LEGISLATIVE AFFAIRS: April Federal and State Legislative Update
Philip Weiden | April 2019
FHA Mitigates Risk in Portfolio
The Federal Housing Administration announced that effective for mortgages with case numbers assigned on or after March 18, 2019, the Technology Open to Approved Lenders (TOTAL) Mortgage Scorecard may flag certain mortgages submitted through the automated underwriting system (AUS) and require the lender to manually underwrite those loans.
FHA is concerned with mortgages with higher risk characteristics, such as those having less than 620 credit scores and greater than 43% debt to income ratios. Currently, 25% of FHA’s loan portfolio is made up of loans with DTI more than 50%, the highest since 2000. This is coupled with a decrease of the average borrower credit score of 670. FHA states it is concerned about the effect on its ability to manage risk and fulfill its mission of supporting sustainable homeownership and is implementing these changes in order to mitigate that risk.
CFPB Releases PACE Proposal
The U.S. Consumer Financial Protection Board has published an Advanced Notice of Proposed Rulemaking to solicit comment on proposed rules related to Property Assessed Clean Energy financing.
Section 307 of the Economic Growth, Regulatory Relief and Consumer Protection Act mandates regulations relating to PACE financing. Specifically, the regulations must apply current ability-to-repay requirements, in place for residential mortgage loans, to PACE financing. The regulations must also apply general civil liability provisions to PACE financing.
State Budget Highlights
The following are key highlights of the state budget as reported by NYSAR and the Journal News.
• Make permanent the state’s 2% property tax cap, which HGAR helped create in 2011.
• Prohibits housing discrimination based on lawful source of income.
• Creates a new real estate transfer tax rate of an additional $1.25 for each $500 of consideration when the conveyance is $3 million or more on residential property in New York City, or $2 million or more on non-residential property.
• Expands the “mansion tax” in New York City on conveyances of residential property valued at $2 million or more. New rates are broken up into seven tiers and range from an additional tax of 0.25% on conveyances between $2 million and $3 million, up to 2.9% on conveyances of $25 million or more.
• Remove the 20% tax deduction for pass-through businesses from its state tax code—Realtors will still be able to claim the deduction on their federal taxes.
• Makes changes the state’s STAR program by capping the growth of the exemption benefit to zero, unless the homeowner enrolls in the new STAR credit program, which requires taxpayers to pay all school taxes up-front and receive a check at a later date.