Washington Hotline - June 26, 2009

FHA Condo Announcement Brings Good and Bad News

First, the bad news: An FHA Mortgagee Letter released this month limits to 30% the number of units in an FHA-approved condo project that may be financed using FHA-insured mortgage loans. A similar requirement has been in place for years concerning units in non-approved projects. Applying the 30% concentration limit to FHA-approved projects would have an extremely negative impact on condo sales, since many current buyers are turning to FHA-insured loans in the current economy. Such an action would cripple the already-wounded condo market.

NAHB expressed this concern to FHA staff when the Mortgagee Letter was issued. In addition, NAHB members and staff will be soon be meeting with FHA staff to voice the concerns which have been expressed by many members and to discuss alternatives that would facilitate FHA-insured financing for condo units while continuing to protect FHA’s insurance fund.

And the Better News

The Mortgagee Letter makes a number of other changes, many of which will be positive for condo developers. For example, beginning on Oct. 1, a building permit and certificate of occupancy from a jurisdiction that performs at least three construction inspections will eliminate the need for the condo units to be covered by a 10-year warranty. For other jurisdictions, the warranty requirements would be waived if a lender issued an “Early Start” letter and the property has been inspected by an FHA-approved inspector.

FHA’s announcement also confirms that 50% of the units must be owner-occupied and that 50% of a project’s or phase’s units must be sold before loans can be closed. While this hurdle may present challenges in many of today’s markets, it is easier to comply with than Fannie Mae’s and Freddie Mac’s presale requirements, which can be as high as 70%.

Another significant policy shift is the option that will grant project approval authority to approved lenders. Under this authority, lenders who approve a condo project would warrant that the project conforms to FHA’s requirements. 

Additional  Changes

The same Mortgagee Letter eliminates the requirement for developers of single-family communities to seek approval for projects that are being developed as “site condos.” It has been common practice for years in Michigan, and to a lesser degree elsewhere, to develop single-family subdivisions as site condominiums. In the past, developers often did not seek FHA’s approval for these projects for a number of reasons, most of which deal with technicalities. The lack of FHA’s approval did not become an issue until the mortgage market turned upside down in 2007, however, making conventional loans harder for home buyers to obtain. Changes in the housing laws in 2008 opened the door for FHA to treat site condo developments the same as other single-family developments, which have not required FHA approval for many years. NAHB had been pressing FHA to make this change since the site condo issue began to surface in early 2008. This change was effective upon issuance of the June 12 Mortgagee Letter.

 View the Condominium Approval Process Mortgagee Letter

For more information, e-mail Bill Renner, or call him at 800-368-5242 x8597.

Environment: Climate Bill Approval Could Mean Big Hikes in Targeted Efficiency Mandates; More...

• House Narrowly Approves Onerous Climate Change Bill
  
  Last Friday, By a vote of 219 to 212, the House narrowly approved climate change legislation that would establish a “cap and trade” market for buying and selling pollution allowances and create mandatory national energy code requirements for all homes and buildings.

  The sweeping House legislation would require new homes to be 30% more energy-efficient than mandated in the 2006 International Energy Conservation Code (IECC). By Jan. 1, 2014, the target would rise to 50% above the 2006 IECC.  Between years 2017 and 2029, the code target increases 5% every three years until it reaches 75% over the 2006 IECC by 2029.
  
  There is no companion climate bill in the Senate, and it is uncertain when that chamber will move forward with its energy legislation, which differs markedly from the House bill. NAHB will continue to monitor the situation closely and work to derail the onerous provisions in the house bill, H.R. 2998 as the legislative process advances.
  
  To read the legislation, click here and enter H.R. 2998 in the box at the center of the page.
  For more information, e-mail Elizabeth Odina at NAHB, or call her at 1-800-368-5242, x8570.
  
  View the full article in NAHB's Washington Update.
  

• Senate Panel Approves Expansion of Clean Water Act
  
  Earlier this month, the Senate Environment and Public Works Committee voted 12-to-7 along party lines to approve S. 787, the Clean Water Restoration Act. The legislation would dramatically expand the scope of the Clean Water Act by replacing the phrase “navigable waters of the United States” in the law with “waters of the United States.
  
  This change, if it were to become law, would have an enormously negative impact on the home building industry, effectively extending the federal government’s reach to all waters, including storm sewers and retention basins, roadside ditches, seasonal streams, and any “activities affecting” all waters in the nation.
  
