Legislative Update

(Taken from the Online NACCED Alert dated May 30, 2008)

Senate Action on Housing Bill Expected Soon

Shortly after returning from the Memorial Day Recess the Senate is expected to take up major housing legislation, "The Federal Housing Finance Reform Act of 2008." The legislation, which cleared the Senate Banking Housing and Urban Affairs Committee May 20th by a vote of 19-2, creates a new regulatory regime for the Government Sponsored Enterprises, Fannie Mae and Freddie Mac and it provides authority to the Federal Housing Administration (FHA) to insure new mortgages that refinance subprime mortgages.

The bill creates a new, independent regulator for Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. The regulator would have the authority to temporarily increase capital requirements (the amount that must be held in reserve) and establish portfolio limits on the enterprises but only for safety and soundness reasons, not a perceived systemic risk to the economy. Both of these provisions have been controversial in the past as the Bush Administration and others have characterized Fannie and Freddie as too big and because of this they pose a systemic risk to the economy.

The bill also creates an Affordable Housing Trust Fund (not to be confused with H.R. 2895, the "National Affordable Housing Trust " passed by the House in 2007), that would be funded based on 4.2 basis points of the portfolios of the GSEs. This is expected to total around $500 million annually. In the first three years of the fund monies would be pledged to cover any defaults experienced by FHA under the mortgage refinancing program, with 100% in 2008, 50% in 2009 and 23% in 2010. There after the trust fund monies would be allocated 65% to the states and 35% to assist Community Development Financial Institutions. Seventy-five percent of the funds must benefit households at or below 30% of area median income. NACCED, NACo and others have objected to the allocation of the funds to the states (each state could get no more than $6.5 million) insisting instead that the GSEs administer the funds in order to leverage their other investments.

Pledging trust fund monies to cover shortfalls in the FHA refinancing program was key to winning the support of the Committee's ranking Republican Richard Shelby (AL) who insisted that taxpayers' money should not be used to bail out lenders or homebuyers who bought homes the couldn't afford. This will ultimately have to be reconciled with provisions in H.R. 3221, the House-passed version of the housing rescue package. Under that legislation the GSE fund would have been directed at rebuilding in the Gulf coast as a result of Hurricane Katrina.

The bill also increases the high coast loan limit for the GSEs up to $550,000. This increase, while higher than the old limit of $417,000 is significantly below the temporary increase that Congress gave the GSEs and FHA this year to be able to increase liquidity in the mortgage market as a result of the subprime crisis to $729,750.

Agreement Near on FY 2009 Budget Resolution

House and Senate negotiators are near agreement on the FY 2009 congressional budget resolution. Agreement is expected shortly after Congress reconvenes next week. The budget resolution is important as it sets the overall ceiling on federal domestic spending. The resolution is certain to call for increased spending over what President Bush requested in his FY 2009 budget. Agreement on the budget resolution has been slowed because of the farm bill and the supplemental appropriations for the wars in Iraq and Afghanistan. Once the budget resolution is passed and the domestic spending ceiling is apportioned among the appropriations subcommittees work will begin on the FY 2009 appropriations bills.

House Democrats have not decided their strategy yet for dealing with the 11 spending bills including the one that funds HUD. It is possible that some of the bills will be marked up in committee and possibly brought to the floor. The Senate Appropriations Committee expects its subcommittees to begin marking up the individual appropriations bills in mid June. However, it is unlikely that these bills will be brought to the Senate floor. The leadership wants to be able to point to their spending priorities, as opposed to the President's, which are different.

It is anticipated that Congress will pass a "continuing resolution" before the end September the close of the fiscal year. The continuing resolution will run through the election and fund programs at the FY 2008. The congressional leadership wants to know who the next president is before finalizing the FY 2009 appropriations bills.

NACCED Committee and Board Meetings set for July 10th-12th in Kansas City

NACCED's Committees and Board of Directors will meet July 10-12, 2008 in Kansas City, MO. The meetings coincide with the 2008 NACo Annual Conference. The meetings begin on Thursday, July 10th with a review of the 2006-2008 NACCED Strategic Plan and development of a membership recruitment strategy. On Friday, July 11th the Committees and Board will meet.

The meetings will be held at the Intercontinental Hotel at the Plaza in Kansas City. NACCED is holding a block of rooms at the Intercontinental at a rate of $169 single/double per night. Please make you reservations directly with the Hotel at 816-756-1500 and ask for the NACCED room block.

All of the NACCED meetings will be at the Intercontinental Hotel in the Pavilion I Room. The schedule can be seen here.

Introducing ….

Daria Daniel is the new Associate Legislative Director for Community and Economic Development at the National Association of Counties. She replaces Cassandra Matthews Duhaney who left NACo in May to become Counsel to the House Financial Services Committee. Ms. Daniel has been the Associate Legislative Director for Labor and Employment at NACo for over four years. Previously, Ms. Daniel worked at Craig Associates, where she represented county governments on workforce and human services issues for three years. Before that Ms. Daniel worked at the Food Research and Action Center (FRAC) on welfare reform and food stamp issues. Ms. Daniel has also served as a law clerk in the Prince Georges County Office of Law, and interned at both the White House Office of the Vice President and U.S. Department of Labor during law school. She received her bachelor's degree from the University of Virginia and her law degree from Georgetown University Law Center.

