FEDERAL HOUSING FINANCE AGENCY STATEMENT
For Immediate Release

FHFA Statement on Certain Energy Retrofit Loan Programs

After careful review and over a year of working with federal and state government agencies, the Federal Housing Finance Agency (FHFA) has determined that certain energy retrofit lending programs present significant safety and soundness concerns that must be addressed by Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Specifically, programs denominated as Property Assessed Clean Energy (PACE) seek to foster lending for retrofits of residential or commercial properties through a county or city’s tax assessment regime. Under most of these programs, such loans acquire a priority lien over existing mortgages, though certain states have chosen not to adopt such priority positions for their loans.

First liens established by PACE loans are unlike routine tax assessments and pose unusual and difficult risk management challenges for lenders, servicers and mortgage securities investors. The size and duration of PACE loans exceed typical local tax programs and do not have the traditional community benefits associated with taxing initiatives.

FHFA urged state and local governments to reconsider these programs and continues to call for a pause in such programs so concerns can be addressed. First liens for such loans represent a key alteration of traditional mortgage lending practice. They present significant risk to lenders and secondary market entities, may alter valuations for mortgage-backed securities and are not essential for successful programs to spur energy conservation.

While the first lien position offered in most PACE programs minimizes credit risk for investors funding the programs, it alters traditional lending priorities. Underwriting for PACE programs results in collateral-based lending rather than lending based upon ability-to-pay, the absence of Truth-in-Lending Act and other consumer protections, and uncertainty as to whether the home improvements actually produce meaningful reductions in energy consumption.

Efforts are just underway to develop underwriting and consumer protection standards as well as energy retrofit standards that are critical for homeowners and lenders to understand the risks and rewards of any energy retrofit lending program. However, first liens that disrupt a fragile housing finance market and long-standing lending priorities, the absence of robust underwriting standards to protect homeowners and the lack of energy retrofit standards to assist homeowners, appraisers, inspectors and lenders determine the value of retrofit products combine to raise safety and soundness concerns.

On May 5, 2010, Fannie Mae and Freddie Mac alerted their seller-servicers to gain an understanding of whether there are existing or prospective PACE or PACE-like programs in jurisdictions where they do business, to be aware that programs with first liens run contrary to the Fannie Mae-Freddie Mac Uniform Security Instrument and that the Enterprises would provide additional guidance should the programs move beyond the experimental stage. Those lender letters remain in effect.

Today, FHFA is directing Fannie Mae, Freddie Mac and the Federal Home Loan Banks to undertake the following prudential actions:

1.
For any homeowner who obtained a PACE or PACE-like loan with a priority first lien prior to this date, FHFA is directing Fannie Mae and Freddie Mac to waive their Uniform Security Instrument prohibitions against such senior liens.

2.
In addressing PACE programs with first liens, Fannie Mae and Freddie Mac should undertake actions that protect their safe and sound operations. These include, but are not limited to:
- Adjusting loan-to-value ratios to reflect the maximum permissible PACE loan amount available to borrowers in PACE jurisdictions;
- Ensuring that loan covenants require approval/consent for any PACE loan;
- Tightening borrower debt-to-income ratios to account for additional obligations associated with possible future PACE loans;
- Ensuring that mortgages on properties in a jurisdiction offering PACE-like programs satisfy all applicable federal and state lending regulations and guidance.
Fannie Mae and Freddie Mac should issue additional guidance as needed.

3.
The Federal Home Loan Banks are directed to review their collateral policies in order to assure that pledged collateral is not adversely affected by energy retrofit programs that include first liens.

Nothing in this Statement affects the normal underwriting programs of the regulated entities or their dealings with PACE programs that do not have a senior lien priority. Further, nothing in these directions to the regulated entities affects in any way underwriting related to traditional tax programs, but is focused solely on senior lien PACE lending initiatives.

FHFA recognizes that PACE and PACE-like programs pose additional lending challenges, but also represent serious efforts to reduce energy consumption. FHFA remains committed to working with federal, state, and local government agencies to develop and implement energy retrofit lending programs with appropriate underwriting guidelines and consumer protection standards. FHFA will also continue to encourage the establishment of energy efficiency standards to support such programs.

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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.9 trillion in funding for the U.S. mortgage markets and financial institutions.

