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House Panel Approves Tax Break for Strapped Home Owners
The House Ways and Means Committee on Sept. 26 approved H.R. 3648, legislation that would help American families avoid foreclosure and stay in their homes. The bill would eliminate any tax penalties home owners might face when banks renegotiate the terms of a home loan and forgive a portion of the outstanding mortgage. The change in the tax law would apply only to principal residences. Prior to the panel's vote, NAHB sent a letter of support to all committee members that said: "With the whirlwind of problems in the mortgage finance system, H.R. 3648 can help stabilize families, their neighborhoods, the surrounding community and the economy as a whole." The legislation also follows one of the policy provisions approved at this month's NAHB Board of Directors meeting in Seattle to address the mortgage credit crunch.
H.R. 3648 also includes an NAHB-supported provision that extends the deductibility of mortgage insurance. Mortgage insurance is especially critical for low-to moderate-income first-time home buyers, many of whom may not qualify for a market-rate mortgage. By enabling mortgage insurance premium payments to be deducted, NAHB said in its letter, "homeownership is made more affordable for thousands of families who would now be able to buy a home without having to resort to more costly subprime or predatory alternatives." The current deduction, which is set to expire on Dec. 31, would be extended through 2014 under the House bill. A similar debt forgiveness bill, S. 1394, is pending in the Senate. To read the legislation, click here and enter the bill number in the box at the center of the page. For more information, contact Greg Brown at 800-368-5242 x8421.
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House Moves to Strengthen Flood Insurance Program
The House on Sept. 27 approved NAHB-supported legislation that would reform the National Flood Insurance Program (NFIP), and, for the first time, include coverage for wind in addition to water damage. H.R. 3121, the Flood Insurance Reform and Modernization Act of 2007, was approved by a vote of 263 to 146. It includes a provision championed by Rep. Gene Taylor (D-Miss.), who lost his home in Hurricane Katrina, that would expand the NFIP to provide property insurance coverage for wind-related damage to help residents who live in coastal areas.
The day before the vote, NAHB sent a letter to every House member in support of the bill and urged lawmakers to approve a Manager's Amendment to the legislation that would provide a needed addition in expanding the availability and affordability of property insurance in high hazard areas. The amendment, which was approved by the chamber, calls on Congress to direct the Federal Emergency Management Agency to use the wind provisions of the model building codes published by the International Code Council and prevents FEMA from defining or establishing windstorm zones and any additional federal land use controls. These provisions were also included as part of a resolution approved by the NAHB Board of Directors in Seattle earlier this month that supports the expansion of the NFIP to include wind damage. NAHB is also urging Congress to limit the amount of the program's fiscal exposure to ensure its financial sustainability and to require premiums for the new multiple-peril coverage to be risk-based and actuarially sound.
Of note to home builders, the bill does not expand the Special Flood Hazard Area to encompass the 500-year floodplain or include mandatory purchase requirements for properties sited behind flood protection structures. After defeating several attempts to include these provisions in previous Congresses, NAHB is pleased that neither were included in H.R. 3121.
H.R. 3121 would also:
- Increase the amount FEMA can raise policy rates in any given year from 10 percent to 15 percent.
- Extend multiple-peril policies for wind damage where local governments agree to adopt and enforce building codes and standards designed to minimize wind damage.
- Permit any community participating in the flood insurance program to opt into the multiple-peril option. The multiple-peril residential policy limit is $500,000 for the structure and $150,000 for contents. Non-residential properties could be covered to $1 million for structure and $750,000 for contents and business interruption.
- Increase the maximum coverage limits for flood insurance policies from $250,000 for structures and $100,000 for contents to $335,000 and $135,000, respectively; and raise non-residential property coverage from $500,000 to $670,000.
The final outlook for enacting this bill into law is uncertain. There is currently no companion bill in the Senate and President Bush has indicated that he would veto the House bill because adding wind coverage to the NFIP could mean that taxpayers would have to subsidize any added expansion to the program. To read the legislation, click here and enter the bill number in the box in center screen. For more information, contact Scott Meyer at 800-368-5242 x8144.
