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Bush Signs Mortgage Debt Relief Bill Into Law
NAHB achieved a major victory in its bid to address the subprime lending crisis when Congress on Dec. 18 approved legislation to eliminate taxes on mortgage debt. For months, NAHB has lobbied the Congress to approve this measure, noting that it will help struggling home owners to avoid foreclosure. The legislation, which was subsequently signed into law by President Bush on Dec. 20, provides a temporary, three-year change to the tax code to eliminate any taxes home owners might face when banks renegotiate the terms of a home loan and forgive a portion of the outstanding mortgage debt. The change in the tax law caps untaxable forgiven debt at $2 million and applies only to principal residences.
Existing tax rules under Section 108 of the Internal Revenue Code impel many struggling home owners to seek foreclosure over restructuring their loan with lenders because forgiven mortgage debt is taxed as ordinary income. H.R. 3648, the Mortgage Forgiveness Debt Relief Act, removes this tax burden on mortgage indebtedness, encourages market-based restructuring between lenders and home owners and discourages foreclosures.
The legislation also includes an NAHB-supported provision that extends the deductibility of mortgage insurance for three more years. By enabling mortgage insurance premium payments to be deducted, homeownership is made more affordable for thousands of families who now will be able to buy a home without having to resort to more costly subprime or predatory alternatives. For more information, see NAHB's press statement or contact Greg Brown at 1-800-368-5242, x8421.
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Lawmakers Pass AMT Patch Without Revenue Offsets
Bowing to Senate demands in the short-term, the House on Dec. 19 approved H.R. 3996, the Temporary Tax Relief Act of 2007. The primary focus of the bill is to extend short-term relief from the Alternative Minimum Tax (AMT) for another year, which would prevent an additional 20 million Americans from being captured under the tax. In order to move the measure forward and avoid a possible Presidential veto, the House agreed to Senate changes in the bill that stripped out $50 billion in revenue-raising offsets to pay for the bill. Since the bill requires 60 Senate votes to move forward, Senate Republicans prevailed in insisting on a stand-alone AMT relief bill without any spending offsets, arguing that AMT revenue was never intended to be collected in the first place.
However, House Democratic leaders, who insist that pay-as-you-go budget rules are essential to enforcing fiscal discipline and not adding further to the national debt, plan to revisit the issue next year when they seek to retroactively restore a number of tax provisions that will expire at year-end. Several of these expiring tax breaks are of interest to NAHB, such as brownfields expensing, New Market Tax Credits and leasehold improvements. When House tax-writers move to restore the expired tax provisions early next year, they will also try to come up with a total of $50 billion in spending cuts and revenue raisers to pay for the one-year AMT patch. For more information, contact Greg Brown at 1-800-368-5242, x8421.
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Bush Signs Into Law Energy Bill Raising CAFE Standards
Congress on Dec. 18 passed a comprehensive energy bill that includes the first increase in corporate average fuel economy (CAFE) standards in 32 years for cars and trucks. It also sets mandates for renewable fuel production, appliance and lighting efficiency and green building for federal construction. Notably, the building code provisions that NAHB and several real estate leaders lobbied against were not included in the final bill. In addition, NAHB worked to modify language acceptable to the home building industry on improving energy efficiency for FHA properties and successfully lobbied to remove language that could have greatly expanded the scope of the Endangered Species Act in addressing climate change.
NAHB was also able to ensure that new storm water requirements for federal facilities did not encroach upon residential construction and helped lobby for the removal of all references to the U.S. Green Building Council’s LEED rating system for new green building requirements for federal construction projects.
Despite NAHB's intense lobbying efforts to extend tax credits for highly efficient new home construction, Congress failed to include any tax items for renewable energy and conservation projects in the legislation. President Bush signed the bill into law on Dec. 19. For more information, contact Elizabeth Odina at 1-800-368-5242 x8570.
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Omnibus Spending Bill Clears Congress
The House on Dec. 19 approved a massive spending bill encompassing 11 of the 12 annual appropriations bills that will provide $437.5 billion in discretionary spending in fiscal 2008 that adheres to the President’s budget limits. The legislation includes an additional $70 billion to fund the wars in Afghanistan and Iraq as well as $11.2 billion in emergency spending. President Bush is expected to sign the measure into law, ending weeks of feuding with congressional Democrats.
Democrats had previously proposed fiscal 2008 spending bills that were $23 billion over the Administration’s request. However, the White House insisted that any spending bills that exceeded its proposed budget would be vetoed by the President. Even after Democrats agreed to “split the difference” and cut the $23 billion figure to $11 billion, the White House held firm, insisting that the President would only sign an appropriations measure that funded the government at the Administration’s original level. Democrats finally agreed to the President’s limits, but shifted funding to their favorite programs at the expense of Republican priorities. For more information, contact Jenna Hamilton at 1-800-368-5242, x8407.
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Dodd Unveils Bill to Reform Subprime Lending Practices
Senate Banking Committee Chairman Chris Dodd (D-Conn.) on Dec. 12 introduced the Homeownership Preservation and Protection Act of 2007. In a press release announcing the bill, Dodd said the measure is intended to "help put an end to the abusive and predatory lending practices that have sent thousands of Americans into foreclosure and put thousands more in danger of losing their homes." NAHB continues to monitor the situation and is evaluating individual provisions in the bill to determine their impact on the housing market. NAHB policy is to support and encourage continued mortgage market innovation to improve housing affordability and expand homeownership opportunities as long as these loans are prudently underwritten to ensure that the form of financing is appropriate for the borrower and market and that consumers are fully aware of the features and risks of the loan. For more information, contact Scott Meyer at 1-800-368-5242, x8144.
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Fed Proposes New Rules on Lending Practices
The Federal Reserve this week announced it was proposing new rules that would protect borrowers against unfair lending practices. The plan would prevent lenders from imposing pre-payment penalties on certain subprime borrowers; require lenders to make sure subprime borrowers have money set aside for taxes and insurance; and bar lenders from making loans when they do not have proof of a prospective buyer’s income. NAHB plans to submit comments in the Federal Register to ensure that any proposed rule changes protect borrowers without reducing liquidity in the mortgage markets. For more information, contact Dave Ledford at 1-800-368-5242, x8265.
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TRIA Extended for Seven Years
The Congress on Dec. 18 approved a bill that will extend the Terrorism Risk Insurance Act (TRIA) for seven years. Ultimately, House lawmakers agreed to a scaled-back Senate version of the bill that extends the program through Dec. 31, 2014 and sets a threshold of $100 million to trigger coverage. The House in September approved a broader bill that would extend the program for 15 years, lower the threshold for triggering aid to $50 million, expand the program to cover life insurance and make available coverage for nuclear, biological, chemical and radiological attacks. The President had previously issued a veto threat if Congress approved the House plan. With TRIA set to expire at year-end, the House today approved the Senate bill by a vote of 360-53. Enacted in 2002 in the wake of the Sept. 11 terrorist attacks, TRIA is intended to provide a backstop for insurance companies in the event of another attack on American soil. President Bush has said that he will sign the bill into law. For more information, contact Scott Meyer at 1-800-368-5242, x8144.
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Washington Update to Return in January
Editor's Note: Congress has adjourned for the holidays and will be out of session until Jan. 15, 2008. The Washington Update will not publish during this time.
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