PPAR Mission Statement:
“The Pikes Peak Association of REALTORS® helps its members to be ethical, professional and successful by providing quality services and protecting the free enterprise system and real property rights.”
PPAR Day at the Legislature – Jan 15, 2014
House Passes Mortgage Debt Forgiveness Tax Relief
Last night (12/3/14) the United States House of Representatives, extended the income tax exemption on mortgage debt forgiven in a short sale or a workout for principal residences. The bill containing the income tax exemption on forgiven mortgage debt and other expired tax provisions passed by a vote of 378 to 46. The United States Senate has not yet voted on the measure. Please contact your Senators and encourage them to pass this measure. NAR will continue to ask members to send messages to United States Senators until the bill is passed or the scheduled end of the Lame Duck session on Friday, December 12.*
*Congress could extend the session beyond its current end date
FDIC Finalizes QRM Rule
On October 21, 2014, The FDIC was the first of six regulators to finalize the QRM (Qualified Residential Mortgage) Rule.
The QRM rule provides a set of requirements a loan must meet to be considered a safe loan and eligible to be sold to investors as part of a mortgage-backed security without the lender having to retain 5 percent of the loan amount on its books. Because the QRM loan comes without the risk-retention requirement, lenders should be able to make more loans and also make them more cheaply, because they don’t have to pass along that risk-retention cost to borrowers.
NAR has been vocal for several years that the QRM rule should be broad rather than prescriptive and that it should match up with the qualified mortgage (QM) rule, which took effect at the beginning of this year, and the QRM rule does in fact do that. The QM rule provides ability-to-repay standards for safe and affordable loans, whether or not they’re securitized for sale to investors. Under the QRM rule, as under the QM rule, loans are generally considered qualified if the borrower’s debt-to-income ratio is 43 percent, among other things. There is no onerous down payment requirement, which regulators had talked about including and which NAR and coalition partners strongly opposed.
The rule takes effect in 12 months. That will give lenders time to align their internal processing systems with the requirements. Since lenders have already been aligning their systems to the QM rule, the process can be expected to go smoothly. For lenders, having the two rules in alignment provides clarity that they’ve long been asking for. One result of this new clarity could be a widening and deepening of loan availability, which has been one of the main stumbling blocks to increased home sales.
Elimination of FHA “Prepayment Penalty”
On August 26, 2014, the Federal Housing Administration (FHA) issued its final rule to eliminate post-payment interest charges on FHA-insured single family mortgages. NAR has lobbied FHA and Ginnie Mae for over a decade to remove this prepayment penalty as the policy placed an unreasonable burden on consumers who already face high housing and closing costs. Conventional loans, as well as loans from the Veterans Administration’s Loan Guaranty Program and the U.S. Department of Agriculture’s Rural Housing Service loan program, do not have post-payment interest charges.
The Consumer Financial Protection Bureau raised the issue with FHA last year, asking why FHA was allowing its lenders to collect post-payment penalties from borrowers at closing. FHA had argued that its bond investors, who purchase packages of insured mortgages, expected full-month payments of interest plus principal. FHA said that its lenders did charge borrowers slightly below market rates to help compensate for the post-closing payments. NAR estimated that during 2003 alone, sellers and refinancers paid nearly $690 million in extra interest charges due to the policy.
The policy change will prohibit mortgagees from charging borrowers interest on their home mortgages after a principal balance pay-off. The final rule will go into effect on January 21, 2015. However, sellers and refinancers who currently have FHA loans and expect to close before Jan. 21 likely won’t see much benefit from the new policy