Financial Institution Letters
Alert on FHFA Statement Relative to Concerns With Certain Energy Lending Programs
FIL-37-2010
July 6, 2010

Summary: The Federal Housing Finance Agency (FHFA) has issued a statement relative to concerns with certain energy retrofit lending programs. Insured institutions should be aware of such programs, as these programs could affect their residential mortgage lending activities and the ability to sell loans to Fannie Mae and Freddie Mac.

Highlights:

* The FHFA statement may impact institutions’ ability to sell residential mortgage loans to Fannie Mae and Freddie Mac.
* The FHFA statement advises that certain energy retrofit programs use the municipal tax assessment process to ensure repayment, which results in a priority lien status that supersedes the position of existing properly recorded lien holders.
* The FHFA statement indicates that underwriting and consumer protection standards, as well as energy retrofit standards, are being developed for these programs to ensure borrowers have the ability to repay the new monies in addition to existing obligations and consumers receive appropriate truth-in-lending disclosures. The FDIC shares the FHFA’s concerns about the lack of appropriate underwriting and consumer protection standards.
* The FHFA statement directs Fannie Mae, Freddie Mac, and the Federal Home Loan Banks to take specific actions that protect their operations.
* The FHFA’s statement is available at www.fhfa.gov/webfiles/15884/PACESTMT7610.pdf.
* This alert is provided for informational purposes.

Distribution:
FDIC-Supervised Banks (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Lending Officer

Suggested Routing:
Chief Executive Officer
Chief Lending Officer

Contact:
Beverlea S. Gardner, Senior Examination Specialist, at BGardner@FDIC.gov or (202) 898-3640

Printable Format:
FIL-37-2010 – PDF (PDF Help)

Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC’s Web site at www.fdic.gov/news/news/financial/2010/index.html.

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.

Paper copies of FDIC financial institution letters may be obtained through the FDIC’s Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562-2200).

The deadline for the completion of qualifying First-Time Homebuyer Credit purchases has been extended. Taxpayers who entered into a binding contract before the end of April now have until September 30, 2010 to close on the home.

The Homebuyer Assistance and Improvement Act of 2010, enacted on July 2, 2010, extended the closing deadline from June 30 to Sept. 30 for eligible homebuyers who entered into a binding purchase contract on or before April 30 to close on the purchase of the home on or before June 30, 2010.

Here are five facts from the IRS about the First-Time Homebuyer Credit and how to claim it.

1. If you entered into a binding contract on or before April 30, 2010  to buy a principal residence located in the United States you must close on the home on or before September 30, 2010.
2. To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
3. To be considered a long-time resident homebuyer, your settlement date must be after November 6, 2009 and you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased.
4. The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.
5. To claim the credit you must file a paper return and attach Form 5405, First Time Homebuyer Credit, along with all required documentation, including a copy of the binding contract. New homebuyers must attach a copy of the properly executed settlement statement used to complete the purchase. Long-time residents are encouraged to attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statements, property tax records or homeowner’s insurance records.

For more information about the First-Time Homebuyer Tax Credit and the documentation requirements, visit IRS.gov/recovery.

New RESPA Interpretive Rule:

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 3500 [Docket No. FR–5425–IA–01]

TITLE: Real Estate Settlement Procedures Act (RESPA): Home Warranty Companies’ Payments to Real Estate Brokers and Agents

AGENCY: Office of General Counsel, HUD.

ACTION: Interpretive rule.

DATES: Effective date: June 25, 2010. Comment Due Date: July 26, 2010.

SUMMARY: Under section 8 of RESPA and HUD’s implementing RESPA regulations, services performed by real estate brokers and agents as additional settlement services in a real estate transaction are compensable if the services are actual, necessary and distinct from the primary services provided by the real estate broker or agent, the services are not nominal, and the payment is not a duplicative charge. A referral is not a compensable service for which a broker or agent may receive compensation…

To read this Interpretive rule in its entirety, and provide comments please visit: http://edocket.access.gpo.gov/2010/pdf/2010-15355.pdf (please do not reply to this email to comment.)

The House of Representatives voted to give first-time homebuyers three more months to close on their home purchases and receive the $8,000 tax credit.

The Senate had needs to approve in the next 24 hours to meet the June 30th deadline .

Buyers must have signed a contact by April 30 to qualify.  The issue is the date the sale must be closed by. June 30th versus Sept 30. Many lenders and title companies are having trouble closing the sales on time. If they close one minute passed the deadline there are about 200,0o0 buyers that will loose their $8000 credit.

