NAR Legislative Update Jamie Gregory Deputy Chief Lobbyist, Government Affairs.

NAR Legislative Update

Jamie GregoryDeputy Chief Lobbyist, Government Affairs

AGENDA

• Key Findings from National Survey• Tax Reform• GSE and FHA Reform• National Flood Insurance Program

Key Findings from a National SurveyMortgage Interest Deduction

Conducted by:

Bill McInturff, PartnerNicole McCleskey, Partner

Geoff Garin, PresidentJeff Horwitt, Vice President

Key Finding #1

Americans recognize the fragile times we are in. They will be reluctant to rock the boat as there are glimmers that the economy may hopefully, finally be showing signs of recovery with the housing sector leading the way.

At the forefront is a dramatic turn-around in feelings about housing.

Housing Market in the Country

Now thinking about the housing market in the

country, do you believe that the housing market

has already bottomed out and is starting to

improve, is at the bottom but is not yet

getting any better, has not yet bottomed out

and will still get worse?

*Trend data from Bipartisan Policy Center: Frequency Questionnaire, December 10-18, 2011

The deficit is the primary culprit Americans believe is holding the economy back.

Which of the following do you think is the biggest factor in holding back an economic recovery today…

Respondents Top Factors Holding Back Economic Recovery

The federal budget deficit 33%Budget cuts and lack of funding for programs 16%Problems with the federal tax system 16%Rising prices 11%Problems in the financial markets 9%Problems in the housing markets 3%

Key Finding #2

Tax reform strikes a stronger chord with voters when the goal is deficit reduction or making the tax code simpler and fairer. It does not mean higher taxes or eliminating tax deductions for individuals.

Americans across party rally around a simpler and fairer tax code.

…Possible goals that Congress might have for comprehensive reform of the federal tax system. For each goal, please indicate how high a priority you feel this should be. Use a scale from zero to ten, on which a ten means it should be the single most important goal,

and a zero means it should not be an important goal, and five is in the middle. You may use any number from zero to ten.

% 8-10 Top Goals by Party

Republicans Independents Democrats

Make the tax code simpler and fairer 75% 71% 66%Reduce the federal budget deficit 77% 61% 56%Reduce overall tax rates for individuals 61% 44% 43%Eliminate tax deductions for businesses 19% 13% 21%Reduce overall tax rates for businesses 44% 27% 20%Eliminate tax deductions for individuals 17% 15% 19%

Key Finding #3

There is still not great familiarity with the Mortgage Interest Deduction

And, while talking about buying a home, before this survey how familiar would you say you were with the mortgage interest tax deduction? Very familiar, somewhat familiar, not too familiar, or not familiar at all?

+42%-24%

By Non-Home Owners, Home Owners, Home Owners with Mortgages, and Itemized Deductions

+52% +48%

Not surprisingly, people who do not own a home are less familiar with the MID.

Key Finding #4

There is a strong opposition to the elimination of MID as a part of a tax reform effort. We lose a little steam on second home mortgages, which is a separate, significant challenge.

Americans demonstrate stronger opposition to these reforms.

There are a number of proposals in Washington to reform our federal tax system...for each one please tell me if you favor or oppose that proposal. And would you say that you strongly (favor/oppose) or just somewhat (favor/oppose) that proposal?

Proposals by 40% or Higher Strongly Oppose

Strongly Oppose

Total Oppose

Completely eliminate the tax deduction for interest payments made on a home mortgage.

53% 74%

Place new limits on annual contributions to retirement savings plans, like 401(k) plans. 49% 71%Limit income tax deductions on contributions to non-profit organizations and charities.

40% 61%

Intensity wanes a bit for these measures.


Proposals by 30% or Higher Strongly Oppose

Strongly Oppose

Total Oppose

Reduce the tax deduction for interest payments made on a home mortgage. 39% 53%Tax the sale of products sold across state lines on Internet retail sites like Amazon. 36% 58%Completely eliminate the tax deduction for interest payments made on home mortgages valued above five hundred thousand dollars.

34% 63%

Americans find room to limit or raise taxes here.


Strongly Oppose

Total Oppose

Total Favor

For people with higher incomes, place a limit on their total amount of itemized deductions, including the home mortgage interest deduction, charitable deductions, and deductions for state and local taxes.

22%

43%

54%

Raise taxes on companies for the profits they earn outside of the United States.

10%

21%

78%

Homeowners make a strong coalition against MID changes.


Strongly Oppose by Overall, Home Owners, and Home Owners with Mortgages

Overall Home Owners Home Owners with Mortgages

Completely eliminate the tax deduction for interest payments made on a home mortgage. 53% 64% 72%Reduce the tax deduction for interest payments made on a home mortgage. 39% 47% 52%Completely eliminate the tax deduction for interest payments made on a mortgage for a second home.

