Nation

WAYS AND MEANS TO ADDRESS AFFORDABLE HOUSING/AMT
The House Ways and Means Committee has approved its "Views and Estimates" letter to the House Budget Committee. The letter is a broad outline of Committee priorities for the year. It provides a framework for the Budget Committee to use as it crafts a preliminary budget resolution for the fiscal year. Notable: The section on tax indicates that one of the committee's goals for the year is to "examine provisions to promote affordable housing." The Committee will also seek to reduce the burden of the Alternative Minimum Tax (AMT). The tax press has reported that Ways and Means Committee Chairman Charlie Rangel (D-NY) provided insights into his approach to "fixing" the AMT in an address to the International Fiscal Association. The Committee will search for as many offsets as possible before beginning any inquiry into increasing tax rates. Notable: He is reported to have said that the mortgage interest deduction (as well as the deduction for state and local taxes and rules affecting tax-exempt entities) will NOT be used to "pay for" any AMT relief.
BANKING REGULATORS RELEASE STATEMENT ON SUBPRIME LENDING
On March 2, 2007, the federal banking agencies that regulate banks, thrifts, and credit unions, released a Statement on Subprime Mortgage Lending. Once published in the Federal Register, public comments will be due within 60 days. In recent months, many industry players and consumer groups have raised concerns about subprime mortgages that have initial teaser rates that impose a significant payment shock when the rate resets at the end of the initial period (usually at the beginning of year 3 or 4). Many lenders have defended them. The proposed Statement attempts to deal with the characteristics of certain types of subprime mortgages that could result in the borrower losing the home or paying very high refinancing costs. The Statement includes underwriting standards, consumer protection principles, control systems for monitoring whether an institutions practices are consistent with its policies and procedures, and supervisory review policies. The Statement would require institutions to underwrite based on a fully indexed, fully amortizing repayment schedule, taking into account taxes and insurance. The Agencies want institutions to limit underwriting based on stated income and reduced documentation, since for many borrowers W-2s, pay stubs, and tax returns should be available to document income. The statement also emphasizes the importance of explaining the terms of the loan to the consumers, especially the risk of payment shock and the impact of prepayment penalties, balloon payments, and absence of tax and insurance escrows.

NAR will assess the details of the Statement during the comment period and submit its views to the Agencies.