Nation

FHA LEGISLATION PASSES HOUSE SEES SENATE ACTION

On September 18, the House of Representatives passed H.R. 1852 the "Expanding American Homeownership Act of 2007" by a strong vote of 348-72. The bill includes provisions to eliminate the 3% downpayment requirement, increase the loan limits, streamline condominium purchases, and eliminates the cap on Home Equity Conversion mortgages (HECMs). During debate, an amendment offered by Reps. Barney Frank (D-MA), Gary Miller (R-CA) and Dennis Cardoza (D-CA) passed on a voice vote. This amendment will increase the FHA loan limits to 125% of median area home price, with a cap of 175% of the conforming loan limit. Such an increase will help FHA be a valuable tool in all areas of the country from Massachusetts, to South Carolina, to Texas, to Nevada, and even in California. NAR issued a full Call to Action to the membership on the bill and the amendment that helped make this victory possible. Thank you to those who responded.

On September 19, the Senate Banking Committee passed their own version of the bill called the "Building American Homeownership Act." The Senate bill has not yet been introduced, but was written by Senators Chris Dodd (D-CT) and Mel Martinez (R-FL). The Senate bill increases the FHA loan limits to 100% of area median, capped at 100% of the conforming loan limit; reduces the downpayment requirement to 1.5%, streamlines condominium purchases, and eliminates the cap on HECMs. The bill also includes a second title that would reform FHA's manufactured housing bill. Similar legislation, which NAR supports, passed the House in June. It is hoped the Senate will take up the measure in the next few weeks.

LAW WOULD KEEP IRS FROM TAXING FORECLOSURES
The U.S. House Ways and Means Committee is considering legislation that would end IRS's practice of classifying mortgage debt forgiven in a foreclosure as taxable income.

The House Ways and Means Committee will met in late September to mark up mortgage cancellation tax relief. In a rare departure from House custom, the bill will likely move as freestanding legislation, rather than as a provision of a larger bill. If adopted, the provision would have no cap and no income limits. It would be a permanent rule. (President Bush proposed only temporary relief.) As presently contemplated, the relief would apply to mortgage debt forgiven on or after January 2007. The revenue estimate for the provision is $1.4 Billion over 10 years. A "pay-for" has been identified that will tighten, but not eliminate, a benefit of current law. Since the 1990s, NAR has supported efforts to change the so-called "phantom tax" law. The bill also would extend a current tax deduction for mortgage insurance. Sens. Debbie Stabenow, a Michigan Democrat, and George Voinovich, an Ohio Republican, have sponsored similar legislation in the Senate, but no date has been set for its consideration.