Nation

MORTGAGE CANCELLATION RELIEF BILLS INTRODUCEDM
Among NAR's major legislative goals is to secure tax relief for individuals who, under current law, must pay tax on any portion of a loan that a lender forgives on a short sale, foreclosure or similar circumstance. Bipartisan companion bills in the House and Senate have been introduced. Senators Stabenow (D-MI) and Voinivich (R-OH) and others have introduced S. 1394. The companion House bill, H.R. 1876, was introduced by Messrs. Andrews (D-NJ) and Ron Lewis (R-KY). Timing for their further consideration is uncertain.

LENDERS CONSIDER END TO PIGGYBACK LOANS
In response to a flood of defaults among borrowers of "piggyback" loans - which are taken out, along with first mortgages, by home buyers with little or no cash for a down payment - lenders are demanding greater documentation on such financing or are dropping this option from their menus altogether. All of this means that investors in bonds backed by piggyback mortgages could endure some pain. Unlike with bonds backed by primary loans, which do not realize losses until the lender sells the foreclosed property, bonds underpinned by piggybacks see the entire balance of the loans written off as soon as the borrower goes into default after three to six months of missed monthly payments. "Losses have come in earlier than expected and higher than expected," according to Grant Bailey of Fitch Ratings' residential mortgage-backed securities group, who says while none of the company's investment-grade piggyback bonds have taken a loss to date, "it's probably only a matter of months until they do." Source: Wall Street Journal, Danielle Reed (06/05/07)

BUSH ADMINISTRATION LIMITS WETLANDS PROTECTIONS

Non-permanent streams and nearby wetlands will be harder to protect under the Federal Clean Water Act according to new guidance issued by the Environmental Protection Agency and the Army Corps of Engineers this month. The guidance provides that for such waters to be protected there must be a 'significant nexus' (connection) shown between the intermittent stream or wetland and a traditional waterway. Determinations of significant nexus will be made on a case-by-case basis following analysis of water flows and related issues. EPA officials said the guidance shows a commitment to ensure the commitment of no loss of wetlands. Environmental groups decry the move as a retreat on such protections.

HUD LIMITS FHA PROPOSAL TO SELLER PAID DOWNPAYMENT ASSISTANCE

A number of state and local associations of REALTORS have received reports of a proposed HUD rule that implies the department is seeking to prohibit the use of downpayment assistance programs in FHA transactions. To clarify, the HUD proposal would only prohibit seller-paid downpayment assistance. For background, HUD's proposal is consistent with a report of the U.S. Government Accountability Office, which found that the average price of homes using seller-paid assistance was inflated by 3 percent and had a higher foreclosure rate. The proposal also follows action by the IRS, which has published a rule that strips organizations found to be "middlemen" for seller-paid assistance of their 501(c)(3) tax-exempt status. Looking ahead, FHA reform legislation under consideration in Congress would allow for zero-downpayment FHA loans, which would then abrogate the need for any downpayment assistance.