The House voted 409 to 5 to delay the closing deadline to September 30 in a stand-alone measure.  The move comes after the Senate failed to approve the jobs bill which contained the tax credit provision.

The House bill would raise the deficit by $9 million.

It is now up to the Senate.  Let’s hope it passes there are a lot of people stressing out. The good news, all my clients that needed to close before the cutoff closed last week.

From  Steve Cook Real Estate Economy Watch On June 25, 2010 @ 10:29 am

Legislation containing a three month extension of the popular homebuyer tax credits that would allow buyers to close by September 30th died in the Senate last night and the opportunity to extend the credits past the current deadline of June 30th may have passed.

The National Association of Realtors estimates some 75,000 first-time and repeat buyers need the three month extension on closing in order to qualify for the credits. Short sales, which require the lender to agree to take a loss on the seller’s mortgage, generally take much longer to close than standard sales, and as many as 15 percent of distressed property sales currently are short sales.

New-home contracts rose 30 percent in March and 15 percent in April, the biggest two-month gain in records dating to 1963, according to the Commerce Department. About a third of the April signings were for homes under construction, and a quarter were for those that weren’t started. Builders are working day and night to complete homes before the deadline next Wednesday at midnight, but many won’t make it.

Without the legislation to extend the closing deadline, buyers will not be able to claim the credits even though they met the April 30th deadline to have their offers accepted by sellers. Credits are worth up to $8000 to a first-time buyer and $6500 to a repeat buyer. The failure of the extension will leave thousands of buyers committed to buy homes without the benefit of a credit.

The homebuyer credits were attached to a Democratic-backed jobs and economic relief bill that collapsed in the Senate after failing for the third time. The defeat underscores the changed political climate in Congress over spending and deficits.

Despite major concessions, GOP moderates refused to cross the aisle to help Reid and Senate Finance Committee Chairman Max Baucus (D-Mont.) get the 60 votes needed to cut off debate. In the course of these talks, the size of the package was cut in half, and, to reduce the impact on the deficit, Democrats even went so far as to pay for state Medicaid assistance by cutting about $10 billion from future food-stamp benefits.

Senior Democrats in the Senate told the Washington Post they will probably try again to attract GOP support for the employment benefits measure, which Obama has called critical to avoiding the layoffs of hundreds of thousands of state workers and propping up the nation’s still-fragile economic recovery. After four months of talks, frustrated senior Democrats said they are likely to delay further action until after the July 4 recess.

“People are in the mood of letting the dust settle before finding the next step,” said Budget Committee Chairman Kent Conrad (N.D.).

When Congress resumes July 12, the dust may be settled but thousands of credit-driven home sales won’t be.

Article printed from RealEstateEconomyWatch.com: http://www.realestateeconomywatch.com

URL to article: http://www.realestateeconomywatch.com/2010/06/homebuyer-tax-credit-extension-hits-the-wall/

Over the past few weeks, you may have seen several articles in the media that the United States Senate had extended the closing deadline to qualify for the $8,000 first-time homebuyers’ tax credit and the $6,000 homebuyers’ tax credit. Unfortunately, these media reports have been premature and no legislation has been passed by Congress that modifies the closing deadline for the homebuyers’ tax credits. At this time, the closing deadline for the homebuyers’ tax credits will continue to be June 30, 2010.

An individual must have entered into a binding written contract on the home prior to April 30, 2010. Once that requirement was satisfied, that individual had until June 30, 2010 to complete the closing on the purchase. If the home is not closed prior to 11:59 PM on June 30, 2010, then that individual will not be eligible to claim the homebuyers’ tax credit. The amendment to the statute (which has not been approved by Congress) would extend that closing deadline until 11:59 PM on September 30, 2010.

The National Association of REALTORS® is actively pursing all available options with Congressional staff to secure passage of legislation that would extend the closing deadline for the homebuyers’ tax credits to September 30, 2010. However, it is uncertain at this time whether those efforts will be successful. If Congress does extend the closing deadline for the homebuyers’ tax credits, we will let you know. In closing, please be aware that nothing has changed for the time being and the current closing deadline for the homebuyers’ tax credits remains at June 30, 2010.

