Congressional Update Housing and Community Development 110 th Congress & Looking Ahead

1. Congressional UpdateHousing and Community Development 110th Congress & Looking Ahead September 2008 Robert A. Rapoza Rapoza Associates 1250 Eye Street, NW Washington, DC Phone: (202) 393-5225 Email: bob@rapoza.org

2. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions GSE Reform • Creates an independent Federal Housing Finance Agency Director to regulate GSEs Fannie Mae and Freddie Mac • Raises GSE loan limits for single family homes up to 115% of the local area median home price • Raises the permanent loan limit from $417,000 to $625,500 • Includes duty to serve underserved markets, rural areas • Requires each entity to develop loan products and flexible underwriting guidelines to facilitate a secondary market for mortgages for very low, low, and moderate income families located in rural areas

3. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions GSE Reform • Grants authority to Secretary of the Treasury to increase existing line of credit to Freddie Mac and Fannie Mae for the next 18 months • Treasury may buy stock in Freddie Mac and Fannie Mae to provide confidence in the GSEs and stabilize housing finance markets. No spending would occur unless the Secretary certifies that there is an emergency that requires immediate action.  If those conditions are not met, there would not be any increase in the deficit as a result of the legislation 

4. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions National Housing Trust Fund • Grants to states for construction, maintenance and preservation of affordable rental housing for extremely low and very low-income individuals and families in rural and urban areas • Not more than 10% may be used to increase homeownership for extremely low and very low-income families • All assistance must benefit very low-income families (incomes not greater than 50% AMI), requires at least 75% of assistance to benefit extremely low-income families (incomes not greater than 30% AMI) • HUD must establish a needs-based formula for grant distribution within 12 months and all funds must be used or committed within 2 years of availability

5. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions Capital Magnet Fund • Will be capitalized with 35% of the affordable housing allocation provided by set aside of GSE profits • Grants may be used for development, preservation, rehabilitation or purchase of affordable housing for extremely low, very low and low-income families • Eligible grantees include certified CDFIs and non-profit organizations with development or management of affordable housing as one of their principal purposes

6. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions FHA Modernization • Expands FHA program, provides authority to insure up to $300 billion in mortgages to keep at least 400,000 families from losing their homes • To participate, lenders and mortgage investors must take losses by reducing the loan principal  • In exchange for an FHA guarantee on the mortgage, borrowers must share any profit from the resale of a refinanced home with the government

7. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions FHA Modernization • Expands opportunities for seniors to tap into equity in their home through FHA reverse mortgage loans • Increases loan limit for the program, reduces and caps lender fees for reverse mortgage loans • Strengthens consumer protections by limiting the sale of other financial products in conjunction with FHA reverse mortgage loans • Protections for taxpayers’ dollars include higher refinancing fees that establish an FHA reserve to cover possible losses from defaults on the government-backed mortgages

8. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions Emergency Assistance to Distressed Communities • $180 million to counseling intermediaries for pre-foreclosure counseling • $3.92 billion in CDBG funds to communities hardest hit by foreclosures • Funds go to State and local governments to purchase foreclosed homes, at a discount, and rehab or redevelop property for resale or rent • financing mechanisms can include loan loss reserves and shared-equity loans for low- and moderate-income homebuyers • land banks for foreclosed homes, demolition and/or redevelopment of blighted structures or vacant property

9. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions Emergency Assistance to Distressed Communities • Priority to communities with greatest need: - greatest % home foreclosures - highest % homes financed by subprime loans - greatest likelihood of rise in rate of home foreclosures • Foreclosed and rehabilitated homes to be sold or rented to moderate-income individuals and families whose incomes do not exceed 120% of the area median income.  • At least 25% of the funds targeted to house low-income and very low-income persons and families whose incomes do not exceed 50% of area median income

10. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions Housing Preservation • Amends Housing Act of 1940 to provide that there be timely approval of requests to transfer ownership or control of Section 515 housing projects that also utilize Low Income Housing Tax Credits or tax exempt housing bonds • USDA will consult with IRS to simplify procedures that need to be taken by multifamily projects where both agencies provide assistance.

11. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions Tax-Related Provisions • First-time homebuyer refundable tax credit 10% of purchase price, up to $7,500 (to be paid back over 15 years).  - The credit phases out for taxpayers with adjusted gross income $75,000 or more ($150,000 or more for a joint return) • Taxpayers that claim standard deduction receive up to an additional $500 ($1,000 for a joint return) for property taxes in 2008

12. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions Housing Tax Incentives • Increases by $0.20 the per capita amount of LIHTCs each state can allocate for 2008 and 2009 • Increases the small state minimum by 10% • Adopts fixed 9% credit rate through 2013 for new construction and rehab projects not financed by tax-exempt bonds • Allows state agencies to designate particular buildings for 130% basis increase treatment as if they were in difficult development areas

13. Housing and Economic Recovery Act of 2008(P.L. 110-289) Summary of Key Provisions Housing Tax Incentives • Energy efficiency and historic nature added to project criteria to be taken into account when making credit allocations • Modifies rural area median income definition to be greater of area median income or national non-metro median income • Temporarily increases volume cap for tax-exempt mortgage revenue bonds by $11 billion; bonds may be used to refinance subprime loans, provide loans to first-time homebuyers and to finance the construction of low-income rental housing • Eliminates recapture bonds; eliminates “below-market federal loans” from definition of a federally subsidized property • Exempts Housing Bonds from AMT, allows interest on rehab credit and LIHTC to be exempt from AMT

14. Status of FY 2009 Appropriations Bills House Committees have approved 5 of 12 spending bills Commerce-Justice-Science Homeland Security Energy & Water Financial Services • Military Construction-VA – passed the House 8/1 Senate Committees have approved 9 of 12 spending bills Ag-Rural Development-FDA State & Foreign Ops Homeland Security Commerce-Justice-Science Labor-HHS-Ed T-HUD Energy & Water Mil-Con-VA Financial Services

15. Federal Opportunities in FY09 • CDFI Fund Fiscal Year 2009 Round ($54 million) October 1, 2008 CDFI Certification Application deadline October 29, 2008 CDFI Program Application deadline • OCS: CED and JOLI awards FY09 announcement later this year • Green Jobs Act

16. Candidates on Community DevelopmentSen. Obama Will: “Increase Access to Capital for Underserved Businesses” • strengthen SBA programs that provide capital to women and minority-owned businesses, outreach programs that help business owners apply for loans, and encourage growth and capacity of these firms • strengthen Community Development Financial Institutions (CDFIs), which are engaged in innovative methods to provide capital to urban businesses • establish federal investment program to help manufacturing centers modernize and help Americans learn the new skills they need to produce green products • invest in job training and transition programs to help workers and industries adapt to clean technology development and production • create competitive grant program for states and localities that implement energy efficiency building codes • create a Green Jobs Corps to match disconnected and disadvantaged youth with job skills for a high-growth industry (Source: www.barackobama.com)

17. Candidates on Community DevelopmentSen. McCain Will: “Foster Rapid and Clean Economic Growth” • energy policies will rely on setting good incentives for firms, entrepreneurs, and households, a portion of cap-and-trade auction proceeds will reduce impacts on low-income American families • keep homeowners facing foreclosure in their homes through “HOME Plan” Holders of a sub-prime mortgage taken after 2005 who live in their home (primary residence only), can prove creditworthiness at the time of the original loan, are either delinquent, in arrears on payments, facing a reset or otherwise demonstrate that they will be unable to continue to meet their mortgage obligations, and can meet the terms of a new 30 year fixed-rate mortgage on the existing home can trade burdensome mortgages for manageable loans that reflects home's market value • bolster groups like Neighborworks America that provide mortgage assistance to homeowners in their communities