GOVERNMENT AFFAIRS UPDATE
PAUL HERRERA, GOVERNMENT AFFAIRS DIRECTOR
Local: Reduction in FHA Loan Limits Caused Use of FHA to Plummet in Local Communities
In 2013, with FHA loan limits set at $500,000 in the Inland Empire and a market recovery just starting to form, buyers used FHA loans on more than a third of transactions to finance their purchases. That fact was true in communities across the Inland Empire, including in higher-cost areas in western Riverside and San Bernardino County. The next year, loan limits were cut by nearly a third to $350,000 in a market where prices were rebounding rapidly. Now, three years later, the data clearly shows the impact of this action at the federal level.
A recent analysis of sales trends shows that Inland cities that fell between the old loan limit and the lowered limits saw FHA buying activity plummet. While that’s hardly surprising, this review of data provides the first clear, analytical view of what took place and why it remains important to seek higher limits for the region.
Seven Inland Empire cities fall above the FHA loan limit (which has now been adjusted up to $370,000). That group includes nearly every city that borders Los Angeles County or Orange County along major east-west transportation corridors. It does not include Montclair, which is the smallest city along the corridor. Also, for the purposes of this review, it also does not include Chino Hills, which was above the loan limit before and after the change.
The seven studied cities – Eastvale, Upland, Rancho Cucamonga, Chino, Norco and Corona – saw FHA buyers plummet in recent years from about one in three buyers to one in 10. At the same time, communities just below that level saw a dip in FHA activity that largely rebounded once investment activity subsided in 2015.
This analysis shows how FHA buyers have been crowded out of large areas of western Riverside and San Bernardino County. It further reveals a need to continue seeking a path toward restoring loan limits for a region that is more closely tied to the Los Angeles and Orange County markets (where loan limits are above $630,000) than communities in the High Desert and Coachella Valley.
State: Bill to Ban Dual Agency in Commercial Real Estate Shelved for 2017
Following a vehement response from the commercial real estate industry and from REALTORS®, legislation that would have ended dual agency in commercial transactions has been pulled from consideration this year. AB 1059, which was scheduled to be heard in a legislative hearing on May 2nd, will not move forward for now.
The bill may be brought back for consideration in 2018 by the current legislature. However, for now, the issue will not be part of the legislature’s agenda.
Federal: REALTORS® Back Effort to Hide Tax Increases in Mortgage Fees
During the financial crisis, the U.S. Treasury pledged as much as $200 billion to keep mortgage giants Fannie Mae and Freddie Mac operational. The “bailout”, as it came to be known, turned out to be far less expensive than that cap. As the housing market crisis began to unwind, the two entities have shifted from receiving a financial bail out to helping to provide billions in revenue – even
after paying back all of the bailout founds provided.
On the flip side, two entities created to help maintain a stable mortgage system are now used as important, alternative sources of government funds for the U.S. Treasury. In the last session of Congress, REALTORS® helped to defeat a proposal to raise “guarantee” fees on new mortgages and divert the funds to transportation infrastructure. Guarantee fees, also known as “g-fees”, are meant to create reserves and financial stability to the mortgage system to avoid any need for future taxpayer bailouts. However, the ability to tack disguised new taxes on mortgages has proven
irresistible at times to lawmakers.
Now, REALTORS® are backing HR 916, a bill designed to curtail this practice and keep guarantee fees for their intended use – to stabilize mortgage lending by funding Fannie Mae and Freddie Mac reserves through their regular operations.
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The most important thing each member can do to support our government affairs work is to stay informed and help spread the word on important issues to your colleagues, clients, friends and neighbors. Nothing is more important than your time, including the time you devote to making your voice heard at the ballot box each election day.
Our work is supported through voluntary contributions made by members to the REALTOR® Action Fund. These annual contributions of $49 or more help ensure that we have the resources to research important issues, communicate with our members and mobilize our industry to have the impact necessary to make a difference.
You can make a contribution as you renew your membership – or anytime by going to ww.car.org/governmentaffairs/raf.
Questions? Comments? You can reach Paul Herrera, Government Affairs Director, at firstname.lastname@example.org or on his cell phone at 951-500-1222.