By 2014 NAR President Steve Brown
Just as the winter snows melt, and spring begins to bloom, there are also signs of renewal for the Federal Housing Administration (FHA).
The White House released its fiscal 2015 budget proposal last week, and it indicates that the FHA should not need additional taxpayer funding in the coming year. This excellent news couldn’t have come at a better time. This announcement puts the FHA on the right path not only towards achieving compliance, but being positioned to cover any future losses without seeking additional funds from the federal government.
When private lenders fled the market after the 2008 financial crash, the FHA was left carrying an oversized burden. I saw this up close in my own company in Dayton, Ohio. During the depths of the Great Recession, FHA-backed loans were more than 60 percent of my affiliated mortgage company’s business. Even today, FHA-backed loans are nearly 30 percent of my book. There is no question that my business would not have survived without the FHA. In fact, the housing recovery we are now experiencing would not have happened if the FHA had not been there when times were tough.
Understandably, FHA paid a price for this commitment. It suffered financial losses and needed additional funding to cover an accounting shortfall in its emergency reserve account. For the first time in the agency’s 80-year history, the FHA drew $1.7 billion from the Treasury Department last year.
To ensure the agency does not need additional funds, the FHA made significant changes. The White House budget announcement indicates these reforms are producing positive results.
NAR continues to be a strong supporter of the FHA. We are pleased that Congress allowed the FHA to put its house in order without enacting hasty reforms that would have stalled the real estate market’s fragile recovery.
Of course, we aren’t out of the woods, yet. This is why we support needed housing finance reforms, especially the Senate’s Johnson-Crapo “FHA Solvency Act of 2013.” This bill is a strong step forward in strengthening the FHA.
But, for now, everyone across the political spectrum should welcome the news that the FHA is on the path to financial solvency. It demonstrates that the FHA’s mission of providing low cost loans to qualified borrowers—particularly low- and middle-income buyers – does not have to come at the expense of America’s taxpayers.
By NAR 2014 President Steve Brown
I want to personally thank everyone who responded to our most recent Call for Action about delaying the changes in the new National Flood Insurance Program law. I appreciate the continued grassroots support of REALTORS® across the country who makes their voices heard on important legislative and regulatory issues, like NFIP, that impact housing and commercial real estate interests.
NAR’s fight to improve the implementation of changes in NFIP will continue to be an important priority in 2014.
Here’s an update on where things stand:
· The House has not taken a vote on the NAR-supported “Homeowner Flood Insurance Affordability Act.”
· The Senate bill has not yet been taken up for consideration by the requisite committees.
· A different bill to delay implementation for one year was withdrawn due to various objections from conservative Republicans, who do not support any delay, and Democrats who support a more costly, but longer, four-year delay.
Over the holidays, let us rest, renew and recharge so that we are ready to start a new year of REALTOR® grassroots advocacy in 2014. When Congress returns to work in January, you can be sure that NAR will be there to stand up for you.
By NAR 2014 President Steve Brown
It’s a tremendous honor to serve as the 2014 President of the National Association of REALTORS®. At our Annual Conference in San Francisco last week, I laid out my goals and direction for our Association in the coming year. For those of you unable to attend the inaugural, let me give you a brief outline of what I shared there, and what I believe we can accomplish together this year.
The goal of NAR has, and always will be, to keep the American Dream of homeownership alive by ensuring that property ownership remains accessible to all, affordable to the many, and sustainable well into the future. Fortunately, the public continues to recognize that real estate, especially residential sales, cannot be reduced to a mere transaction, no matter how sophisticated the technology. In fact, survey after survey shows increasing use of REALTOR® services.
Twenty years ago, past NAR President Bill Chee warned of a “lion coming over the hill”. He used this as a metaphor for all the forces of “disintermediation”—the Internet, technology and other entities—that could come between REALTORS® and consumers.
We have long lived in fear of that lion. Today, we need no longer fear change. REALTORS® are now the “lions coming over the hill”. We have not only weathered disintermediation, we have survived the Great Recession. Even in the age of the Internet, clients need and rely on the benefits offered by REALTORS®.
Further developments in technology will only help us to expand available information, participation and commitment from our members and real estate consumers. We will continue to pursue the latest and greatest technology for our members.
NAR will continue to adapt. One example is how we are increasingly becoming an organization that crosses borders. As we do so, our international mission must be to encourage global participation in our Association, and global membership in the REALTOR® family.
As you well know, being a REALTOR® is not just a job. Its rewards, like any profession done well, are deeper and richer than any salary can provide. Moving forward, our goal must be to continually raise the bar of professionalism through education, training and designations, as well as by our own example.
This will require a renewed emphasis on communication, both inside and outside of NAR. To be truly effective we must act and move as one body, with common vision, purpose and goals.
There are many reasons for renewed optimism. I believe the time is now for us to plant and cultivate the seeds of progress from which we will reap numerous benefits in the years ahead.
I look forward to what will be an exciting year, full of new issues, new people and new challenges. Together, we will prosper. I hope you’ll join me in making NAR an even greater organization.
By NAR 2013 President Gary Thomas
Last week I met with Ed DeMarco, Acting Director of the Federal Housing Finance Agency. We had a very positive discussion in which I reiterated NAR’s position of opposing lower conforming loan limits for Fannie Mae and Freddie Mac.
