Flood Insurance Affordability Act

Flood Insurance Affordability Act

Own Waterfront Property in Grand Traverse County or Leelanau County? This could impact you!

Click here to contact your Michigan US Senator's office!

Daily Real Estate News | Wednesday, January 08, 2014

NAR President-elect Chris Polychron (far left) joins a bipartisan group of senators yesterday in support of a bill that would press the pause button on destabilizing changes to flood insurance premiums.

"This bill is going to come to the floor very, very soon," Sen. Chuck Schumer (D-N.Y.), a member of the Democratic Senate leadership, said yesterday at a press conference held on Capitol Hill. NAR President-elect Chris Polychron joined the senators on the podium to show NAR's support for the bill.

The bill is called the "Flood Insurance Affordability Act" (S. 1846), introduced by Sen. Robert Menendez (D-N.J.), and today has 28 sponsors from both parties. It would require the Federal Emergency Management Agency, which administers the federal flood insurance program, to stop implementing changes to premiums so it can investigate and report to Congress on the magnitude of these increases. FEMA has been phasing out longstanding premium subsidies to certain home owners and requiring premiums to rise to their actuarial level. But questions have been raised by lawmakers, industry groups, and consumers about the accuracy of the levels that are being set.

"People were paying $800 or $1,000 and now we’re talking about $10,000 or more," said Sen. Menendez at the press conference. "That’s simply unsustainable.”

The bill would also require FEMA to set up an advocate so consumers have a place to turn if they get stuck with confusing or overly high rate quotes and provide a process for the agency to start working with industry groups on a longer-term solution to the affordability problem.

NAR has been a major supporter of lawmakers' efforts to require a pause in the premium change, and close to 80,000 of its members have sent letters to their members of Congress in support of the bill. A companion bill in the House is also gaining strength, with about a third of House members signed on as cosponsors.

Watch the full C-SPAN video of the press conference.

The National Association of Realtors supported the Biggert-Waters Act but is now supporting a delay?

  • NAR continues to support the intent but the law has not been implemented as intended.
  • Biggert-Waters was supposed to end the uncertainty that had cost 40,000 home sales a month.
  • Yet, property owners across the nation are again facing foreclosure in the 20,000 communities where flood insurance is required for a mortgage.
  • The Federal Emergency Management Agency (FEMA) which administers the law:
    • FAILED to predict rate increases of this magnitude; during the debate, FEMA estimates ranged from several hundreds to thousands, not the tens of thousands we’re seeing.
    • FAILED to warn home buyers of rate shocks before purchasing their property; now, real estate agents are being forced to explain to former clients the lack of FEMA disclosures.
    • FAILED to train or hold accountable insurance agents who are issuing MANY rate quotes that can differ by tens of thousands, when there is only ONE actuarial rate per property.
    • FAILED to explain or provide property owners with a single point of contact to answer questions about the insurance rating errors and discrepancies.
    • FAILED to implement many parts of the law that could help (such as installment payments) while rushing forward with others that have shocked and awed.
    • FAILED to report to Congress on the affordability of these implementation decisions. 
  • For these reasons, NAR supports the Homeowner Flood Insurance Affordability Act to delay further implementation until FEMA follows and reports to Congress as required by the law.

Won’t delaying Biggert-Waters Act drive the NFIP back into debt?

  • NAR agrees that flood insurance rates should be actuarially sound. 
  • However, rushing unintentional rate shocks could cause another foreclosure crisis.
  • Due to insurance mistakes, property owners are being asked to pay more than their fair share.
  • If flood insurance becomes unaffordable and owners foreclose, FEMA would not be able to pay back the debt anyway.
  • Under the Homeowner Flood Insurance Affordability Act, it may take FEMA a few more years to pay the Treasury loan for Hurricanes like Katrina and Sandy, but taxpayers will continue to be compensated with interest.
  • In the meantime NFIP will continue to reduce the amount that taxpayers will have to spend on emergency disaster relief for underinsured properties after major floods.

The bill would simply delay but shouldn’t we fix the rates instead?

  • The rate increases took effect October 1, 2013, and every day we wait, compounds the impact.
  • NAR is working with Congress and FEMA on longer term solutions but we cannot afford to wait on the bipartisan, bicameral consensus.
  • Congress cannot address the problem until FEMA investigates and reports back on the cause(s).
  • The Homeowner Flood Insurance Affordability Act provides FEMA with additional resources to create an office of the Advocate to investigate the causes and respond to consumer questions.
  • The Act will delay the costliest increases until FEMA can investigate and report to Congress with affordability solutions.

Will the bill exclude second homes and commercial properties from the delay?

