Archive for the ‘The Housing Bill’ Category


Sunday, September 28th, 2008

     I picked up the Arizona Daily Star this morning and read the headline “Tucson May Charge Fee on New Home Sales”,  had a gut reaction, hastily poured my cup of coffee, then sat down to read the article so as not to prejudge.

    A 1% (One Per Cent) transfer fee on all new home sales is being proposed by  two city Council  members, Regina Romero and Karin Uhlich.   The purpose is that the city’s housing trust fund,  be “used to pay for such things as home repairs and down payment assistance for low-income residents”, according to Rob O’Dell, who wrote the front page article.  

                      ” The new fee, recommended for approval by a council subcommittee on Sept. 15, would apply to any house or condomium unit where a builder has entered into a development agreement with the city.”

according to O’Dell’s article.

    (I would like to provide a link to this story so you, the reader, can have the opportunity to read it verbatim.  The Star, however, now requires a person to register in order to read the article.  If you want to read the article, register at:  and then pull up the article).

       This would not apply, as I read it, to development in Pima County.  

       My reaction was/is visceral.  I haven’t had such a physical reaction in months to anything.  This is being proposed by our elected officials in Tucson. 

     The Arizona Association of Realtors is working to get Proposition 100 passed by the citizens of Arizona which will prohibit, by Constitutional Amendment, a real estate transfer tax at the state level.  To do this, voters must vote YES on the Proposition.  A  copy of the proposition is at Jan Brewer’s website, Arizona Secretary of State.     


        Arizona, like many states, is in a budget crisis, as is the City of Tucson. Were Arizona to pass a 2% transfer tax on the sale of real property, and the City of Tucson were to pass the 1% tax, and the average price of a home in August was $238,504, the total transfer tax would amount to an additional $7155.  I think that is a lot of money!   There is nothing to prohibit the city from passing a transfer tax even if the state has a transfer tax.  

       (My cynical question is, do we mark up the price of the house by that amount so that the 3% fees can then apply to the more than $7,000 added,   and then house then becomes priced at $245,659 – and the tax is an additional $200.+.!   Does this make housing more affordable for the Average Joe?  Granted this is worse case scenario but I remember when Social Security was paid on the first $32,000 of a person’s income!)

     I understand this is not called a tax, it is called a “fee” – but it is not voluntary and therefore it is a tax!  

    Two other issues galled me when I read the proposal by Romero and Ulrich.  The huge bailout, okayed at midnight by Congressional leaders for which taxpayers are now on the hook, was partially necessitated by the lax standards and no money down mentality which had it’s origins in Lyndon Johnson’s New Society.   The guidelines of the Community Reinvestment Act, over the years, became looser and looser. Congress embraced the idea that the American Dream of homeownership should  apply to all Americans, regardless of ability to pay.   Both sides of the aisle are equally responsible.  Where else could you purchase something for $300,000 with zero down?

    The second source of irritation is the amount of money which was approved by Congress in the much touted Housing Bill which was supposed to help people in distress to prevent foreclosures.  That bill gave millions of dollars to towns and cities for the expressed purpose of low income housing, to buy up abandoned or foreclosed houses, or to build new low income housing for people within the low income, extremely low income, and very low income brackets.   I have read the nearly 700 pages of the Federal Housing Bill and have written extensively about it in this blog.  I suggest both Council people wade through that document and ask the federal government for what is Tucson’s just due.

     Affordable housing is an issue, to be sure.  Adding fees onto those people who are struggling to save ten percent to purchase a home in order to provide down payment assistance to low income residents just doesn’t resonate.  A family of four earning $60,000 and purchasing a property at the average price of a home in Tucson in August, with a 3% transfer fee -(assuming both city and state) would then fall into the low income category after than transfer fee is paid.   Other sources of revenue are proposed and listed below and I have provided resources below regarding low income housing and the income points.


Tucson Housing Fund:

 From the Report of the Tucson Housing Fund Trust – January 2008

Revenue Recommendations:

The current sources of funding are not sufficient to support an ongoing meaningful effort to address housing issues in Tucson. The CAC has prepared some preliminary recommendations to the subcommittee for future funding sources to support the THTF. We are prepared to work with the Mayor and Council to obtain other community input toward successful adoption of these or other sources of revenue the Mayor and Council wish to consider more closely.

1. Increase the Bed Tax by $1.00 per night. Dedicate this new revenue, estimated at $2 million a year, to the Trust Fund. There is a compelling argument in using revenues from visitors to support housing for Tucsonans. The employees of the hospitality industry are among many families that would benefit from the availability of more affordable housing options.

