Howard County Association of REALTORS® Legislative Update Center keeps you up-to-date on issues and pending real estate legislation that can impact both its members and the Howard County community. To view the current Federal, Maryland, or Howard County updates, click on the news items below and the Related Links to the left.
Mortgage Interest Deduction and Mortgage Debt Forgiveness Survive Fiscal Cliff!
On January 2, legislation written to avoid going over the "fiscal cliff" was signed into law. Thankfully, congress did not harm the mortgage interest deduction and tax relief on mortgage debt forgiveness was extended for one year.
Thanks to everyone who responded to the Call for Action to preserve the MID! Here are a few of the other real estate provisions in the law.
Click here for more details in the NAR Issue Brief: Real Estate Provisions in "Fiscal Cliff" Bill >
- Leasehold Improvements: The 15 year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012.
- Energy Efficiency Tax Credit: The 10% tax credit (up to $500) for homeowners for energy efficiency improvements to existing homes is extended through 2013 and made retroactive to cover 2012.
- Return of the "Pease" limitations on itemized deductions for high income filers: Under the agreement so called "Pease Limitations" that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers.
Victory! Condominium Financing Rules Improved
Finally! The FHA heard our call by moving in the right direction and easing some of the key condo financing limitations that HCAR brought to their attention through our grassroots advocacy efforts.
As background, HCAR's RPAC Committee met individually with Howard County Council members in January, 2012 to discuss the problem of obtaining FHA financing for condominiums since the spot loan approval process was eliminated. The Committee pointed out numerous issues that needed to be addressed regarding the new regulatory process. Among them were:
- that no more than 10 percent of units could be owned by one investor or entity
- that no more than 15 percent of the units could be over 30 days past due on their monthly assessments
- that the new rules require COA board members to sign certifications attesting that the governing documents comply with all local statutes and that they have no knowledge of situations that could cause any owner to become delinquent at some later date.
The rule that "no more than 15% of the units in a development be 30 days or more delinquent on their association dues" was particularly troublesome because it is often impossible for volunteer boards of directors in large projects to keep track of, much less to certify the delinquency rate to FHA, and the mandatory certification carried a maximum penalty of $1 million in fines and 30 years' imprisonment if found to be incorrect.
After conducting a thorough examination to review our concerns, County Council member Courtney Watson forwarded a letter to Sen. Ben Cardin. The Senator, in turn, forwarded these concerns to HUD Secretary Shaun Donovan.
Separately in January, 2012, at MAR's Legislative Day, HCAR members spoke to Del. Guy Guzzone, Chairman of the Howard County Delegation, regarding the condo financing issue. Subsequently, HCAR prepared a letter outlining the issues and Del. Guzzone forwarded HCAR's letter to Sen. Barbara Mikulski. Independently, HCAR members also met with Sen. Mikulski's staff during NAR's mid year meetings. As a result of Del. Guzzone's letter and our meeting with her staff, Sen. Mikulski also forwarded our concerns to the HUD regulators.
On September 13, 2012, HUD released Mortgagee Letter 2012-18 making changes to the regulations governing FHA condo financing, which addressed HCAR's items of concern listed above. Included in the changes are
- allowing 15 percent of a project's units to be 60-days delinquent on HOA dues, up from just 30 days delinquent
- increasing the amount of Non-FHA investor purchases allowed in a development from 10% up to 50% under certain circumstances
- softening of the representations that a Board member must make in the Board certification process to be approved for FHA financing.
Additionally, the new rules addressed another concern raised by HCAR by increasing commercial space allowances under mixed use developments. Mixed use developments have become an increasingly popular land use tool utilized by Howard County under smart growth principles. Commercial space allowance has been increased from 25% to 35% with local approval and up to 50% (and possibly more) in certain circumstances.
Attached below is HCAR's letter, NAR's summary of the changes, and a link to the copy of the mortgagee letter itself. Through your association's hard work and grassroots efforts, a positive change to overly burdensome federal regulations has occurred which should assist the County, the state, and our nation's real estate market in its recovery.
NFIP Update: Some Property Owners Will Spend More on Flood Insurance.
On Jan. 1, 2013, the National Flood Insurance Program (NFIP) began phasing out the rate subsidies for the vast majority of older properties. The 2012 Biggert-Waters law (which extended the NFIP for 5 years) requires that subsidized rates increase in steps of 25% per year until the affected owners are paying the full cost for flood insurance. Passage of this law was essential to ensure that all properties, including second/vacation homes, would continue to have access to comprehensive coverage under the NFIP.
Some older property owners will spend more on flood insurance.
