REALTORS® are meeting with their U.S. Representatives during the August recess in their district offices to discuss several important issues, including preservation of the mortgage interest deduction, maintaining the existing loan limits, and continuation of the flood insurance program.

Lawmakers have introduced legislation to extend the current loan limits for FHA, VA, and the two secondary mortgage market companies Fannie Mae and Freddie Mac. The “Homeownership Affordability Act of 2011,’’ S. 1508 (co-sponsored by Sen. Feinstein), would extend the current loan limits until December 31, 2013. The current FHA, Fannie, and Freddie limits for high cost areas, set at 125 percent of area median price, are set to expire on September 30. VA limits expire December 31. The extension issue is becoming critical, with many lenders already rejecting applications at the higher limits out of concern the loan won’t close prior to the reset. 

The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

The National Association of REALTORS® (NAR) is supporting current efforts to reauthorize the National Flood Insurance Program (NFIP) to issue flood insurance, which is required in 21,000 communities nationwide. As part of the reauthorization NAR hopes it will:
• renew and strengthen the long-term viability of the NFIP for at least five years;
• improve the accuracy of flood insurance rate maps used to determine which properties require flood insurance;
• continue to include comprehensive coverage for residences, including rental properties and second homes; and
• provide “full risk” premiums for most repetitive loss structures in many states.

For the past several years, Congress has been approving short-term extensions of the NFIP’s authority to issue flood insurance policies while it continues to debate long-term fiscal reforms to the program. Twice in 2010 Congress allowed the NFIP to lapse for multiple weeks at a time, halting tens of thousands of real estate transactions in areas where homebuyers are required to purchase flood insurance to obtain a mortgage. With the NFIP authority set to expire on September 30, 2011, for the 10th time in three years, NAR is advocating for further reform and long-term extension of the program.

On July 12, 2011, by a vote of 406-22, the House passed the Flood Insurance Reform Act (H.R. 1309), a bill to extend NFIP authority by five years and strengthen the program’s actuarial stability. Before that, it defeated 38-384 a NAR-opposed amendment by Rep. Candice Miller (R-MI) to strike the bill and terminate NFIP in six months. The House bill now moves to the Senate, where we are urging quick action. NAR is pushing for the longest extension possible before the looming September 30, 2011 deadline.

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