2. Pursue a change to the Model Cities Tax Code that would allow the City to implement a Residential Rental Tax on units that rent for $1,000 or more to support the THTF.

3. Request a voluntary contribution to the Trust Fund from all housing disciplines (Builders, Realtors, Lenders, Title Companies, etc.) at the closing of every home sold within the City.

4. Support state legislation that would dedicate interest earned on rental Security Deposits and earned interest on Escrow Funds from home sales within city limits to the City of Tucson Housing Trust Fund.


Program Criteria and Evaluation Considerations:

— Housing must be within the City limits
— THTF is limited to households that earn under 100% of the area income (see chart)
— Housing can be in the form of ownership or rental
— Proximity of proposed housing to employment or mass transit
— Leverage ratio of THTF funding to that of the employer’s
— Recapture policy
— Homebuyer Education/Counseling component

Household Size

Income limit



























Sharing the Stage…The Housing Bill…A Response…

Friday, August 29th, 2008

   I was pleased to open my e mail this morning and find a post from a gentleman who refered me to an extensive treatise on the housing bill.   There is no way that I can provide a synopsis of what the article contained, so I will reproduce the post from the gentleman along with the link to the articles.

   The point was made that the author didn’t believe that Congress people read the bill, and when I waded through the nearly 600 pages, that was my sentiment exactly.  

    His original post said:   “Don’t know your opinion of Catherin Austin Fitts, but this is one hell of a read.  She’s one fine detective.”

    The link is as follows:


     Much of this bill was written long ago, as far back as 2002, and like much legislation, just waiting for the appropriate time to tuck this legislation into something which seemingly is worthwhile.

     Additional comments are more than welcome!

Manufactured Housing, Armed Forces Personnel, and Emergency Assistance for Abandoned and Foreclosed Homes

Tuesday, August 12th, 2008

    The housing legislation provides for increased loan limits for manufactured housing for low and moderate income homebuyers.  In an attempt to prevent or forestall mortgage foreclosures, the bill provides for credit counseling, home mortgage counseling, or any counseling deemed appropriate.

   The mortgage foreclosure protection for servicemen extends the period of time prior to foreclosure of the mortgage from 90 days to nine months.  The stay of proceedings is also extended to nine months.  This provision will expire December 31, 2010.

   Under the Emergency Asistance Redevelopment for Abandoned and Foreclosed Homes section of the bill, a total of $4,000,000.000 will be made available until expended to states and local governments for redevelopment of abandoned and foreclosed homes.

   The Secretary of the Department of Housing and Urban Development will construct  a funding formula within 60 days of enactment of the bill.  Most of funds will go to low and moderate income metropolitan areas or areas deemed the areas of greatest need.  This may be the areas with the highest subprime mortage related loans and/or the highest foreclosure rates.

   A funding mechanism will be established so that these homes can be purchased to sell, rent, or redevelop.  Blighted areas will be demolished.  All properties purchased must be purchased at a discount to the appraised value.

     Additionally, $30,000,000 will be set aside for neighborhood reinvestment for the 100 metropolitan areas which are suffering the most from foreclosures. 

      The Mortgage Disclosure Improvement Act, also known as Truth in Lending, provides that full disclosure be made and that warnings be made to homeowners by lenders about foreclosure rescue scams.  Lenders must send the notices to homeowners who are deliquent by two months in their payments. The notice must contain the following statement in 14 point bold type in both Spanish and English:

    “Mortgage foreclosure is a complex process.  Some people may approach you about  saving your home.  You should be careful about any such promises.  There are government and non profit agencies you may contact for helpful information about the foreclosure process.  Contact your lender immediately at —-, call the Department of Housing and Urban Development Housing Counseling Line at (800) 569-4287 to find a housing counseling agency certified by the Department to assist you in avoiding foreclosure, or visit the Department’s Tips for Avoiding Foreclosure website at for additonal assistance.”

   Any homeowner signing a contract with a foreclosure rescue person or company has a three day right of recission. 

     Veterans disabled before discharge or release who must move because of a foreclsoure of a rental property can have their move paid for by the government. 

   The approximate 700 page housing bill constains provisions for housing tax incentives , low income housing tax credits, first time home buyers credit against the tax, and tax changes regarding Real Estate Investment Trusts and Health Care REITS.

    The bill, which is now law, is now being interpreted by the various agencies designated to carry out and enforce the legislation.  These series are only a snapshot of the the true scope of the law.


