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GA Blog: National issues

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2.12.20 Moving Away From Debit to Income

In a letter to members of Congress, the Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger said the bureau has decided to propose an amendment to the Qualified Mortgage (QM) Rule that would move away from debt-to-income ratios in mortgage underwriting.  The amendment would implement other measures for underwriting like pricing threshold.

Debt-to-Income ratios are a trending topic with the QM Patch set to expire in January 2021.  The QM Patch exempts GSE-backed loans from abiding by the full scope of the Qualified Mortgage rule, specifically the debt-to-income cap of 43%.  Privately backed loans however are still required to abide by the 43% cap.

The National Association of REALTORS® has expressed support for a QM Patch extension and has signed onto a letter sent to CFPB Director Kraninger which makes a “recommendation that the Bureau implement a QM definition that relies on measurable underwriting thresholds and the use of compensating factors for higher risk mortgages rather than either a pricing-based QM definition that uses the spread between the annual percentage rate (APR) and the Average Prime Offer Rate (APOR) as a proxy for underwriting requirements (the “APOR approach”) or a hard cut-off at either 43% or 45% DTI.”  This would mimic what Fannie Mae and Freddie Mac currently use with the QM Patch.

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9.11.19 Administrations GSE Proposal

For 11 years, Fannie Mae and Freddie Mac have been under conservatorship.  Now, the Trump administration has released a 53-page plan for the conservatorship of the government sponsored-enterprises (GSEs) to end.

NAR has been in direct meetings with the administration and the Federal Housing Finance Agency, the authority that oversees Fannie Mae and Freddie Mac.  While the National Association of REALTORS® applaud the movement to shift the GSEs out of conservatorship, NAR will be diligent to share any concerns over provisions that potentially could negatively impact the housing markets. NAR released its own plan in February to positive industry support.

This process is not expected to have any effect of housing markets in the short term. Still, reforms to the secondary mortgage market can affect both the availability and the cost of mortgage credit for REALTOR® clients.

You can find a detailed article from HousingWire here.

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3.20.19 National News: Federal Reserve Signals It Won't Raise Interest Rates At All This Year

At the conclusion of its March meeting, the Federal Reserve announced it is not raising the federal funds rate. In fact, the Fed is signaling it is done with the idea of rate hikes for the rest of 2019.

The Federal Open Market Committee’s statement indicated that the Fed is taking a cautious tone with the rates as it monitors the rate of inflation and other global economic conditions and developments.

“In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes,” The FOMC statement said.

The committee said it will maintain its target range for the federal funds rate at 2.25-2.5%. 

Read more about interest rates at HousingWire.

Federal Reserve

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3.18.19 National News: NAR Cheers Bill to Extend Fair Housing Protections to the LGBTQ Community


From NAR's REALTOR® Magazine

The National Association of REALTORS® supports legislation introduced in both chambers of Congress Wednesday to extend protections under the Fair Housing Act to the LGBT community. “REALTORS® have worked for [nearly] a decade to ensure the American dream of homeownership is not unfairly denied to those in the LGBT community,” NAR President John Smaby said in a statement.

NAR amended its Code of Ethics to prohibit discrimination based on sexual orientation in 2011 and gender identity in 2013. Last year, the association supported the Fair and Equal Housing Act, which would make those protections part of the Fair Housing Act. However, Congress adjourned before the bill could come up for a vote.

The legislation introduced Wednesday, called the Equality Act, includes the NAR-supported housing protections of the Fair and Equal Housing Act and also extends LGBT protections in the areas of employment, public accommodations, credit markets, and voting. Shannon McGahn, NAR senior vice president for government affairs, will appear at a policy summit hosted by the National Association of Gay and Lesbian Real Estate Professionals next month in Washington, D.C., to talk about next steps for the legislation.

Read more about "What Everyone Should Know About Equal Opportunity Housing"

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1.23.19 National News: Treasury, IRS Give Big Win to Real Estate Professionals in Qualified Business Income Rule

Late last week, the Treasury Department and the Internal Revenue Service issued final regulations regarding the new 20 percent deduction on qualified business income. As Americans begin preparations for the 2018 tax filing season, real estate professionals have been uncertain about the true impact of the 2017 Tax Cuts and Jobs Act on their respective businesses. Friday’s ruling from Treasury and the IRS, however, signaled a significant victory for the real estate industry and for many of the National Association of Realtors®’ 1.3 million members.

A central component of the new tax law is a reduction of the corporate tax rate – from 35 to 21 percent. However, since nine out of ten American businesses are structured as pass-through entities rather than corporations, the Section 199A provision provides critical tax deductions for small businesses and self-employed independent contractors, which is how many real estate professionals are classified.

Within the 247-page rule issued last Friday, three major provisions for real estate professionals stood out as critical victories for members of the National Association of Realtors®.

Most importantly, the regulation clarifies that all real estate agents and brokers who are not employees but operate as sole proprietors or owners of partnerships, S corporations or limited liability companies are eligible for the new deduction, which can be as high as 20 percent. This includes those whose income exceeds the threshold of $157,500 for single filers and $315,000 for those filing a joint return.

Second, the rule simplifies the process that owners of rental real estate property must follow to claim the new deduction. As written in the Tax Cuts and Jobs Act, only income that is from a “trade or business” qualifies for the 20 percent write-off. However, because this distinction was not clearly defined by Congress when crafting the law, various court rulings and prior IRS guidance have caused confusion among tax professionals in determining which rental properties were merely investments and which could accurately be considered a business enterprise.

NAR strongly urged Treasury and the IRS to simplify the rules in order to give millions of rental real estate owners certainty surrounding their ability to qualify for this new deduction. Friday’s final regulations included a bright-line safe harbor test requiring at least 250 hours per year spent on maintaining and repairing property, collecting rent, paying expenses and conducting other typical landlord activities.

Finally, within the proposed regulation released last August, those who had exchanged one parcel of real estate under Section 1031 for another parcel were unfairly denied deduction eligibility. However, NAR and multiple additional trade groups concerned with commercial real estate were vocal in highlighting this shortcoming. In a positive resolution to the situation, Treasury and the IRS recognized the initial ruling was misguided and corrected the policy in Friday’s final guidance.

More information on the final regulations for the 20 percent deduction is available here.


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1.21.19 National News: Annual BU Survey of Mayors Nationwide Finds Affordable Housing is Top Issue

As home values and rents continue climbing nationwide, affordable housing is the number-one concern for big city mayors — whether Republican or Democratic — and the cost of housing is the sole issue that many mayors from both parties consider a significant barrier to social mobility, according to a new study from the Boston University Initiative on Cities.

Almost two-thirds of mayors consider affordable housing an integral part of city infrastructure, though only 56 percent favor relaxing zoning rules to encourage greater density in established, popular neighborhoods, according to BU’s 2018 Menino Survey of Mayors.

“By and large, I think mayors are acknowledging the challenges in reshaping their cities’ housing,” said Katherine Levine Einstein, a BU assistant professor of political science and co-author of the study, which is named for former longtime Boston mayor Thomas M. Menino.

Einstein added, though, that the mayors’ reluctance to increase density doesn’t seem to “match what they’ve said about how big a priority this is for them.”

More on the survey results from The Boston Globe.

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