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Pending Bills Could Greatly Affect South Florida Housing Market
By Paola Iuspa-Abbott
April 20, 2012
Daily Business Review
National Association of Realtors chief lobbyist Jerry Giovaniello discusses proposed bills in Congress that could have a profound impact in South Florida's housing market.
Gerard "Jerry" Giovaniello is the chief lobbyist for the National Association of Realtors, one of the nation's largest trade associations with more than 1.2 million members.
He is in charge of pushing legislation that affects homebuyers, homeowners, distressed borrowers and renters.
NAR is a bipartisan group that lobbies for bills regardless of the political affiliation of the bill sponsors. Giovaniello will be in Miami on May 4 as a panelist at the National Housing and Florida Legislative/Governmental Update breakfast roundtable hosted by the Duane Morris law firm.
In this question-and-answer session, Giovaniello discussed some of the bills pending in Congress that stand to have a profound impact on South Florida. The interview has been edited for clarity and length.
What's the future of FHA loans, which are very popular among South Florida homebuyers?
We need to keep FHA strong for people who cannot afford to put down big down payments. There is a debate in Congress about FHA's reserve funds. The reserve funds [equivalent to 30 years for each mortgage it covers] will keep FHA strong for 30 years. But there is another reserve fund that cannot drop below 2 percent of all outstanding FHA loans. There is a debate whether that might be happening because housing prices are low and the premiums that are coming in are not matching some of the actuarial prognostications. We agree that there need to be certain increases in the guarantee fees [paid by FHA loan borrowers] to make sure FHA remains strong and active. But to make loans more expensive at this time seems the wrong way to go as far as public policy is concerned.
What is the status of a bill that would grant visas to foreigners who spend at least $500,000 buying a home in the U.S.?
There was a [committee] hearing on it about a week ago. The hearing was on the general concept of providing incentives for Canadian and other foreigners, including Chinese, to come and stay longer than the current visa program permits. We support the general concept of incentives for foreigners to extend their visas. There were questions raised at the hearing about the tax consequences of it. But right now, the details of the bill have not been worked out. This is the beginning of a good discussion, but I don't think we are going to get to pass it this year.
What is NAR's position on an ongoing effort to overhaul Fannie Mae and Freddie Mac?
We support bills that reform Fannie Mae and Freddie Mac but we don't support closing them. We support changing them from the way they were organized, where the government is the guarantor and the investors get the profits. We still want [them] to be a federal presence in the secondary mortgage market across the United States, whether in good times or bad. We want something that would involve an implicit federal guarantee but with different underwriting standards. That's what we are working on with Congress. But Congress won't get to pass a bill this year because there is no real consensus. There are 27 different bills and approaches, and we had hearings on them, but there is no consensus on the issue yet.
What's the status of a proposal to change or eliminate the mortgage interest deduction?
That has been debated by think tanks for the last two years. Congress had some hearings on it but hasn't done anything more than that. The real push will come next year. The whole idea of the deficit, cuts in the budget and tax reform will begin to be debated in 2013. There is a perfect storm brewing with the Bush tax cuts expiring and lots of incentives for businesses, like R&D [research and development] tax credits, and payroll tax ending next year. Next January, no matter who is sworn in as president, there are going to be some huge challenges as far as the tax code is involved. In May, when we are going to have 10,000 Realtors in Washington, D.C., we are going to lobby against changing the mortgage interest deduction for homeowners.
Is there any legislation being considered to help reduce the impact that the shadow inventory could have on future home sale prices?
There is a bipartisan bill we are supporting on short sales that essentially says that lenders have 45 days to make a decision [accepting or denying an offer]. Just introducing that bill and pushing it has had an impact on lenders who are now coming up with programs to voluntarily shorten that period when a decision needs to be made.
What's NAR's position on the Dec. 31 expiration of the Mortgage Forgiveness Debt Relief Act in which the IRS forgives taxable income on deficiency balances resulting from short sales and foreclosures?
Three bills were just introduced to extend the expiring tax relief. One was introduced by Representative Tom Reed, R-New York, another by Representative Charles Rangel, D-New York, and another by Senator Debbie Stabenow, D-Michigan. The Forgiveness Debt Relief Act needs to be renewed or extended into next year. Otherwise, it permits the IRS to tax phantom income when there has been a [mortgage] workout or the lender has forgiven part of the mortgage. The bill has support, and we are going to start pushing it very strongly from now on.
Is there any other bill that, if approved, could have a significant impact in our local economy?
We are supporting a bill to permit credit unions to lend a higher amount of loans to small businesses. Right now, they are very restricted as to how much of their net assets they can apply to loans for commercial enterprises. Because there is such a lack of private financing, this is something that could be very helpful to small businesses.
This article is reprinted with permission from the Daily Business Review.