If your radon level is 4.0 pC/L or greater, you can call your state radon office to obtain more information, including a list of EPA or State-approved radon contractors who can fix or can help you develop a plan for fixing a radon problem. Reduction methods can be as simple as sealing cracks in floors and walls or as complex as installing systems that use pipes and fans to draw radon out of the building.

EPA maintains a comprehensive web site on radon at: http://www.epa.gov/iaq/radon/ where you can find internet versions of all of EPA’s documents, brochures and publications relating to radon.

Below are descriptions of three of the more common EPA publications on radon, copied from site http://www.epa.gov /iaq/radon/pubs/index.html

A Citizen’s Guide To Radon (second edtition) The Guide To Protecting Yourself And Your Family From Radon.
This booklet was developed by the EPA, the U.S. Department of Health, Human Services and the U.S. Public Health Service.  This is a complete guide to taking action to lower the radon level in your home. It offers strategies for testing and discussions of what steps to take after you have tested, discussions of the risk of radon and radon myths.
EPA Document Number 402-K-92-001. September 1994. (www .epa.gov/iaq/radon/pubs/citguide.html)

Consumer’s Guide To Radon Protection How To Reduce Radon Levels In Your Home …
This booklet is for people who have tested their home for radon and confirmed that they have elevated radon levels. EPA Document Number 402-K-*93-003.  (www.epa.gov/iaq/radon/pubs/consguid.html)

Home Buyer’s And Seller’s Guide To Radon
This guide has been developed for anyone buying or selling a home who wants to learn about radon. For sale by the U.S. Government Printing Office, Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328. Order Number – ISBN: 0-16-041680-9. EPA Document Number: 402-R-93-003, March 1993. (www.epa.gov/radon/pubslhmbyguid.html)

The U.S. Department of Housing and Urban Development ( HUD) , has created a new ” Good Faith Estimate ” for and new rules for this form. The form was originally developed to help consumers understand the fine print created by lenders. It was also developed to encourage borrowers to shop.

KEY POINTS -
There is a period that the lender MUST give the borrower to review the documents. At least 10 days.
If there are changes in the original docs, the borrower could need at least another 3 days to review the docs.

This may be overly simplified, because there are very complicated rule on each item, but at the end it boils down to 10 days for big $$$ things, 3 days for small.

What does this mean? GET YOUR LENDER TO GIVE YOU THE GOOD FAITH ESTIMATE IMMEDIATELY so that 10 day clock begins to run. Then, if you need to make any changes,  you can close within 3 days of the buyer receiving new docs.

Here is a sample copy of the new good faith estimate HUD GFE.

The second most important person in the real estate transaction is the Home Inspector. Get a good one you can trust.

A buyer may use any home inspector they like. Here are a few home inspectors that I trust. No one is perfect, but these are some of the better ones. These are licensed and insured. It is a law in Kansas but not in Missouri. For a Missouri inspection be sure to ask. A good inspector will climb on the roof, crawl in the attic and in the crawl space. They can arrange for termite and radon testing. Some may be available on Saturdays.

An inspection is typically 2-3 hours. Some buyers are there the whole time, some come for the last 30 minutes or so to review the findings.  Most inspectors produce a 30-50 page report with photos for the client’s review later review. I’ll be there as well.

The weather is the trick. Normally I like to get the inspections done ASAP. That way if we need to call in any specialists we have ample time.

It is a good practice for the buyer to contact the inspector directly to schedule the appointment. Also, to arrange for payment which is normally due at the time of inspection.

If there is ice or snow the inspectors will not climb on the roof.

Star Home Inspections – Larry or Greg
http://www.starhomeinspection.biz/ContactUs
816-554-1110

Sweet Home Inspections – James Allen
http://sweethomeinspections.com/index.html
913-894-5893

The Home Team – Mike Faulconer
http://www.kansascity-homeinspections.com/
913-642-3515

INSURANCE INSPECTION – It is wise to contact your insurance agent immediately. Due to some heavy claims in the KC area some companies are hesitant to write policies on homes and/or exclude items, such as the roof or an electrical fire.  A good broker that I trust is Chuck Eberly with Goodman Gravely (913) 782-1404. Email: ceberle@insurancesourceagency.com

Call them to inspect the property quickly. If an insurance issue is found after the inspection period the buyer may not have any recourse.

Steve Kornspan
Re/Max Premier Realty Kansas City | Associate Broker, ABR, GRI, SRES
913-871-4148 ext 2 | Fax:  913-562-5789