ALTA Advocacy Update
August 30, 2010
ALTA Advocacy Update
ALTA's efforts to warn homebuyers about home resale fees are producing a steady drumbeat of media stories. Most notable this past week are articles from Forbes which published this piece on Freehold Capital Partners founder Joe Alderman: "Proponent Of New Real Estate Fee Exempts His Own House," and CNN Money which published the article: "The latest real estate rip-off?"
We discussed last week the ban on all transfer fees proposed by the Federal Housing Finance Agency (FHFA) on Fannie Mae, Freddie Mac and the Federal Home Loan Bank loans and the potential impact of the ban on Homeowners Associations (HOAs) that use transfer fees to fund community improvements. Since then, we have received conflicting information about how community associations (or HOAs) use transfer fees. If the revenue is used to fund improvements to common areas in a community, it arguably benefits the land. If the revenue is used by an association management company or developer-controlled HOA for other uses, it may be difficult to make a "benefit-the-land" argument. This argument is key to the legitimacy of the transfer fee. If you have information that can help ALTA understand how this revenue is used, please contact Justin Ailes at jailes@alta.org.
While we have discussed financial regulatory reform for over a year in the Advocacy Update and at ALTA meetings, some of you may be interested in a "deep dive." ALTA has partnered with our colleagues at the Texas Land Title Association to offer a webinar discussing the new financial reform law and how it will impact the title and settlement services industry. The webinar will be held from 11:00 a.m. to 12:00 p.m. ET next Tuesday September 8, where you can learn how the 2,300-page bill will impact your business and the hundreds of rulemakings that will follow, about the new Consumer Financial Protection Bureau and its vast new federal powers, as well as key points found in the section of the bill devoted to reform of the mortgage market. If you're interested, click here to register.
ALTA President Mark Winter, Agents Section Chair Frank Pellegrini and I sat down last week with Fannie Mae CFO David Johnson to discuss the value of title insurance in the secondary market, as well as private transfer fee covenants and ALTA's support for providing consumers their closing documents before closing. It was a wide-ranging and fascinating conversation that plunged deeply into the inner workings of the mortgage market, and particularly well timed as Congress is poised to begin debate on how to reform the federal government's support of mortgage finance and the secondary mortgage market. Industry groups are already gearing up for the fight with the Realtors, Mortgage Bankers, and Home Builders all calling for some level of government support for the future housing finance system.
The FHFA, which serves as the regulator and conservator of Fannie and Freddie, released a report on the collapse of the two government-owned mortgage giants. The report came to the unexpected conclusion that the GSE's losses stemmed from their role as guarantor of mortgages, rather than from overleveraging in an attempt to build up their own portfolios.
Administration officials are floating the idea for a system with a more transparent, risk-related fee on mortgage lending that would fund future government guarantees on mortgages. While there is no solid plan for how this would work, lawmakers are aware that they must walk a fine line between pricing the fee high enough to cover the risk while not shutting borrowers out of the market because of high costs.
The talk show circuit is stirring up debate on whether Congress should preserve the Bush era tax rates set to expire at the end of this year, including those for the wealthiest Americans. That groups like the Chamber of Commerce, National Association of Manufacturers and National Federation of Independent Businesses are pushing for an extension is no surprise, as the tax hikes would fall disproportionately upon their small business members. However, some Democrats are growing more supportive of a temporary extension, mindful of the fact that the top three percent of wage earners in America account for 25% of consumer spending, and that cutting their ability to spend during a recession may be stronger economic poison than it is budgetary medicine.
BP announced a portion of its $20 billion claims fund for victims of the Gulf Coast oil spill has been set aside for real estate professionals. According to HousingWire, the fund will set aside $60 million for real estate licensees in the five states affected by the spill: Texas, Louisiana, Mississippi, Alabama, and Florida. This could prove helpful for any ALTA members that may have a partnership with a real estate agent or brokerage. Click here for more information about how to file a claim.
At the Federal Reserve's annual retreat in Jackson Hole, Wyoming, this weekend, Chairman Ben Bernanke reinforced earlier statements that the Fed is ready to act to stabilize the economy if necessary. Although no immediate policy changes are expected, Bernanke outlined four options to spur economic growth, while cautioning that each could come with unfavorable consequences. Options include continuing the practice of buying mortgage and Treasury debt; maintaining low short-term interest rates; reducing rates banks receive by parking their reserves with the Fed; and raising the Fed's inflation target above 2%. Investors rallied after the speech, but time will tell if any of these ideas need to be pulled out of the Fed's toolkit.
Mortgage rates for 30-year conventional mortgages dropped another 6 basis points to 4.36% last week. Several housing market indicators were released last week as well. There was a lot of bad news, but some good news too. On the downside, July's existing home sales dropped to 3.83 million annualized units - down 27.2% from June and 25.5% from a year earlier. This is a 15 year low. New home sales also fell to an all-time low (we're going back to the '60s here) of 276,000 annualized units - down 12.4% from June and 32.4% from a year earlier. Columnist Frank Ahrens argues that these types of drops need to occur in order for markets to right themselves, painful as it may be to admit.
The good news: the Federal Housing Finance Agency's (FHFA) home price index rose last quarter (for the first time in three years), up 0.9%. In addition the Mortgage Bankers Association reported that for the first time since 2006, there were fewer homes in the foreclosure process. In the last quarter, 9.11% of outstanding mortgage loans were in foreclosure, down from 9.54% in the first quarter. The S&P Case-Schiller home price index is also expected to show a rise when it is released tomorrow.
We also have good news to report on TIPAC. To date, TIPAC has received commitments of $201,225 from 362 contributors. While she got an informal introduction in the Advocacy Update last week, I am excited to welcome Kelley Williams to ALTA's staff as Manager of Government Affairs. Aside from her lobbying duties, Kelley is responsible for building and promoting TIPAC. Kelley joins us from the "big four" accounting and auditing firm KPMG, where she managed their PAC and supported the firm's advocacy on Capitol Hill. If you would like to welcome Kelley, please reach out to her at kelley@alta.org.
We know that budgets are extremely tight and that it is especially important for title companies to measure the return on investment of their time away from the office spent at industry meetings and events. That's why we have created a Return on Investment Planner to help you track the value of the educational and networking opportunities you'll experience at the 2010 ALTA Annual Convention, to be held October 13-16 at the Manchester Grand Hyatt in San Diego. ALTA's ROI planner will help clarify your goals and takeaways from the Annual Convention, and quantify their value to your company. Remember, if you register by September 17, you can save $200.
Lastly, Cuba is opening up property ownership to allow foreign investors to lease government land for up to 99 years. While foreign investors are cheering, skeptics note that Cuba has been down this road before, loosening foreign investment rules during tough times, only to scrap those reforms when its economy improved. Investors looking to build golf courses ringed by luxury villas, beachfront timeshares and vacation homes for well-heeled tourists may want to learn more about the value of a leasehold policy.
I hope you find this ALTA Advocacy Update useful. Please e-mail me if you have questions or comments.
Best regards,
Kurt Pfotenhauer |
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Closing 101
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