  • No.  The bill would delay the increase for purchase of ALL properties, including second homes and commercial properties.   ALL properties will be able to keep the grandfathered rate.
  • ALL buyers of any property will not see the rate increase for 4 years until FEMA reports to Congress with affordability solutions.
  • The existing owners of those properties will continue to see their rates capped at 25% per year.

Robert Freedman, REALTOR® Magazine
Source: http://realtormag.realtor.org/daily-news/2014/01/08/senators-boost-flood-insurance-time-out

Source: http://www.realtor.org/topics/national-flood-insurance-program-nfip/nar-issue-brief-homeowner-flood-insurance-affordability-act

Copyright National Association of REALTORS®. Reprinted with permission.

Real Estate and the "Fiscal Cliff" Bill - What it means

Real Estate Provisions in “Fiscal Cliff” Bill

On January 1, 2013 the Senate and House passed H.R. 8, legislation to avert the “fiscal cliff,” the bill will be signed by President Barack Obama today, on January 2, 2013.

Below are a summary of real estate related provisions in the bill.

Real Estate Tax Extenders

  • Mortgage Cancellation Relief is extended for one year to January 1, 2014
  •  Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012
  • Leasehold Improvements: the 15 year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012.
  •  Energy Efficiency Tax Credit: the 10% tax credit (up to $500) for homeowners for energy efficiency improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

Return of the “Pease” limitations on itemized deductions for high income filers
Under the agreement so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers.

“Pease” limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000. The thresholds are indexed for inflation so will rise over time. Under the formula, filers gradually lose the value of their total itemized deductions up to a total of a 20% reduction.

First enacted in 1990, and named for the Ohio Congressman Don Pease who came up with the idea, the limitations continued throughout the Clinton years. The limitations were gradually phased out starting in 2003 and were completely eliminated in 2010-2012. The reinstitution of these limits has far less impact on the mortgage interest deduction than a hard dollar deduction cap, percentage deduction cap, or reduction of the amount of MID that can be claimed.

Capital Gains
Capital Gains rate stays at 15% for those the top rate of $400,000 individual and $450,000 joint return. After that, any gains above those amounts will be taxed at 20%. The 250/500k exclusion for sale of principle residence remains in place.

Estate Tax
The first $5 million dollars in individual estates and $10 million for family estates are now exempted from the estate tax. After that the rate will be 40 percent, up from 35 percent. The exemption amounts are indexed for inflation.

Copyright National Association of REALTORS®. Reprinted with permission.
Source: http://www.ksefocus.com/billdatabase/clientfiles/172/4/1711.pdf

Michigan Homebuyer Assistance Grant

$3,000 Michigan Homebuyer Assistance Grant

$3,000 Michigan State Housing Development Authority (MSHDA) Grant is now available for first time home buyers in Leelanau County and Grand Traverse County (Traverse City).

1. Homebuyer Assistance - $15 million has been allocated for the Homebuyer Assistance grant program that will assist first-time homebuyers purchasing a single-family/one-unit, owner occupied, principal residence. Eligible first-time homebuyers are defined as a person who has not owned a home as their principal residence for three years prior to the date of purchase. Non-military homebuyers are eligible for grants up to $3,000. Active military and veterans are eligible for grants up to $5,000. Neither grant can exceed 25% of the purchase price.  Grant funds may be used with any first lien mortgage transaction and can be combined with MSHDA's Down Payment Assistance.  NOTE:  Military is defined as a member of the U.S. Armed Forces or National Guard and Reserves.

Source and additional information can be found here: http://www.michigan.gov/mshda/0,4641,7-141--291018--,00.html or by asking your loan officer!

For more information please contact:

Jonathan Oltersdorf
Oltersdorf Realty, LLC
231-271-7777
E-mail: jonathan@oltersdorf.com

Michigan Beach Grooming Legislation -SB 1052

Michigan Beach Grooming Legislation

SB 1052 has been passed by the Michigan Senate and the Michigan House and is currently on its way to Governor Rick Snyder for approval.

Lakefront vegetation has become more of an issue in recent years in Leelanau County and Grand Traverse County as water levels have receded exposing more shoreline and lake bottom allowing plants to grow. Previously a permit was required to remove vegetation. The new bill allows property owners on Lake Michigan (West Grand Traverse Bay & East Grand traverse Bay) to remove vegetation without a state permit.

The latest version of the legislation specifically says that the state or a local government may not regulate

• Leveling sand, removing vegetation, grooming soil, or removing debris, in an area of unconsolidated material predominantly composed of sand, rock, or pebbles, located between the ordinary high-water mark and the water's edge, or the
• Mowing vegetation between the ordinary high-water mark and the water's edge.