Earlier this year, NAR acknowledged the reduction of current FHA limits from $729,500 to $625,500 at the end of the year. However, we believe that further action of lowering the size of mortgages for Fannie and Freddie now would disrupt the housing finance market and negatively impact the availability of affordable housing credit.
NAR Research estimates that if the national conforming limit were lowered to $400,000, roughly 154,000 total mortgages and 49,000 purchase mortgages would have been impacted in 2012.
Many of these borrowers would not have qualified under the high minimum down payments and tight credit standards currently required by the private market. For example, one bank offered a loan to borrowers with an average credit score of 769 that required nearly a 34 percent down payment.
How many buyers have this much to put down on a home, especially first-time buyers.
Furthermore a number of changes are already in the wind. In January, many adjustments to Dodd-Frank changes will take effect, including the new QM rules. We expect the QRM rules to follow shortly after, as well as actions by the Federal Reserve.
The housing market is coming back, but its recovery is still fragile. It’s crucial that the federal government act to maintain market stability, not add disruptive and unnecessary changes at this critical time.
Many in the industry agree with us. NAR initiated the call to not lower the limits in a letter to Acting Director DeMarco September 19th and spearheaded a coalition of more than a dozen trade groups to show broad-based, grass roots support for maintaining loan limits at this time. Let’s hope our positive discussion with Acting Director DeMarco has resonance.
I believe he understands our message: Let’s enact what has already been decided. Regarding the rest, for now, just let it be.
By NAR 2013 President Gary Thomas
If you’re considering how nice it would be to own a larger home, this may be the time to buy.
For the first time in history, interest rates on jumbo mortgages actually fell below the interest rate of conforming 30-year fixed-rate loans.
As REALTORS® well know, jumbo loans are those over the local limit that can vary from $417,000 to $729,750, depending on the county.
Traditionally, consumers who needed a home loan bigger than a conforming mortgage would pay a higher rate of interest for the privilege of borrowing more money—often a quarter of a percent or greater, and for a brief period it was nearly two percentage points.
But with mortgage rates much higher than a year ago and declining profits from refinances, banks have become more aggressive in pricing mortgages. As a result, it is now cheaper to borrow in the jumbo market which is currently dominated by private lenders.
With interest rates at historic lows, more buyers are willing to stretch to buy bigger properties and more buyers are able to qualify for a jumbo loan. But even non-jumbo home buyers should look into the competitive rates at banks and credit unions.
There’s no telling how long it will continue, but this unusual circumstance may offer an opportunity for REALTORS®. Think big!
By NAR 2013 President Gary Thomas
When it comes to rules and regulations, the National Association of REALTORS® must always be vigilant. We have heard your concerns about the Federal Housing Administration’s (FHA) proposal to prohibit “dual agency” in pre-foreclosure transactions.
Know that NAR is working hard on your behalf to address this issue. On September 18, I sent FHA Commissioner Carol Galante a letter expressing NAR’s concerns about the new policy. As a result, the Department of Housing and Urban Development (HUD) has delayed implementation of its proposal, which would have been implemented on October 1. This gives NAR more time to continue our dialogue with agency officials.
Under the proposed policy, the Department of Housing and Urban Development (HUD) would no longer allow dual agency agreements in short sale transactions. This is when two agents, working for the same broker, represent the buyer and the seller. It also applies to a single agent representing both parties in a short sale transaction. In either case, under current law, dual agency transactions must be disclosed in writing and accepted by both parties.
According to HUD, the new policy comes as a result of the detection of fraud and abuse in pre-foreclosure sales. However, no statistics or reports were provided to NAR, detailing short sale fraud by real estate agents. As you are well aware, REALTORS® adhere to a strict Code of Ethics. Indeed, it was the founding principle on which NAR was created.
In our view, the fact that the policy would put excessive restrictions on agents representing buyers or sellers in the short sales process will only add to delays in the process. Some large brokers have hundreds of agents across multiple offices. Under HUD’s new policy, if one of those offices lists a short sale, none of the other agents can bring a buyer to that property.
One large broker told us that in his market, there are over 2000 agents across multiple offices. His firm has buyer’s and seller’s agents work on the same transaction in more than 30 percent of their sales. In rural areas with fewer agents, those numbers are even higher.
Brokers have also expressed concerns that the policy would conflict with certain MLS guidelines and state license laws. In every state, except Colorado, dual agency is allowed, as long as it is disclosed in writing to the parties involved in the real estate transaction and accepted by them. Most states have established standards and a complaint process in the event of suspected fraud.
We believe there are other ways that HUD could address concerns about the short sale process without restricting so many real estate agents from participating in pre-foreclosure transactions.
For example, Fannie Mae allows dual agency on short sales. They recently implemented a policy that requires all properties being considered for a short sale to be listed on an MLS, according to certain specifications. They provide relevant training and contact information to report potential fraud regarding a short sale.
NAR stands strongly against fraud of any kind, but we believe there is a more effective way to solve the problem then unnecessarily restricting dual agency. Let’s not kill the patient to cure the cancer. Instead, we should take the long view: establish a national standard that most states have already adopted and crack down on violations when and where they occur.