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HOPE VI: Mandatory Green Building Provision a Poison Pill
The House Financial Services Committee on Sept. 26 approved H.R. 3524, the HOPE VI Improvement and Reauthorization Act of 2007. While NAHB has long supported the HOPE VI program, a letter was sent to every committee member informing them that NAHB would oppose the bill because it seeks to mandate green building requirements through the Green Communities program and the U.S. Green Building Council's (USGBC) Leadership in energy and Environmental Design (LEED) rating system. "As leaders in green building, NAHB believes this mandate is a tremendous obstacle for affordability, particularly for a market that is specifically concerned with development cost constaints ... the explicit reference to one rating system in this legislation is overly restrictive, costly and could limit the number of projects that can be undertaken within the HOPE VI program. Most importantly, the LEED rating system is not an officially recognized construction standard," the letter stated. The bill will now go to the House floor. In the interim NAHB will continue to urge lawmakers to oppose any explicit mandate for only one green building program and to strike this provision from the legislation when the full chamber considers the measure. For more information, contact Elizabeth Odina at 800-368-5242 x8570.
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Stopgap Bill Keeps Government Running Through Mid-November
With the new fiscal year to begin on Oct. 1 and none of the 12 annual spending yet to be enacted into law, Congress this week approved a stopgap spending measure that will fund government programs through Nov. 16. Known as a continuing resolution (CR), the legislation will keep the government funded at fiscal 2007 levels. Currently, only four of the 12 appropriations bills have passed both the House and Senate. President Bush has indicated that he would veto any bills that exceed his budget request. In addition, the CR also includes short-term extensions of funding that falls outside the appropriations process , including for the State Children's Health Insurance Program, or SCHIP, and aviation- and trade assistance-related programs.
The Senate is expected to consider the fiscal 2008 Defense and Commerce-Justice-State appropriations bills next week before adjourning for a week-long Columbus Day break. House Appropriations Committee Chairman David Obey (D-Wis.) is calling on the President to meet with Democratic lawmakers now to negotiate over spending levels on all the appropriations bills, even though Congress has yet to send a single spending bill to the White House. Obey believes that beginning the negotiating process now will enable Congress and the President to work out compromises sooner and expedite the appropriations process. The Senate has thus far been silent on his proposal. For more information, contact Jenna Hamilton at 800-368-5242 x8407.
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House Panel Approves Disaster Insurance Bill
The House Financial Services Committee on Sept. 26 approved legislation designed to make disaster insurance more affordable to home owners who live in certain high-risk areas. H.R. 3355, the Homeowners' Defense Act of 2007, focuses on making disaster insurance more readily available and cost-effective for home owners who live in areas affected by natural disasters, such as certain coastal areas in Florida where many private insurers have avoided issuing insurance. The bill, which was introduced by Reps. Ron Klein (D-Fla.) and Tim Mahoney (D-Fla.), would disperse insurance risks by allowing state-sponsored insurance funds to band together and pool their risks to guard against massive insurance losses from natural disasters. The bill could move to the House floor before the end of the year. To read the legislation, click here and enter the bill number in the box in the center screen. For more information, contact Scott Meyer at 800-368-5242 x8144.
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House Judiciary Holds Hearing on the ‘Mortgage Mess’
The House Judiciary Subcommittee on Commercial and Administrative Law on Sept. 25 held a self-titled “mortgage mess” hearing on legislative proposals that would allow bankruptcy judges to modify the terms of a mortgage for home owners going through Chapter 13 bankruptcy proceedings. Currently, bankruptcy judges can alter the terms of all secured debts — except for mortgages on a primary residence. Much of the hearing focused on whether lenders are willing — and able — to voluntarily modify the terms of a mortgage, particularly sub-prime mortgages that are about to reset in order to stave off a foreclosure and possible bankruptcy.
Under the Emergency Home Ownership and Mortgage Equity Protection Act of 2007 (H.R. 3609), introduced in the House last week by Rep. Brad Miller (D-N.C.), the judges would be able to reduce the value of the loan, extend the terms of the loan, lower the interest rate, delay the effective date of an adjustable rate increase and make other similar changes to a mortgage. Although well-intentioned, NAHB is concerned that this bill could have a negative impact on liquidity in the mortgage markets.
Such changes introduce substantial risks that the terms of loans will be changed in unpredictable ways. It is likely that the cost of mortgages would have to increase to reflect this additional risk, especially in the sub-prime market. This may make it harder for Americans to obtain a new mortgage or refinance their existing mortgage, the exact opposite of what the bill’s supporters intend. NAHB, joining with nearly a dozen other groups concerned about liquidity in the mortgage markets, sent a letter to members of the House Judiciary Committee in opposition to H.R. 3609 prior to the hearing. To read the legislation, click here and enter the bill number in the box at the center of the page. For more information, contact J.P. Delmore at 800-368-5242 x8412.
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