  NAHB opposed the legislation and participated in a coalition attempting to defeat it, joining with other stakeholder groups such as the Associated Builders and Contractors, the National Stone, Sand & Gravel Association, the American Forest and Paper Association, the American Farm Bureau Federation and the National Association of Realtors.
  
  Read the full article in NAHB's Washinton Update.

To view the legislation, click here and type the bill number in the box in the upper center screen. For more information, contact Annie Raymond at 1-800-368-5242, x8307.

• NAHB Wins Supreme Court Victory on Wetlands
  

  The Supreme Court, in its final environmental decision this term, delivered a favorable opinion concerning wetlands permits that adopted the position that NAHB had put forward in its amicus brief.

  In Coeur Alaska v. Southeast Alaska Conservation Council, the Court made clear that a single discharge of pollutants did not require two permits under the Clean Water Act. Environmental groups had sought a ruling that would have required a land owner to obtain permits from both EPA (or a state delegated with permitting authority) and the Army Corps of Engineers, for a single addition of fill material. 

  As Justice Kennedy wrote for the majority, “[a] two-permit regime would cause confusion, delay, expense, and uncertainty in the permitting process.”

  Thus, while it remains time-consuming and expensive to obtain Clean Water Act permits, a contrary decision would have made it far more difficult to navigate the already burdensome and costly Corps and EPA bureaucracies.

  This case concludes a highly successful Supreme Court term for NAHB.  In the four environmental cases that the high Court reviewed on the merits, NAHB’s amicus briefs tracked the high Court’s majority opinions in each matter.

  For more information, e-mail Duane Desiderio or call him at 800-368-5242 x8146.

Finance: NAHB Analysis of Obama's Proposed Regulatory Reform, More...

• Financial Regulatory Reform: An Overview
  
  This week President Obama unveiled a comprehensive plan to overhaul financial system regulation. The plan is built around proposed reforms designed to meet the following five key objectives:

1. Promote robust supervision and regulation of financial firms
2. Protect consumer and investors from financial abuse
3. Establish comprehensive regulations of financial markets
4. Provide the government with the tools it needs to manage financial crises
5. Raise international regulatory standards and improve international cooperation.

Details of the Administration’s Plan are outlined in an 80-plus page white paper.  The white paper and fact sheets on the five major components of the Plan are posted on the Treasury Department’s website at:  http://www.ustreas.gov/news/index1.html.

NAHB staff members are presently reviewing the proposal, but the initial read is that the plan raises some significant concerns for housing finance, including: elimination of the thrift charter and the Office of Thrift Supervision (OTS); questions on the future role of the housing government-sponsored enterprises (GSEs); reassessment of capital requirements (which will probably riser); and increased mortgage lending and consumer regulations. A combination of all these factors could result in reduced government support to the mortgage market.

The document linked here delves into a more detailed preliminary analysis of the plan, and makes note of the fact the Administration has not submitted actual legislative language to accompany the proposal. In short, the Congress will undoubtedly put its own stamp on this topic, and NAHB will have an extended opportunity to try and influence the debate (which is likely to bleed into next year). 

Our Advocacy staff will be sharing this same material with the Federal Gov’t Affairs and Housing Finance committees later today and we will keep the members updated as this discussion/debate evolves. 

Questions or comments should be directed to Chellie Hamecs or John Dimitri, of NAHB's Housing Finance department.

• Office of Management and Budget Releases Guidance on Reporting Requirements

Pursuant to the American Recovery and Reinvestment Act of 2009 (ARRA), the Office of Management and Budget (OMB) has released guidance for reporting requirements included in the legislation. Recipients of ARRA funds are required to answer important questions such as who is receiving ARRA dollars and in what amounts? What projects or activities are being funded with ARRA dollars? What is the completion status of such project or activities and what impacts have they had on job creation and retention? These reporting requirements apply to both Tax Credit Assistance and Exchange program funds and must be collected by the  recipients, which in this case, are the State Housing Finance Agencies.

