7.15.08     Rendell vetoes spot assessments bills    The victory for REALTOR® and real estate consumers was short lived as Governor Ed Rendell vetoed legislation aimed at protecting consumers from spot reassessments - despite the overwhelming bipartisan support in both houses of the legislature. The General Assembly approved legislation on July 4 to stop school districts from appealing property tax assessments on homes that recently sold. If enacted, Senate Bill 1247 (Rhoades, R-Schuylkill) and House Bill 1438 (Seip, D-Schuylkill) would have closed this loop hole. LVAR and PAR offered support for the legislation, which was opposed by the PA School Boards Association and others. Senate Bill 1247 passed with only two negative votes in the Senate and seven in the House; House Bill 1438 passed with three negative votes in the House and four in the Senate. LVAR issued a press release expressing our disappointment with the Governor’s decision to veto these important bills aimed at protecting real estate consumers. LVAR will continue to follow this issue closely and work with our legislators to address this issue when they reconvene in the fall.   7.15.08   U.S. Government Reassures Financial Markets on Viability of Fannie Mae and Freddie Mac In response to market turmoil and unsubstantiated rumors about the continued viability of Fannie Mae and Freddie Mac, the U.S. Government took action to make clear that the two government sponsored enterprises (GSEs) will not be allowed to fail. On July 13, the Federal Reserve Board announced authority for the Federal Reserve Bank of New York to make secured loans to the GSEs, if necessary. The Fed took a similar step for investment banks at the time of the Bear Stearns failure. The same day, Treasury Secretary Paulson announced three legislative proposals: Temporary authority for the Treasury Department to make direct loans to the GSEs.  Temporary authority for the Treasury Department to purchase stock of the GSEs. The stock is expected to have priority status over existing classes of GSE stock.  A permanent requirement that the new GSE regulator (the successor to the Office of Federal Housing Enterprise Oversight (OFHEO)) must consult with the Fed on GSE capital requirements and all other safety and soundness standards for the operation of the GSEs. This authority strengthens the hand of the new regulator by putting the prestige and power of the Fed behinds its policies, but it weakens the regulator by giving the Fed an important policy role. GSE and government officials are both on the record saying that they see no current need for the GSEs to borrow from the Fed or the Treasury or for Treasury to buy stock in the GSEs. 7.15.08   Federal Reserve Board Issues Final Rule to Prevent Abusive Lending   On July 14, 2008, the Federal Reserve Board released its final rule to prevent unfair or deceptive practices in the mortgage markets by all lenders, not just those with federal deposit insurance. Some requirements apply only to "higher-priced mortgages" (subprime mortgages defined as those with an interest rate at least 1.5 percentage points above the average prime mortgage rate based on the Freddie Mac survey and 3.5 percentage points above for subordinate mortgages). Other requirements apply to both higher-priced (subprime) mortgages and to most other mortgages. The rules do not apply to home equity lines of credit, construction loans, bridge loans, or reverse mortgage loans. For higher priced loans, the final rule: Requires lenders to verify borrower income and assets. Requires escrows/reserves for taxes and insurance.  Bars prepayment penalties for mortgages where the payment can change during the first 4 years of the mortgage (and bar prepayment for the first two years for other higher priced loans). (NAR's comment on the proposed rule opposed all prepayment penalties, and the Fed accepted the NAR position with respect to mortgages that reset during the first 4 years--a significant improvement).  Requires lenders to consider the ability of the borrower to repay the loan from sources other than the value of the home. (In response to NAR and other commenters, the Fed dropped the requirement that there would only be a violation if a lender engaged in a "pattern or practice" of such weak underwriting, since that would be extremely hard for consumers to prove.) The final rule takes effect on October 1, 2009, except the escrow/reserve requirement will phase in during 2010. Click here to read the announcement. 7.28.08   Congress Passes Massive Housing Bill Last week the House and Senate passed H.R. 3221, the "Housing and Economic Recovery Act of 2008." This legislation contains a number of victories for REALTORS® and American homeowners including GSE reform, FHA reform, permanent loan limit increases, and a $7500 homeowner tax credit. This bill will help homeowners facing foreclosure find ways to refinance, and will help strengthen mortgage markets. Congressman Charlie Dent, although supportive of virtually all of the housing stimulation provisions, voted against the bill citing concern about a provision that would extend an open ended line of credit from the US Treasury to Fannie Mae and Freddie Mac. The bill passed the House by a vote of 272-152 on July 23 and the Senate by a vote of 72-13 on July 26. The President is expected to sign the bill on Tuesday, July 29, 2008. Effective dates of the bill differ among provisions. See the summary below for more details. View the bill summary