S.A.F.E. Mortgage Licensing Act

Monday, August 11th, 2008

     The Secure and Fair Enforcement (S.A.F.E.) for a nationwide mortgage licensing system and registery is one of the provisions of this housing legislation.  It provides for licensing and supervision and a nationwide database of all loan originators.   The purpose is to enhance consumer protection.

    Publically adjudicated disciplinary and enforcement actions are specified for violations and mortgage fraud with a maximum penalty of $25,000.  Additionally, loan originators will be required to be fingerprinted, provide history and experience, a credit report, and any admission of civil or criminal findings to the Conference of State Banking Supervisors and the American Association of Residential Mortgage Regulators.  A surety bond is also required.    Pre licensing classes will be required as well as continuing education classes including classes in ethics.      

   A study and report concerning defaults and foreclosrues will be prepared to determine the “root causes of default and foreclosure of home loans” using empirical evidence.  This report will be presented to Congress within one year. 

    The FHA Modernization Act of 2008, also known as Building American Homeownership Act of 2008 prohibits seller funded down payments as has been permitted in the past.  At least 3.5% of the appraised value of the house must be a down payment, which can be borrowed from family members but any lien against the property must be subordinate to the first mortgage.

   The Act prohibits any third party from putting money down and then be reimbursed.  This targets programs such as Ameridream and Nehemiah.  The borrower did not have to put any money down on a property.  The down payment was paid for by inflating the price of the house about 4% .  Usually 3% was used for down payment and 1% was the income earned by the program.

    Other types of loans such as 203 K loans, or loans which provide funds for rehabiitation of properties, the insurance of condos , the Hawaiian Home Lands and Indian Reservations  and Home Equity Conversion Mortgages, also known as Reverse Mortgages, and Energy Efficient Mortgage Programs all have specific guidelines within the legislaton.

   Provision is made for alternative methods of credit ratings for people who have insufficient credit histories by using rent history, payment of utilities and insurance payment history.

    A pilot program for not more than 3,000 home buyers annually will be enacted by the Department of Housing and Urban Development for pre purchase home ownership counseling.   This will target first time home buyers with loan to value ratios of 97% to 98.5%.  Counseling can be via telephone, in person counseling, web based counseling, counseling classes or any other method deemed appropriate by the Secretary of HUD.   HUD will follow the progression of these homebuyers and attempt to determine if pre purchase counseling impacts the numbers of defaults or foreclosures.

Next:  Manufactured Housing and Mortgage Foreclosure Protection for Servicemen


HOPE for Homeowners

Friday, August 8th, 2008

   Title VI of the legislation is the Hope for Homeowner Act of 2008 and is a voluntary program between exisiting loan holders and home owners.   It is designed to “insure refinanced loans for distressed borrowers and to support long-term sustainable homeownership”.   It is established under the Federal Housing Administration (FHA).  HOPE is an acronymn for Home Ownership Preservation Equity.

   By reducing the principle (sic)  balance and reducing the interest rate on the mortgage, the goal of HOPE is to help home owners avoid foreclosure and stabilize the mortgage markets by bringing transparency to the value of assets, based upon mortgage costs. 

   The timeframe for HOPE is October 1, 2008 through September 30, 2011.   FHA has a commitment to insure any eligible mortgage that has been refinanced.  Homeowners must show a lack of capacity to pay their existing mortgage and have only one residence which is their principal residence. 

   The debt to income ratio of the home owner must be 31% or more.  (To calculate, take the gross income and multiply by 31%, then divide by 12 to derive the monthly mortgage payment.  For instance, a  homeowner earning $60,000 annually would have a minimum of $18,600 in annual mortgage payments or $1550 a month.) This does not include taxes and insurance which are often included in the mortgage payment.

   To qualify, the homeowner must demonstrate a reasonable ability to to make payments on the new mortgage which cannot exceed 90% of the appraised value of the property.  This would be an appraisal today, not the appraisal upon which the original mortgage was based, done by a certfied appraiser.

   Any second lien holder (second mortgage holder) must agree to extinguish any liens by reaching an agreement with primary mortgage holder.   Funds come from the  new mortgage insured by FHA.  However, those funds may not be enough to cover both loans so agreement must be reached.   Only one mortgage will be insured by FHA.  However, the second lien holder may share in any future price appreciation of the property.

   New mortgages cannot exceed 132% of the FHA limit.  Loans must be single rate fixed and at least 30 year mortgages.  No adjustable rate mortgages are acceptable under the program.   Homeowners utilizing this program may take no second mortgage for five years. 