- Second/vacation home subsidies were the first to see the 25% step increase on Jan. 1
- Business properties, Severe Repetitive or High Loss properties, and properties with a substantial improvement or damage will go next and see the first step on June 1, 2013
- Properties Purchased or with Lapsed/New Insurance are no longer eligible for subsidies so these new policyholders will pay more for this insurance. Our latest information is that this provision will apply to all properties by the end of 2013, but we are awaiting an official bulletin from the NFIP.
Learn more about the Biggert-Waters law and what to say:
NAR will continue to monitor implementation of the legislative reforms and keep you apprised of any major developments going forward.
NFIP Update: Congress Extends Flood Insurance for Five Years
The Flood Insurance Reform Act has been signed into law. This successful result is directly related to the ongoing REALTOR® campaigns, including the final push at the May 2012 Midyear Legislative Meetings.
Congress had been extending the National Flood Insurance Program (NFIP) for a few months at a time since 2008. Twice this led to shutdowns, including one that stalled over 40,000 sales in June 2010. This 5-year re-authorization helps bring certainty to real estate transactions in over 21,000 communities nationwide where flood insurance is required for a mortgage. The bill ensures the NFIP will continue long-term for millions of business and homeowners, as well as ensuring that taxpayers will spend less on federal assistance for flood disasters over the long run. NAR will continue to monitor the legislation as it is implemented.
Also, be aware of the proposed changes to the Flood Insurance Rate Maps (FIRM) for Howard County and share this information with clients.
NAR - Government Affairs Issue Brief
2013 Federal Public Policy Priorities
NAR has released its Legislative and Regulatory Priorities which details the public policy initiatives we will be focusing on for 2013. The list includes homeownership and real estate investment tax policies, credit and lending policies, business operations, and commercial real estate loans.
For more information on public policy being tracked by NAR click here.
NAR - Government Affairs Issue Brief
2012 Federal Public Policy Priorities
As a follow-up to the 2012 REALTOR® Party Policy and Advocacy Conference, NAR has released its Federal Public Policy Priorities - a detailed list of the most important issues on the Agenda for 2012 - including Taxation, Real Estate Finance, Property Insurance, and Appraisal and Commercial Issues.
For more information on Federal Issues being tracked by NAR click here.
Freddie Mac Amends Short Sale Policy
Freddie Mac has amended its short sale affidavit policy. The purpose of the affidavit is to prevent fraud by requiring the buyer, the seller, the real estate brokers, the escrow/closing agent, and any transaction facilitator to make various certifications (including that the short sale is an arm's length transaction and the buyer will not resell within 120 days unless there are substantial improvements).
Policy changes were mandatory as of January 1, 2012. NAR advises members to make sure that any short sale affidavit they sign is an updated form. If presented with an old form, members should request the servicer to update the form before signing, to avoid potential liability issues.
Legislative Victory - FHA Loan Limits Restored!
The reinstated FHA loan limit formula and cap change helps make mortgages more affordable and accessible for hard-working, middle-class families in 669 counties in 42 states and territories, where the average loan limit reduction after the reset was more than $68,000. The maximum FHA loan limit in Howard County has been restored from the lowered limit of $494, 500 which went into effect on October 1, 2011, back to its former limit of $560,000.
2012 NAR President Moe Veissi reminds us, "I know that when we work together we can accomplish anything we set our minds to in order to preserve, protect and defend the American Dream of Home Ownership."
Thank you for your support of homeownership! More details >
SAFE Act Final Rule
On June 30, 2011, the Department of Housing and Urban Development (HUD) published a final rule under the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act). The rule is now in effect. The SAFE Act requires states to establish loan originator licensing requirements that meet minimum federal standards. HUD had overall responsibility for interpretation, implementation, and compliance until July 21 when the Consumer Financial Protection Bureau (CFPB) officially took over these responsibilities.
NAR urged HUD to exempt all seller financing from the licensing requirements or at least exempt some categories of seller financing, and also asked HUD to clarify that payment of a real estate commission by a lender for the sale of a lender-owned property (REO) does not require the real estate agent to be licensed. In the preamble to the rule, HUD states that it lacks statutory authority to grant exemptions to licensing under the SAFE Act. The final rule requires licensing of individuals who engage in the business of a loan originator.
HUD chose not to decide how frequently an individual may provide financing, but NAR expects the CFPB to defer to reasonable state laws on the number of seller financing transactions that would trigger licensing. Sellers financing the sale of their own property would completely avoid the issue of licensing by retaining the services of a licensed loan originator.
SAFE Act Final Rule >
National Legislation Impacting Real Estate
Representatives from HCAR, MAR and NAR meet with our U.S. Senators and Representatives on a regular basis to communicate the issues critical to REALTORS®, our businesses, communities and the consumers we represent.