack again.  As the 112th Congress struggles to finalize a budget plan for this year, everything is back on the table.  House Speaker John Boehner (R-OH) recently stated that MID for second homes is becoming harder and harder to justify in these
difficult times.  So might be the MID for homes greater than $500,000.

Now is the time for REALTORS® to act!  On March 28, an all member Call for Action (CFA) will be launched.  This CFA will ask REALTORS® to contact their House Members to urge them not to touch the MID in any legislative or budget proposal.  It will also urge them to sign on to H.Res. 25 expressing
the sense of Congress that the current Federal income tax deduction on interest paid on debt secured by a first or second home should not be further restricted.

First, be on the lookout early next week for the CFA (either from your broker or from NAR).  Second, respond immediately to the CFA.  Third, spread the word and ask your colleagues to respond too.  Any House budget action will be quick.  MID is on the line.  Now is not the time to sit back and let
someone else make the decisions.


CAR asks legislature to let the citizens decide.

C.A.R. today sent a letter to Gov. Jerry Brown and members of the California Legislature asking them to place the Governor’s budget framework on the June ballot.  The Governor’s budget framework calls for a $26 billion solution – half in the form of budget cuts and half in the form of revenue from the extension of existing taxes.

C.A.R. has not taken a position in support of tax extensions, but is only in support of putting the tax extensions on the June ballot to let California voters decide.

For more information, contact Christopher Carlisle, C.A.R.’s legislative advocate at (916) 492-5200.

I don’t know if I agree with today’s move by CAR – but they didn’t ask me. However, it appears to be in line with recent polls showing the majority of Californians appear to prefer having a voice in this latest budget skirmish. 61% believe the issue of  Gov. Browns tax & cut budget should be decided by a vote of the people. Even 56% of Republicans believe this should be the case although 61% of Republicans also say they would vote
against the tax measure. A majority of voters also indicate they would not vote for any new or increased taxes – but the survey didn’t drill right down to whether the majority would vote to extend the currently increased taxes for another 5 years.

While I am not in favor of the tax increase that was foisted on us two years ago and is now scheduled to expire, if the few Republicans who have not backed themselves into a corner with the No New Tax pledge can negotiate some meaningful cuts – not just the lame-ass cuts proposed by the Governor, it’s worth bringing to a vote of the people. Without the current taxes being extended, there will be foul nastiness ahead for our state. The few real cuts that have been proposed as well as any future cuts, would be to programs that probably should not be cut. The retirement boondoggle, entitlements and growing employment at the state level will not be impacted. Education, police and parks will be.

Whats worse, if the current tax structure is not extended for another 5 years, in addition to the worthless and superficial cuts that may occur, we would likely face a slew of new taxes disguised as fees, levies and outright thievery from our cities and counties. Many of those taxes would also be aimed at independent contractors, small business owners and other housing related areas. I mean, face it folks, our state is broke and should be declared bankrupt if such a thing were allowed and if we had any politicians with enough balls to do it. Unfortunately it’s not and we don’t.

Further, if the tax extension is placed on a special ballot I believe it would pass. It would be supported by massive spending by the  public employee unions, teachers, nurses, etc, as well as the vast entitlement population who live on the public dole. California has reached a tipping point where we have more takers than  givers, people who rely on the system for their income whether it’s direct payroll, retirement or welfare. When that dynamic exists in a state without the political will to address it, the result will inevitably result in those voters making sure their nest continues to be lined as long as the rest of us can pay for it.

Of even greater concern, and something I believe is another inevitability, taxes will get placed on the ballot with the promise of real and substantial cuts to programs and entitlements. The taxes will get passed but the cuts will not occur. We already saw what happened a few years ago when Arnold worked up the machismo to try to tackle a few state employment issues. He was sued under the table  and no jobs were lost. Even the few cost reductions that might have been realized by the imposition of a few months of furlough days was largely negated by the lawsuits necessary to defend the governors right to impose them.

So we’ll get our existing higher taxes extended another five years, the $12 Billion in cuts will not materialize, there will be a call for more ‘fees’ on services and any other way to wring the last few bucks out of the business class and the paying populace and next year we’ll be right back here trying to figure out why we’re another $25 Billion in the crapper.

Ahhh California.

On the upside, it is almost 80 today and the sun is shining beautifully. Had a great lunch with my Congressional Rep on an outdoor patio and it’s almost time to pour a cold one. What? Me worry?


War Games – Gov. Browns Budget Vote Scheduled today.

War games

Mar 16, 2011
Tensions in the Capitol increased dramatically as the first floor votes loomed on a budget crafted by Gov. Jerry Brown and majority Democrats. But as the negotiations intensified, the voice of the people — a cliche, but a nice cliche — was heard: Most Californians want a chance to vote on the budget, a new poll shows.

From the Chronicle’s Wyatt Buchanan: “A strong majority of California voters want a special election and support Gov. Jerry Brown’s plan to shrink the state budget deficit by extending temporary tax increases for five more years, according to a survey by UC Berkeley and the Field Poll. Most California voters, however, would not support paying new or higher taxes to help close the state’s $26.6 billion deficit.”

“The poll showed 61 percent of all voters surveyed said they were in favor of calling a special election, and 56 percent of Republican voters surveyed said they wanted that, too. However, most of the Republicans – 61 percent – said they would vote against the tax proposal.”

More from the poll: About nine out of 10 lawmakers are either conservative or liberal, but only about half of Californians fall into those cagtegories, notes the Bee’s Dan Walters.