   Lenders must verify the income of persons applying for HOPE with the tax returns for the most recent two years.  Penalities including jail of no more than five years and/or fines are prescribed for any type of mortgage fraud for any person who has an interest in the real estate transaction.  This includes the mortgage broker, banker, real estate broker, appraisal management company, appraiser, or any employee who tries to influence the appraisal or otherwise commit mortgage fraud.

   The insurance premium of 3% of the original insured principal obligation will be paid to FHA and an annual premium of 1.5% of the insured principal balance.  There is a five year phase in for equity in the home to be shared with the mortgagor and FHA. Within one year of sale or refinancing after obtaining such a loan, the homeowner will owe 100% of the equity,; between 1-2 years, 90%; 2-3 years, 80%, 3-4 years, 70%,4-5 years 60%, and five years or after 50%.

   The Home Ownership Preservation Entity Fund will be used to carry out mortgage insurance obligations.  The Government National Mortgage Association (GNMA or Ginnie Mae) is authorized to issue HOPE bonds to fund this program.  No more than $300,000,000,000 in bonds may be isssued to fund this program.

Next:  SAFE Mortgage Licensing Act, Foreclosure Prevention, FHA Modernization Act of 2008







Consumer Education, Critical Capital, and the Federal Home Loan Banks

Thursday, August 7th, 2008

    One of the provisions of the Housing and Economic Recovery Act of 2008 is to provide funding for programs approved by the Department of Housing and Urban Development (HUD) to increase the financial knowledge and decision making capabilities of prospective homebuyers.

   The programs will be designed to help people learn to establish monthly budgets, build personal savings for major purchases, reduce debt, implement financial stability and teach people to set and reach financial goals. 

   Additionally these programs will be designed to help people understand their credit scores and the relationship between credit history and credit scores.  Building savings for long term and/or short term goals is also an objective.

   Grants will be distributed for approved programs.  Documented behavioral changes in savings and spending patterns must be evident.  Additionally, five pilot programs will be authorized and tracked for effectiveness.

   The legislation also provides for some people working within HUD to transfer to the Federal Housing Finance Agency without loss of pay, status or tenure.  All benefits are to be equivalent between the two agencies.

    The Director will establish the amount of critical capital necessary for the Home Loan Banks.  Capital requirements will be established by the Director for adequately capitalized banks, undercapitalized banks, significantly undercapitalized banks and critically undercapitalized banks.  The capital reserves of the banks will be monitored and remedies established for those banks failing to meet the requirements.  Supervisory actions are spelled out including conservatorship and ultimately receivership for critically undercapitalized banks.

    Provisions for claims, disposition of assets, notification of potential claimants, and the legal procedures to be followed are delineated in the legislation. 

     Title II concerns the Federal Home Loan Banks whose job is to provide liquidity to member banks, encourage affordable housing and community development, and provide a capital structure.  Semi annual reporting to Congress by the Director regarding these objectives is mandated.

     The legislation abolishes the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development and tranfers many of these objectives to the Federal Housing Fianance Agency.   As with other areas of HUD where employees will be transferred, status, pay, and benefits will not be impacted.

Next- HOPE for Homeowners, S.A.F.E. Mortgage Licensing Act, and Foreclosure Prevention

Related Stories Today:

Fannie Mae and Freddie Mac In the News

What are the Housing Goals?

Wednesday, August 6th, 2008

     The Housing and Economic Recovery Act of 2008 contains goals for residential low income, very low income and housing for families residing in low income areas. These goals will be set by the Director of the Federal Housing Finance Agency within a “reasonable time table”.

    The legislation describes the goals as a percentage of single family money market mortgages financed.  Targets are determined by national housing needs, economic, housing demographics and conditions, and the peformance and efforts of the lender.   Mortgage financing of one to four owner occupied units will count towards these goals as will multifamily housing financed by tax exempt or taxable bonds if they meet certain requirements.

    Multi-family affordable housing units includes mortgages for very low family income housing and housing which is eligible for assistance from Section 42 of the Internal Revenue Service tax code.  Additionally, smaller units and those units 5 to 50 units may be eligible for up to $5,000,000.

   Owners of very low income owner occupied units cannot have income more than 50% of the median income level of the area.  The same applies to rental units with adjustments for family size.  However income must be at least 30% of the median level for the area.  Extremly low income is considered not more than 30% of the median income level of the area.

   According to the legislation, there is a duty to serve underserved markets which include; very low, low, and moderate income families.  Fannie Mae and Freddie Mac are expected to purchase securitized mortages which may not carry the same rate of return as other mortgages. 