To read the full 27 page bill as passed by the house and senate on June 14, 2012 please click the following link: http://www.legislature.mi.gov/documents/2011-2012/billconcurred/Senate/pdf/2012-SCB-1052.pdf

Principal Residence Exemption Changes - Senate Bill 349

Principal Residence Exemption Legislation Unanimously Passes Senate

Today, the Michigan Senate voted 38-0 in support of legislation providing a fair process when it comes to their property taxes.

Senate Bill 349, sponsored by Senator Dave Hildenbrand (R-Lowell) creates two Principal Residence Exemption (PRE) filing dates; one on June 1st, and the other on November 1st. Additionally, this legislation allows bank-owned properties to retain their PRE so that buyers can qualify at the lower rate of taxation. This is particularly important since foreclosures have flooded the market in recent years.

Senate Bill 349 now heads over to the House for consideration.

Copyright Michigan Association of REALTORS®. Reprinted with permission.

IF THIS BECOMES LAW WHAT DOES IT MEAN?

Currently, Michigan property owners have to file a principal residence exemption form by May 1 to get lower primary home taxes for the full year. If you miss the May 1 deadline or you purchase a house that wasn't a primary home after May 1 you will pay the higher non homestead taxes until the following year. If this bill becomes law the new deadline for your summer tax bill (the much higher bill) will be June 1 and November 1 for the winter tax bill. In short, it will save the home purchaser money if you buy a non-homestead (vacant or non primary residence) home after May 1 and intend to occupy the home as your primary residence.

Exemptions for bank owned properties.

This also appears to be a major tax break for lending institutions and banks that can file an exemption to receive the homestead property tax rate (primary home rate) for vacant assets that are currently for sale. This also could allow for purchasers to qualify for their mortgage based on the lower tax rate and qualify for a slightly more expensive home.

Here is the most relavent portion of the bill:

An owner of property may claim 1 exemption under this section by filing an affidavit on or before May 1 FOR TAXES LEVIED BEFORE JANUARY 1,2012 OR, FOR TAXES LEVIED AFTER DECEMBER 31, 2011, ON OR BEFORE JUNE 1 FOR THE IMMEDIATELY SUCCEEDING SUMMER TAX LEVY AND ALL SUBSEQUENT TAX LEVIES OR ON OR BEFORE NOVEMBER 1 FOR THE IMMEDIATELY SUCCEEDING WINTER TAX LEVY AND ALL SUBSEQUENT TAX LEVIES

You can read and/or download the full 27 page Senate Bill 349 by clicking here:
http://www.legislature.mi.gov/documents/2011-2012/billengrossed/Senate/pdf/2011-SEBS-0349.pdf

 

UPDATE: APRIL 26, 2012: Yesterday, the Michigan House of Representatives voted 109-1 in support of legislation providing a fair process when it comes to their property taxes. The bill now heads to the Governor, where we expect his signature before May 1st.

UPDATE #2: MAY 1, 2012: PRE Enhancement Legislation Signed by the Governor 5/1/2012 Today, Governor Snyder signed legislation providing homebuyers a fair process when it comes to their property taxes. Senate Bill 349, sponsored by Senator Dave Hildenbrand (R-Lowell) creates two Principal Residence Exemption (PRE) filing dates; one on June 1st, and the other on November 1st. Additionally, this legislation allows bank-owned properties to retain their PRE so that buyers can qualify at the lower rate of taxation. This is particularly important since foreclosures have flooded the market in recent years.

Below are a few FAQ’s regarding the new law:

1. Does the legislation take effect this year?
A. Yes. The new law moves current May 1st PRE filing deadline to June 1st of this year.

2. How does it work?
A. If a homebuyer purchases a Principal Residence and closes on or before June 1st, they can take advantage of a significant tax break by filing for a Principal Residence Exemption.

3. When is the additional filing date?
A. November 1st. This allows for tax relief in those communities that still collect a portion, if not all of their non-homestead mills, on the December tax bill.

4. If my client buys after June 1st this year, what can they expect?
A. If a homebuyer purchases a home after the June 1st filing deadline, and their local tax authority collects all non-homestead mills on the spring tax bill, their property taxes may not reflect the exemption until the next tax bill. If however that local tax authority collects a portion of the non-homestead mills on the winter tax billing cycle, the homebuyer can file for a PRE before the November 1st and exempt themselves from any non-homestead mills collected on the December bill.