“That’s another way of saying that the state’s moderate Democrats, centrist Republicans and independent voters – half of the electorate – have only scant representation in the Capitol.”

“The stark contrast between the political dynamics inside the Capitol and the reality outside its impervious granite walls is one of the major impediments to timely and effective political decision-making. Those inside the building engage in ideological gamesmanship. Those outside just want politicians to do their jobs, even if that requires compromise.”

The eternal push by some Republicans to rewrite the state’s principal environmental law, the California Environmental Quality Act, is gaining new momentum as five Republicans are demanding CEQA changes — the same Republicans whose votes Brown is courting for the state budget.  The LA Times’ Shane Goldmacher and Evan Halper have the story.

“Sweeping changes in the California Environmental Quality Act would stand little chance of approval through the normal legislative process, which Democrats — environmentalists’ usual allies — control. But the governor’s budget cannot pass without some Republican votes, and GOP lawmakers see an opportunity to win long-sought concessions.”

“Environmentalists expressed outrage at the Republicans’ bid. Bill Magavern, director of Sierra Club California, said that what the legislators want amounts to a “wholesale gutting” of the law.”


FHA's Stevens Departs for MBA Greener Pastures

stevens

In the past I have written favorably about FHA Commissioner David Stevens. I even got a comment on one blog from Stevens thanking me for my post. I’ve attended several talks by Stevens, a couple webinars and phone chats, etc. I like Dave – think he’s done a good job keeping the FHA out of bail-out territory, adjusting some  policies – like the 90 day flip rule, etc.

Well, the end of this month what will be a big loss for the FHA will become a big gain for the Mortgage Bankers Association when David Stevens leaves the former for the latter. I don’t know if I will like him as well in the new position but hope he can bring the same clarity and focus to the MBA that he has brought to FHA and that his knowledge of a broad spectrum of the market from several perspectives will be put to good use.

Stevens joined the administration team at FHA as one of President Obama’s new hires and has usually been perceived as a straight shooter knowledgeable of the industry whereof he governs. The same could  not always be said of his bosses HUD Secretary Shaun Donovan or FDIC Chair Sheila Bair. Stevens, while toeing the company line, could also be candid in appraising some of the constraints of working within the administration, explaining why things were the way they were and what the impact and repercussions to the industry would be. Donovan and Bair can always be counted on to spout the strict company line regardless of whether you call BS on them or not. I always found him a refreshing fresh voice amidst the sea of blather.

He joined the administration after serving as President and COO of real estate firm Long & Fosters but he has an even more extensive background as a  mortgage lender at World Bank and Wells Fargo and a seven year stint running the small lender channel at Freddie Mac.

No word yet on who will be tapped to replace Stevens at the helm of the FHA when he  leaves at the end of the month. One can only hope that an equally competent and focused individual will be named, someone who knows what business they’re in, actually understands housing, lending and how they impact the economy and can work to keep the FHA a relevant entity for first time and lower income homebuyers.

Thanks Dave. We’re wishing you the best. If you can do the same kind of job at MBA you did at FHA the housing industry as a whole will benefit from it. Good luck.

Update: CA State Bar v. Michael T. Pines. SHARK ATTACK!

Last October I wrote about a local attorney by the name of Michael T. Pines who was making quite a name for himself in local real estate circles. (Another Real Estate Scam to beware of.) Counselor Pines was making the evening news by advising clients who had been foreclosed on and evicted to break back into their former homes under the theory that since the debt had been satisfied through foreclosure, they could now own their former home free and clear.

To say this hadn’t worked would be an understatement. Clients who actually followed his advice were summarily re-evicted if they were lucky and arrested if they were not. After all, the homes were now the property of the bank and in some cases had already been resold so charges of breaking and entering and other minor misdeeds were alleged.

Turns out Mr. Pines himself was in foreclosure on some homes he owned and lost his own law office building to foreclosure (he didn’t try to break into his own building). At that time a judge had also slapped him with a $16,000 fine for filing frivolous lawsuits and for wasting his time and not acting in the best interest of his clients.  He also had a couple restraining orders against him for civil harassment after a trial and had been cited for contempt at least once.

law

Today attorneys for the State Bar of California asked a judge to suspend the law license of Mr. Pines. According to the state bar, Pines behavior had become ‘so
egregious’ that it filed to have his license suspended on an interim basis while it seeks a permanent removal. Jeez, that’s like watching sharks attack another shark – gruesome yet exciting, and as rare in legal circles as it is in nature.

Chief Trial Counsel James Towery was quoted in a written statement as saying “To remove a lawyer from active practice before formal charges are filed is a drastic remedy. In this case, that remedy is justified by the established misconduct of Michael T. Pines, who has shown complete disrespect for the law, the courts and especially the best interest of his clients.” Duh.

Never to be outdone, Pines has filed his own lawsuit against the state bar. “I’m sure the charges are going to be thrown out,” says Pines. “They’re going to be really embarrassed when they find out the truth.”

Hmm, attorneys vs. attorney. I’m guessing the truth might be a rare commodity in this v enue. Of course that’s just my opinion, I could be wrong.

Meanwhile people who have already suffered through a legal foreclosure in Southern California will not have the opportunity to be further victimized by this predator – at least until he teaches the state bar a lesson and gets his dorsal fin back.

fin

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The opinions in this commentary are strictly Gene Wunderlich’s personal opinions. While any reasonable and/or rational indivdual should agree wholeheartedly, the opinons reflected herein may not necessarily be those of the Southwest Riverside County AOR, or any local or state government or other mental institution.