    In an effort to provide very low, low and moderate income housing, new products are to be developed for the secondary market for manufactured housing with flexible underwriting guidelines, as well as affordable site built housing.  These guidelines will also apply to Section 8 housing, below market interest rate mortgage programs, housing for the elderly, the disabled, the homeless and rural rental housing.

     Provision is made for monitoring, enforcement and compliance of these housing goals.  The Director determines whether each enterprise (Fannie Mae, Freddie Mac, Federal Home Loan Banks and/or affiliates) have met the goals.  If not met, the Director can issue a cease and desist order, issue civil monetary penalties, or require the enterprise to submit new housing goal plans.

   For each dollar of unpaid principal balance of new total business, Fannie Mae and Freddie Mac must set aside 4.2 basis points.  (A basis point is 1/100th of a one point.)  Translated, this means that on a $100,000 unpaid balance, 4.2% must be set aside or $4.20.  A total of 65% will go to the Secretary for HUD to fund the Housing Trust Fund and 35% will go to the Capital Maget Fund.

    The purpose of the Housing Trust Fund is to increase the supply of rental housing for low, extremly low, and very low income families including homeless persons, according to the legislation.  In 2010 and subsequent years, grants to state housing finance agencies, housing community developments, and tribally designated housing entities will be awarded on a needs based formula.  A minimum of $3,000,000 will be awarded to each state.

      Grants can be used for production, preservation and rehabilitation of housing with no less than 75% of the funds going to extremly low income families and 25% going to very low income famlieis.  Down payment assistance, closing costs, and interest rate buydowns are permitted for extremely low and low income buyers.

      The Capital Magnet Fund is designed to attract private capital for increased investement in affordable housing for extremely low, very low, and low income families.  Funding may be given for community service facilities such as day care centers, workforce development centers and healthcare clinics to stablilize or revitalize low income areas or underserved rurual areas.    Provisions are made for the Secretary of the Treasury to report to Congreess and the public.


Section 8 United States Housing Act of 1937        

Section 236 of National Housing Act

Section 221 (d)(4) National Housing Act                

Section 202 of Housing Act of 1959

Cranston-Gonzalez National Affordable Housing Act    

 McKinney-Vento Homelss Assistance Act

Rural Rental Housing Program SEction 515 Housing Act of 1949

Next:  Financial Education and Counseling, HUD Employees, and Critical Capital Levels

What’s Really in the Housing Bill?

Wednesday, August 6th, 2008

    Congress passed the “Housing and Economic Recovery Act of 2008” and President Bush signed the legislation July 30, 2008. The bill, which can be read in it’s entirety at

  establishes the Federal Housing Finance Agency.

       The newly created agency is an independent agency of the Federal Government with authority over the Federal National Mortgage Agency (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks and Office of Finance.  The Director will be selected by the President with the consent of the Senate and serve for a five year term.

     A Federal Housing Oversight Board is created consisting of the Secretary of the Treasury, the  Secretary of the Department of Housing and Urban Development, the Chairman of the Securities and Exchange Commission, as well as the Director.  The Board reports to Congress not less than once every three months.   An Ombudsman will be appointed by the Director to hear complaints and appeals.

     Oversight guidelines and standards will be created by the new Agency including regulation of capital requirements, portfolio monitoring, reporting fraudulent loans, compensation, and golden parachutes. 

    Section 1124 increases the Fannie Mae and Freddie Mac conforming loan limits to $417,000 for a single family home, $533,850 for a two family home, $645,300 for a three family home and $801,950 for a four family home.

    Each year, housing prices will be adjusted according to an index determined by the Director of the Federal Housing Finance Agency.  If the index shows a decrease in value, no adjustment will be made. 

   In areas of higher property values, the amount will be adjusted to the lesser of 150% of the limit or an amount equal to the median price of that type of housing within that area. 

   The annual housing price index will be determined by annual housing reports which contain; demographic information, types of loans, creditworthiness of borrowers, loan to value ratios including second liens, race, gender, income levels, underserved markets,  and the purchase price of the property.  Comparision of characteristics of all loans including sub prime and jumbo loans will be included.

    The Director will report by October 30 the the Committee on Banking, Housing and Urban Affairs in the Senate and the Committe on Financial Services in the House to apprise legislators as to how Fannie Mae, Freddie Mac, the federal home banks and the Office of Finance are achieving the goals set forth by the housing goals of this legislation.

Next:  Housing Goals- Low Income, Very Low Income, Families residing in Low Income Areas