5. What about the foreclosure provisions?
A. Banks have the option of maintaining the home’s Principal Residence status by filing a Conditional Rescission. By maintaining this exemption status, it’s the expectation that borrowers will be able to qualify for financing on these foreclosed properties at the PRE rate and begin paying the lower rate of taxation as soon as they move into the home. To make up for the lost school revenue, banks will be assessed a newly defined tax that will keep the 18 mills (which they presently pay on any foreclosed property) when a property can no longer qualify as a principle residence. It is important for those REALTORS® working with bank clients to let lenders know about the change and communicate the benefit of filing a Conditional Rescission.

Copyright Michigan Association of REALTORS®. Reprinted with permission.


If you are planning on buying a home in Leelanau County or Traverse City/Grand Traverse County you should continue to follow this bill as it could potentially become law in the near future.

Jonathan Oltersdorf
Vicky Oltersdorf
Oltersdorf Realty, LLC
Phone: 231-271-7777
E-Mail: realestate@oltersdorf.com

Fed Vows to Keep Rates Low Until 2014

Fed Vows to Keep Rates Low Until 2014

 

Daily Real Estate News | Thursday, January 26, 2012


The Federal Reserve announced that short-term interest rates will likely stay near zero for nearly three more years, a move that is expected to spillover to long-term mortgage rates for home buyers and home owners.

In August, the Fed had made a rare move to say it would keep rates near zero until at least mid-2013. The Fed said Wednesday that the economy still needs more help and it will now extend that period to 2014. 

Fed Chairman Ben Bernanke said in a news conference that the Fed isn’t happy with the modest economic recovery and that the Fed may need to take additional steps to spur recovery. He did not comment further on what those steps might be, though. 

While the economy has improved somewhat in recent weeks, Fed officials say it’s worried about “strains in global financial markets” and the still high unemployment rate. 

Some critics say that the Fed’s vow to keep mortgage rates longer won’t do enough to help the economy and the housing market. They argue that too many Americans are already unable to take advantage of the record low mortgage rates because of the tightening of lending standards. 

Bernanke shared that concern, saying that millions of home owners were unable to refinance because of damaged credit or being from underwater in their homes. 

Source: “Fed Sees Low Rates to 2014,” The Wall Street Journal (Jan. 26, 2012) and “Fed Signals That a Full Recovery Is Years Away,” The New York Times (Jan. 25, 2012)

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Home Affordable Program - New Refinance Plan

The Ins and Outs of Obama's New Mortgage Refi Plan


Daily Real Estate News | Tuesday, October 25, 2011

President Obama announced Monday a plan to ease eligibility rules for home owners who want to refinance to take advantage of ultra-low mortgage rates and lower their mortgage payments. The administration hopes that by broadening its requirements for the Home Affordable Program that about 1 million home owners will now be able to qualify. 

Here are more details about the newly announced changes to the program:

What is HARP?

It’s a program started in 2009 that allows home owners to refinance their mortgages at lower rates without having to meet the typical requirement of having at least 20 percent of equity in their home to do so. Under current guidelines, many underwater borrowers have been ineligible for the program because their home values had to be no more than 25 percent below what they owed their lender. Also, some home owners were unable to afford the closing costs and appraisal fees to participate. 

What’s changing?

Many of the extra fees to participate in the program have been waived, and home owners' eligibility won't be contingent on how far their home's value has fallen. 

Who’s eligible?

  • Home owners with loans backed by Fannie Mae or Freddie Mac can participate. (Home owners can visit: freddiemac.com/mymortgage or fanniemae.com/loanlookup to determine if their mortgage is owned by either). 
  • Home owners must be current on their mortgage. 

When will it take effect?

The changes could take effect by Dec. 1. HARP also is being extended through 2013 to allow more home owners the opportunity to qualify.

How successful will this be?

The administration hopes that by home owners being able to lower their monthly mortgage payments (with an average annual savings of $2,500 expected), they’ll be more likely to stay current on their mortgage and avoid foreclosure. Also, the administration hopes that it will then free up household money to start spending more on other things, which could provide an overall boost to the economy. However, the administration says it realizes that aiding the housing market requires much more than a refinancing plan. 

"This is only one piece of a broader strategy to help the housing market," says Housing Secretary Shaun Donovan. Donovan also notes federal efforts to help home owners who are delinquent on their mortgages and the unemployed. 

Source: “A Guide to Administration’s New Mortgage-Refi Plan,” The Associated Press (Oct. 24, 2011) and “Refinancing Plan Won’t Help Housing Market Much,” CNNMoney (Oct. 24, 2011)

Read More:
Gov't Officials Urge Banks to Help 'Underwater' Borrowers

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.