Members attending the Committee meetings in Kansas City will have the opportunity to meet Daria and welcome her to the NACCED family.

Legislative Update

(Taken from the Online NACCED Alert dated May 9, 2008)

 House Passes Massive Housing Bills

Yesterday, the House passed sweeping legislation, the "American Housing Rescue and Foreclosure Prevention Act of 2008," to combat the foreclosure and subprime mortgage crisis. The House took up a Senate-passed bill, H.R. 3221, and struck all of the Senate language and replaced it with three amendments. The first amendment, which was passed by a vote of 266-154, included legislation to modernize the Federal Housing Administration (FHA) mortgage insurance programs, legislation to create a new independent regulator for the Government-Sponsored Enterprises, Fannie Mae and Freddie Mac, and legislation that would authorize FHA to insure $300 billion in new, affordable long-term mortgages that refinance qualified subprime loans. Earlier in the day the House passed a separate housing bill, H.R. 5818, the "Neighborhood Stabilization Act of 2008" by a vote of 239-188. Introduced by Rep. Maxine Waters, H.R. 5818 would provide $15 billion in loans and grants to states to enable communities to purchase and rehabilitate foreclosed homes and make them available for purchase.

As introduced, H.R. 5818 would have given states discretion to reallocate the funds to local governments. However during markup of the bill by the House Financial Services Committee, NACCED and others succeeded in amending the bill to require states to provide direct funding to the 50 largest urban counties. The amendment also required states to provide direct funding to the 100 largest cities.

The second amendment to H.R. 3221, which passed 322-94, included the provisions of H.R. 5720, the "Housing Assistance Tax Act of 2008." That legislation provides a $10 billion increase in the tax-exempt private activity bond volume cap to enable local and state housing agencies to refinance qualified subprime loans, serve other first-time homebuyers, and construct affordable rental housing. The bill also provides a permanent exemption of tax-exempt housing bonds from the Alternative Minimum Tax, and it would allow investors in Low-Income Housing Tax Credits (LIHTC) to fully claim those credits against the Alternative Minimum Tax. Also included in the legislation is a $.20 per capita increase in the volume cap for LIHTC's for 2008 and 2009 as well as several refinements to the LIHTC program. In addition, the bill provides a refundable tax credit of up to $7,500 for first-time homebuyers that must be repaid over time, and it permits an additional standard deduction of up to $350 for individuals and $700 for couples for state and local property taxes.

The third amendment to H.R. 3221, adopted 256-160, would prevent H.R. 3221 or two other federal banking statutes from overriding state laws governing residential foreclosures.

The Bush Administration vowed to veto H.R. 3221 as well as H.R. 5818. President Bush called the new authority for FHA to insure loans that refinance subprime loans a bailout of lenders, speculators, and irresponsible borrowers. Democrats countered that the program is voluntary, is only available to borrowers and would cost taxpayers no more that $1.7 billion should there be defaults. The Administration objected to the tax amendment to the bill because it would allow the Federal Home Loan Banks (FHLBs) to provide letters of credit for tax-exempt bonds that finance infrastructure projects. It said doing so would allow them to stray from their mission. Both NACo and NACCED are on record in support of this new authority for the FHLBs. Under current law the FHLBs can issue letters of credit to back tax-exempt housing bonds. The Administration also said it opposed one of the bill's revenue offsets that would permit U.S. corporations to elect a favorable method of allocating interest expense for purposes of using foreign tax credits (commonly known as worldwide interest allocation).

While generally supporting H.R. 3221's FHA modernization and GSE regulatory reform provisions the Administration criticized the permanent increase in the loan limits for FHA and the GSE's to as much as $729,750 in areas of high housing costs. The Administration also said it opposed an affordable housing fund that would be created by tapping a portion of the GSEs' earnings for aid to very-low and extremely low-income households. It also took issue with the bill's provisions that would permit the new GSE regulator to impose portfolio limits on the GSEs only for safety and soundness reasons, not for perceived systemic risk to the economy.

The Administration also expressed its strong opposition to the third amendment to H.R. 3221 that it says "… would grant states the authority to impair the ability of federal banking regulators to ensure the safety and soundness of their regulated entities in matters related to foreclosures."

The bill needs to be reconciled with a smaller Senate-passed version of H.R. 3221. The Senate bill contains the same $10 billion increase in the private activity bond cap to permit agencies to issue Mortgage Revenue Bonds to refinance subprime loans, aid additional first-time homebuyers, and construct rental housing. It provides a temporary (through 2010) exemption of housing bonds from the AMT, but it does not have any of the refinements to the LIHTC. The Senate bill also includes $4 billion in CDBG funds to enable communities to buy, rehabilitate and sell foreclosed homes. In addition, it would permit homebuilders and other industries hurt by the housing crisis to carry back for four years losses incurred in 2008 and 2008. This would result in their receiving tax refunds. This provision was sharply criticized by the Bush Administration.

Outlook

It is not clear how or when the House and Senate bills will be reconciled by a House-Senate conference committee. Senate Banking Committee Chairman Christopher Dodd (D-CT) continues to negotiate with the Committee's ranking Republican Richard Shelby (AL) over details of a Senate GSE regulatory reform bill. Little progress has been reported.

The Administration will have a large say over the shape and size of the final version of the legislation. The betting here is that the bill will be larger than the Senate bill but much smaller than the House bill. Final action could happen just prior to the July 4th Congressional recess.