The guidance states that recipients should not attempt to report on the employment impact on materials suppliers and central service providers (so-called “indirect” jobs) or on the local community (“induced” jobs). Employees who are not directly charged to ARRA supported projects/activities, who, nonetheless, provide critical indirect support, e.g., clerical/administrative staff preparing reports, institutional review board staff members, departmental administrators, are NOT counted as jobs created/retained. Recipients report only direct jobs because they may not have sufficient insight or consistent methodologies for reporting indirect or induced jobs. The Council of Economic Advisers is developing a macro-economic methodology to account for the overall employment impact of ARRA.

View the OMB Guidance here.

NAHB is studying whether we can provide a simple tool for estimating the direct jobs. If you have any questions, contact Paul Emrath at 800-368-5242 x8449.

More LIHTC Money Could Be Available in Certain States

• Disaster Credits Legislation Introduced in the House and Senate

Last week, Senators Evan Bayh (D-IN) and Richard Shelby (R-AL) introduced S. 1326, the “Disaster State Housing Recovery Act.” This legislation would ensure states that were provided with disaster credits—including Indiana, Alabama, Arkansas, Illinois, Iowa, Kansas, Louisiana, Michigan, Missouri, Minnesota, Nebraska, Texas and Wisconsin—would be able to convert a portion of their housing tax credits into federal cash grants through the Tax Credit Exchange Program enacted through the American Recovery and Reinvestment Act” earlier this year. Since that time, NAHB and members of the Housing Credit Group have been working closely with members of Congress to resolve this issue. An identical companion bill was introduced in the House by Congressmen Artur Davis (D-AL) and Charles Boustany (R-LA), both members of the House Ways and Means Committee. 

View the Disaster State Housing Recovery Act 2009 here.

• Supplement Appropriations Bill Clarifies TCAP Provision

In related news, Congress passed a supplemental appropriations bill (H.R. 2346) last week that included a provision clarifying that Tax Credit Assistance Program (TCAP) funds, which are administered by HUD, can be used with projects solely receiving an allocation of disaster credits. Previously, projects with disaster credits were required to receive a nominal award of credits allocated through Section 42(h) in order to be eligible for TCAP. 

The legislative language is below:

Sec. 1204. Public Law 111-5 is amended by striking the second proviso under the heading `HOME Investment Partnerships Program' and inserting `Provided further, That the housing credit agencies in each State shall distribute these funds competitively under this heading and pursuant to their qualified allocation plan (as defined in section 42(m) of the Internal Revenue Code of 1986) to owners of projects who have received or receive simultaneously an award of low-income housing tax credits under sections 42(h) and 1400N of the Internal Revenue Code of 1986.

For more information, contact Carmel McGuire at 800-368-5242 x8207.

Fannie and Freddie Urged to Change 70% Presale Underwriting Standard

Rep. Barney Frank and Rep. Anthony Weiner sent a letter to the CEO's of Fannie Mae and Freddie Mac urging the GSEs to adjust  their underwriting standards for condominiums and cooperative loans.

The 70% presale occupancy requirement is now implemented for both Fannie and Freddie (when the lender is NOT submitting the project through the Web-based CPM (Condo Project Manager) or using Fannie Mae’s Project Eligibility Review Service (PERS) review). This pre-sale requirement and an increase in other fees could stall the absorption of unsold condos in projects have not previously been approved by Fannie Mae.
 
View the Letter to Fannie Mae
View the Letter to Freddie Mac

View Fannie Mae's CPM Fact Sheet here.
View Freddie Mac's CPM Web site here.

For more information, e-mail Bill Renner or call him at 800-368-5242 x8597.

New S&P Proposal Could Put CMBS in Danger

The Fed announced that starting this month, Commercial Mortgage Backed Securities (CMBS) will be considered eligible collateral under  the Term Asset-Backed Loan Securities Facility (TALF). The expansion of TALF to include new CMBS loans is critical to accommodate loan refinancings that are on the horizon and have limited opportunity to refi through private markets at this time. 

A counterweight to this positive development is the Standard & Poor’s (S&P) newly-proposed ratings methodology for CMBS transactions. If the new methodology is implemented, it will likely prompt considerable downgrading of securities issued between 2005 and 2008. These downgrades will put a large part of the CMBS universe in danger of no longer being used as collateral for TALF funds.   

Given the percentage of the deals that S&P rates, and their forecast for heavy downgrades, S&P’s proposal jeopardizes the potential effectiveness of legacy TALF for CMBS. On June 10, NAHB joined other concerned organizations by submitting a comment letter addressing S&P’s proposed ratings methodology. To date, the Federal Reserve has not addressed the possible impact of these changes on the TALF program.