29% 33% 35%Completely eliminate the tax deduction for interest payments made on home mortgages valued above five hundred thousand dollars.

34% 38% 41%


COMPLETELY ELIMINATE the tax deduction for interest payments made on a home mortgage.

Strongly Oppose

Total Oppose

All Respondents53%

74%

Labor Union Households (10%)66%

82%

Respondents from labor union households demonstrate overwhelming opposition to eliminating the MID.


REDUCE the tax deduction for interest payments made on a home mortgage.

Strongly Oppose

Total Oppose

All Respondents39%

53%

Labor Union Households (10%)50%

62%

Labor union households also exhibit stronger opposition to reducing the MID.

Tax Deduction for Interest Payments Lowered to

$500,000 Cap

Completely eliminate the tax deduction for interest payments made on home mortgages valued above five hundred thousand

dollars.

6363%%

3535%%

Favor Oppose

There are a number of proposals in Washington to reform our federal tax system. I would like to read you some of these proposals. For each one please tell me if you favor or oppose that proposal.

*Cap the home mortgages that are eligible for the

yearly mortgage interest tax deduction at five

hundred thousand dollars, instead of the current one

million dollars.

2828%%

6666%%*Data from a national survey conducted September 21-22, 2011. N=400 adults

Eliminating the Tax Deduction

for a Second Home

Strong opposition across party is still lower for eliminating the tax deduction for a second home.

Now, having heard some more information about the mortgage interest deduction, I would like to read you some proposals to reform our federal tax system again. For each one, please tell me if you favor or oppose that proposal.

Republicans Independents Democrats

Reduce the tax deduction for interest payments made on a home mortgage. 47% 35% 30%Completely eliminate the tax deduction for interest payments made on a home mortgage.

66% 53% 50%Completely eliminate the tax deduction for interest payments made for home mortgages valued above $500,000.

50% 35% 29%Completely eliminate the tax deduction for interest payments made on a mortgage for a second home.

34% 25% 27%

Strongly Oppose Tax Reform Proposals by Party

Strong opposition to eliminate the deduction for second homes is also lower even among the highest income households.

Now, having heard some more information about the mortgage interest deduction, I would like to read you some proposals to reform our federal tax system again. For each one, please tell me if you favor or oppose that proposal.

Strongly Oppose Tax Reform Proposals by Income

Less than $60K $60K-$100K $100K+

Reduce the tax deduction for interest payments made on a home mortgage. 24% 41% 56%Completely eliminate the tax deduction for interest payments made on a home mortgage. 40% 60% 81%Completely eliminate the tax deduction for interest payments made for home mortgages valued above $500,000.

32% 37% 47%Completely eliminate the tax deduction for interest payments made on a mortgage for a second home.

29% 26% 32%

Key Finding #5

There is strong messaging against changes in the mortgage interest deduction.

People understand the positive value of home ownership to economic security.

Top “Bad Idea” Messages to Make Changes to the MID Ranked by Very ConvincingVery Convincing Total Convincing

American home ownership is a bedrock value of our culture and people who are able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream. We need policies that encourage home ownership so we can create stronger communities, social stability, and build wealth over the long term through our homes.

50% 81%

This would be a tax increase on the nation's seventy five million home owners. A majority of mortgage interest payments claimed as deductions are filed by people with incomes under one hundred thousand dollars. Eliminating the tax deduction will hit the middle class the hardest, with an average increase of three thousand five hundred dollars on their federal tax bill.

46% 78%

Please tell me whether each statement is very convincing, somewhat convincing, not too convincing, or not at all convincing argument to you for why this is a bad idea.

People understand the positive value of home ownership to economic security.

Top “Bad Idea” Messages to Make Changes to the MID Ranked by Very ConvincingVery Convincing Total Convincing

Our nation's economic recovery depends on the strength of our housing sector. For every two homes sold, one job is created - good jobs that fuel small businesses in our communities year after year, like roofers, plumbers, painters, and landscapers. Every home purchased pumps up to sixty thousand dollars into the economy over time. Policies that add uncertainty to our housing sector threaten our economic recovery and the lives of hard-working Americans.

37% 80%

We need policies that promote home ownership, not jeopardize it, because our real estate market plays a vital role in our nation's economy. Housing accounts for more than fifteen percent of our gross domestic product - that is two trillion dollars a year. And home sales generate more than two point five million private-sector jobs in an average year.

35% 82%


Our nation's economic recovery depends on the strength of our housing sector. For every two

homes sold, one job is created - good jobs that fuel small

businesses in our communities year after year, like roofers,

plumbers, painters, and landscapers. Every home

purchased pumps up to sixty thousand dollars into the

economy over time. Policies that add uncertainty to our housing sector threaten our economic recovery and the lives of hard-

working Americans.

