HUD’s Proposed RESPA Regulation Published in Federal Register
On Friday March 14, 2008 the Federal Register published HUD’s long-awaited proposed regulation on the Real Estate Settlement Procedure Act. The 94-page proposed regulation includes, among other things, a mandatory four-page Good Faith Estimate (GFE) and a modified HUD-1/1A, a required “closing script” that must be read orally at settlement, enhanced disclosures and new rules concerning volume discounts, average cost pricing and “required use.” There will be a 60-day public comment period which expires on May 13, 2008. NAR will study the proposal and file formal comments with the Department of Housing and Urban Development.
HUD Publishes Unofficial Staff Interpretation on “Marketing/Administrative Services Agreements Used by Real Estate Agents.
The Department of Housing and Urban Development’s Fort Worth Field Office published, on February 21, 2008, an unofficial staff interpretation letter on “marketing/administrative services agreements” between some real estate agents and brokers and home warranty companies (HWC). The arrangement calls for the real estate agent/broker to perform certain marketing services for a HWC in return for a fee that would be paid only when a consumer purchases the HWC product. The letter concludes that “it appears likely that the … arrangement constitutes a violation of Section 8 of RESPA.” Stating that the specific marketing services were not described in the request for guidance, the HUD letter went on to state that ” … it would be difficult for real estate agents and brokers to establish that the services they provide in connection with a homeowner warranty merit additional compensation that is in accordance with Section 8 and HUD regulations.” NAR and other trade groups are meeting to discuss the implications of the letter and expect to have further discussions with HUD on the matter.
Unofficial interpretations are issued by HUD in response to requests for interpretation of matters “not adequately covered … by an official interpretation…. Such interpretations provide no protection under … RESPA.” 24 CFR Sec. 3500.4(b).
Fannie Mae and Freddie Mac Announce Requirements for Jumbo Conforming Mortgages
Fannie Mae and Freddie Mac (the government sponsored enterprises or GSEs) have each announced special requirements for the origination, underwriting, delivery, and servicing of jumbo conforming mortgages loans (loans above $417,000 up to $729,750). Both Fannie and Freddie are taking a conservative underwriting approach to the new jumbo conforming mortgages. Under Fannie’s requirements, the maximum loan-to-value ratio (LTV) is 90 percent for fixed rate mortgages (FRMs) and 80 percent for adjustable rate mortgages (ARMs). The minimum FICO score for a primary residence purchase loan is 700 for loans with LTVs of more than 80 percent and 660 for LTVs of 80 percent or less. Under Freddie’s requirements, the maximum LTV is 90 percent for both FRMs and ARMs. The minimum FICO score for a primary residence purchase loan is 700 for LTVs of more than 75 percent and 660 for LTVs of 75 percent or less. Both GSEs limit jumbo conforming mortgages to one-unit attached or detached dwellings (including condos but excluding manufactured homes). There are many other requirements that apply to these newly eligible jumbo conforming mortgages.
Commemorate the 40th Anniversary of the Fair Housing Act
April is just around the corner and marks the 40th Anniversary of the 1968 Fair Housing Act, as well as Fair Housing Month. In addition to receiving the annual Fair Housing FOCUS newsletter and commemorative poster, all state and local associations will receive a $150 savings if they sponsor or become sponsors of the popular At Home with Diversity® Certification Course in April. For those members who do not have a local course in their area, they may take the At Home with Diversity® Course Online through REALTOR® University for 50% off of the regular cost this April only. For more information on this savings and for additional activities your association can do mark the historic 40th Anniversary visit our website at www.realtor.org/dive rsity.
During debate on a budget resolution covering Fiscal Year 2009 two amendments were offered that would have modified the estate tax rules enacted in 2001. Those rules are scheduled to expire effective January 1, 2011. The 2001 rules expanded the estate tax exemption and lowered the estate tax rates for the period January 1, 2001 through December 31, 2009. Current law repeals the estate tax in 2010, but includes an onerous carryover basis requirement. (Carryover basis has the effect of increasing the amount of capital gains taxes on any subsequent sale of inherited property by the heirs who received it.) Under current law the pre-2001 estate tax rules would go back into effect as of January 1, 2011. Those rules allowed a $1 million exclusion and had a top rate of 55%.
One amendment would have made all the Bush tax cuts permanent, including estate tax repeal. That amendment failed. The second amendment also failed. It would have allowed the Senate Finance Committee to have an estate tax exclusion of as much as $5 million with a 45% maximum rate. Because these two amendments failed, the estate tax repeal with carryover basis remains in effect for 2010.
Legislation Introduced to Include VA loans in the Economic Stimulus Increases
Following NAR lobbying efforts, several bills were introduced this week to amend the Economic Stimulus Act of 2008 and include VA home loan guarantee loans in the loan limits increases provided to FHA and Freddie Mac and Fannie Mae. VA loans were inadvertently left out of the stimulus package, and therefore the loan limit for va loans remains at $417,000. Legislation introduced by Reps. Capito and Buyer (HR 5566 and HR 5561 respectively) and Senator Akaka (S. 2768) were referred to the Veterans Affairs Committees in each chamber. NAR will be working to assure our nation’s veterans receive the same benefits from the Economic Stimulus bill as other citizens
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