View the letter sent by NAHB and other industry organizations here.

For more information, e-mail Scott Meyer or contact him at 800-368-5242 x8144.

Labor Issues: Worksite Davis-Bacon Compliance Investigations to Increase; More...

• Worksite Davis-Bacon Compliance Investigations to Increase  

The Davis-Bacon and Related Acts (DBRA) requires all contractors and subcontractors performing work on federal or District of Columbia construction contracts or federally- assisted contracts in excess of $2,000 to pay their laborers and mechanics the prevailing wage rates and fringe benefits determined by the Secretary of Labor. 

On June 1, the Department of Labor (DOL) published a “Recovery Plan” for implementation that notes that DOL will be increasing the number of worksite investigations on Recovery Act projects to ensure Davis-Bacon compliance. 

Additionally, they will be increasing the number of agents to do the investigations and providing for “outreach efforts” to train those employers who have not previously been covered by Davis-Bacon, as well as training on other Wage and Hour rules and regulations.

View Davis-Bacon compliance assistance materials here.
 
For more information, e-mail Jenna Hamilton, or call her at 800-368-5242 x8407  

Resources: Multi-Lingual Resources Expand Access to HUD Programs

Promoting Equal Access to Housing Programs

HUD has launched its new multi-lingual Web site which provides essential housing information in 12 different languages. This effort will expand the access and education of HUD programs and services for consumers and families nationwide.

The site offers information and brochures on topics such as:

• Fair housing
• Model lease agreements
• Housing Choice Voucher Program (Section 8)
• Resident Rights and Responsibilities
• Fact sheets
• FHEO posters
• and more...

View the press release here.

Visit the Web site NOW!

Calendar: Multifamily Webinar in July: Reap Big Green Building Benefits at Low Costs

July 2009

Green Building: A Cost/Benefit Analysis Webinar July 8, 2009 2:00 - 3:00 pm ET    REGISTER HERE! Multifamily Members Register Free!!! NAHB Member Fee: $100 Non-NAHB Member: $125 Most market-rate and affordable apartment developers still are figuring out how to incorporate green features into their properties without breaking their budgets. Experts will provide a cost/benefit analysis that will guide you through going green in the most cost-effective manner. Energy-saving technologies and sustainable building practices will be among the topics discussed, along with the various green rating systems and certifications. Speakers: Sanford Steinberg, Steinberg Design Collaborative, LLP;                   Patrick Dennis, Wood Partners For more information, e-mail Carmel McGuire or call her at 800-368-5242 x8207 Attend this session and SAVE 20%! By participating in this webinar you can receive a 20% discount off the National Green Building Standard, the first green building rating system to be approved by ANSI, and Build Green and Save: Protecting the Earth and Your Bottom Line, the insider’s guide to residential green building. Simply enter discount code AUDSM20 on the checkout page at BuilderBooks.com.  Discount good through August 31, 2009.  Discount good only on Web orders and cannot be combined with any other discount or promotion.  Not good on prior purchases. View more Multifamily Webinars here.

2009 Advanced FHA Webinar: A Detailed Look at Financing in Today's Multifamily Market July 22, 2009 REGISTER HERE! Multifamily Members Register Free!!! NAHB Member Fee: $100 Non-NAHB Member: $125 3:00 - 4:00 pm ET   Register now for Part II of the FHA Financing for Multifamily Builders series. In part II of the series, industry experts will explain how the FHA Section 221 (d)(4) and 223(f) programs can be used in today’s market.  Speakers: Tom Booher, EVP, PNC Multifamily Capital; Hank Williams, Sr. VP, FHA Programs,Wells Fargo Multifamily Capital Moderator: David Reznick,  Principal/Chairman at Reznick Group, P.C. If you are interested in affordable housing or multifamily housing in general, please visit our Web site, or call us at 800-368-5242 ext. 8550 to learn more. View more Multifamily Webinars here.

October

SAVE THE DATE!! 2009 Fall Board of Directors Meeting September 30 - October 4 All NAHB members are invited to attend the Fall Board of Directors meeting.Sit in on committee meetings, receive industry updates, and network with your peers during this annual event. Sheraton Chicago Hotel & Tower 301 East North Water Street Chicago IL, 60611 REGISTER TODAY!