Very Convincing Total Convincing

All Respondents 37% 80%

Labor Union Households (10%) 48% 87%


A jobs-based argument for why not to change the MID does especially well in labor union households.

TAX REFORM

Tax Reform

• On June 27th the Senate Finance Committee announced its plan for tax reform legislation in the Senate using a “blank slate approach”– A “blank slate” means that as a starting point, all tax

expenditures will be removed from the tax code including MID and capital gains on primary residence

• Senators have until July 26th to submit in writing to the Finance Committee any tax expenditures they wish to see kept in the code. – It is believed that once all submissions are received, the

professional staff of the Finance Committee will begin drafting a tax reform package.

Tax Reform

• NAR is specifically asking Senators to preserve the following real estate provisions:– Mortgage Interest and Real Property Tax

Deductions– Exclusion of capital gain on sale of principal

residence– Exclusion of mortgage debt cancellation– Depreciation of real estate– Deferral of gain on like-kind exchanges

GSE & FHA REFORM

GSE & FHA Reform

• House Financial Services Chairman Hensarling (R-TX) introduced “The Protecting American Taxpayers and Homeowners (PATH) Act” which includes reforms to FHA, the GSEs, and the financial regulatory law known as the Dodd-Frank Act

• NAR has a number of concerns with this bill:– It does not provide for a federal guarantee for a secondary

mortgage market– It contains significant changes to the FHA program that

include income targeting, downpayment increases, and loan limit decreases.

• The Bill does include language to fix the definition of fees and points in the ability to repay/qualified mortgage (QM) regulation

GSE Reform

• Senators Corker (R-TN) and Warner (D-VA) introduced the “Housing Finance Reform and Taxpayer Protection Act” which would replace Fannie Mae and Freddie Mac with a new guarantor, the Federal Mortgage Insurance Corporation– It would offer reinsurance of mortgage securities

if private creditors ever reached another crisis in the future

– This retention of the federal guarantee for mortgage securities is critical to REALTORS®.

NATIONAL FLOOD INSURANCE PROGRAM

Several Reasons for the Increase

• Flood map improvements reveal homes in the floodplain• Lender requires private insurance above NFIP’s limit

(250K) • Property does not have an Elevation Certificate to

provide accurate information on the flood risk• Misleading news reports of the worst-case insurance

rates if Sandy-rebuilding communities don’t elevate their homes.

• 2012 Biggert-Waters Law phases-out some rate subsidies

2012 Biggert-Waters Law• Situation:

– For years NFIP operated month to month shutting down several times and stalling +1,300 home sales daily

– No private market alternative for flood insurance

– Political Choice: Subsidies or Extension

Figure 1Average Private Flood Premium is More Than

Twice as Much as NFIP Premium

$585 $585

$361

$236

$83$32

0

200

400

600

800

1,000

1,200

1,400

NFIP Average Premium Private Policy Premium

Source: PCI, based on NFIP Actuarial Rate Review and other sources

$1,297

$

TOTAL

Cost of Capital & Profit

Fed./Foreign Income Taxes

Subsidy

NFIP Average Premium(excl. premium tax)

Premium Taxes

(excl. premium tax)

2012 Biggert-Waters Law (Cont.)

• The Best Deal in a Bad Situation:– No shutdowns for 5 years– Below private-market pricing– Gradual phase-out for existing subsidies– More accurate maps & streamlined appeals– FEMA report on affordability

NAR Policy: Maintain NFIP coverage for 2nd homes

Next Steps: NAR Educational Efforts

• Enhanced content on Realtor.org Flood Page• NAR Legal developed info and guidance for

members on how to address disclosure concerns and possibility of increased flood insurance premiums

• Continue to brief numerous state associations and local boards

• Conducting survey on NFIP rate increases with state associations; please ask your members to it fill out

• Held multiple webinars with FEMA officials

Next Steps: NAR Actions on the Hill

• Working to delay several Biggert-Waters rate provisions until FEMA reports to Congress on rate affordability– House already passed an amendment to delay

one of the provisions (“grandfathering”) for 1 year

– Successful attached that amendment to the Senate bill when it comes up for a vote

– Also working to lengthen and expand the delay to include the other rate provisions (no more subsidies for home purchases after Oct. 1)

What We Need• Ground truth the cause of any rate issues

– Please have clients talk to an insurance agent, don’t rely on blogs or media rumors

– Get specifics & any calculations in writing so we can investigate; have them fill out our survey

– Get Elevation Certificates, Go through appeals process

• Need to build case for rate relief– Congress won’t fix unless proven broken– Don’t want Congress to pass something that doesn’t

fix

Questions?

www.realtor.org/topics/national-flood-insurance-program-nfip

NAR Legislative Update Jamie Gregory Deputy Chief Lobbyist, Government Affairs.

Documents

Transcript of NAR Legislative Update Jamie Gregory Deputy Chief Lobbyist, Government Affairs.