WASHINGTON WEEKLY
October 12, 2007
HOPE NOW Alliance Created to Help Homeowners
Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson unveiled the HOPE NOW alliance of credit counselors, mortgage servicers and others this week. The alliance, of which SIFMA and the American Securitization Forum, an adjunct forum of SIFMA, are members, was created to explore ways the industry could assist homeowners at risk of default. HOPE NOW is part of the administration’s foreclosure prevention initiative, announced in August, to identify struggling homeowners and help as many as possible stay in their primary residence.
In a quiet week on Capitol Hill—the Senate was not in session and the House was in session for only two days due to the Columbus Day recess and the death of Rep. Jo Ann Davis (R-VA)—the House approved the Tax Collection Responsibility Act (H.R.3056) by a vote of 232-173.
The House Government Reform Subcommittee on Domestic Policy held the second in a series of hearings on the use of public financing to build sports stadiums. Michael Decker, Senior Managing Director of Research and Public Policy, SIFMA, testified at the first hearing on the issue back in March.
HOPE NOW Alliance Unveiled
Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson unveiled the HOPE NOW alliance of credit counselors, mortgage servicers and others to explore ways for the industry to assist homeowners at risk of default. SIFMA and the American Securitization Forum (ASF), an independent forum of SIFMA, and the other members of the alliance are working together to create a unified, coordinated plan to reach as many homeowners as possible in an effort to prevent foreclosures. The alliance will conduct a direct mail campaign to contact at-risk borrowers, advising them to contact their lenders or credit counselors. The alliance has also adopted a standardized process model to speed work flow and communication between servicers and providers. Also, the ASF announced counseling fees can be reimbursed from securitization transactions in appropriate circumstances. During the press conference to announce HOPE NOW, Secretary Paulson suggested that across-the-board loan modifications are not measures the Administration would support. He also warned proposals to amend the current bankruptcy laws to allow courts to modify mortgages on primary residences during bankruptcy proceedings could impede future financing in the mortgage market.
House Approves Tax Collection Responsibility Act
The House approved the Tax Collection Responsibility Act (H.R.3056) this week by a vote of 232-173. The bill would revoke the ability of the Internal Revenue Service (IRS) to use private debt collectors to contact taxpayers and urge them to pay off their delinquent accounts. According to the Joint Committee on Taxation (JCT), eliminating the program will cost the government an estimated $1.1 billion over 10 years. The Tax Collection Responsibility Act of 2007 also includes a number of provisions intended to offset the cost of eliminating the program. H.R.3056 would increase penalties for failing to file information returns, such as on 1099 tax forms. The provision is estimated to raise $280 million over 10 years. Prior to approving the bill, the House voted 196-212 to defeat a motion to recommit, offered by Rep. Kenny Hulshof, which would have repealed the estate tax. In a Statement of Administration Policy (SAP) this week, the administration warned the president would veto the bill.
House Subcommittee Continues Focus on Public Financing of Stadiums
During the second in a series of hearings on financing sports stadiums with tax-exempt bonds, Eric Solomon, Treasury Assistant Secretary for Tax Policy, said the current statutory structure was designed to leave discretion to the state and local governments to make financing decisions. Solomon said the current statutory structure strikes a balance between two different interests—targeting the use of tax-exempt bonds for critical governmental projects and providing flexibility for municipalities to finance projects that have some private use. Solomon suggested if Congress wanted to prohibit the use of tax-exempt bonds to finance sports stadiums, it could consider repealing the private payments prong of the private activity bond definition for stadiums only or consider combining a repeal of the private payments prong with an amendment to Section 142 of the tax code to allow the use of tax-exempt private activity bonds to finance stadiums used primarily for private use within the constraint of the annual state tax-exempt private activity bond caps. Or Congress could choose to end tax-exempt bond financing for stadiums all together. House Oversight and Government Reform Subcommittee on Domestic Policy Chairman Dennis Kucinich (D-OH) said the subcommittee will hold at least two more hearings on the subject before deciding whether to propose legislation.
The Week Ahead
- The House Financial Services Committee will hold a field hearing in Boston, MA, on mortgage lending disparities on Monday, October 15.
- On Wednesday, October 17, the House Ways and Means Subcommittee on Income Security and Family Support will hold a hearing on tax relief for the military and their families.
Bills Introduced This Week:
Rep. Melissa Bean (D-IL) and Rep. Randy Neugebauer (R-TX) introduced legislation (H.R.3777) that would allow the housing-related government-sponsored enterprises (GSEs) to increase their mortgage portfolios by ten percent for one year. Also this week, Sen. Chuck Schumer (D-NY) and House Financial Services Committee Chairman Barney Frank (D-MA) announced they would introduce legislation that would increase the GSE portfolio limits by ten percent for a six-month period. Under their proposed bills, 85 percent (an estimated $125 billion) would be devoted to help refinance the loans of subprime borrowers.
The HOMES Act, introduced by Rep. Steve Chabot (R-OH), would amend the federal bankruptcy code to authorize bankruptcy judges to revalue a primary residence based on its actual market value, instead of based on the appraised price often used for mortgage closings. H.R.3778 would give judges the authority to delay, modify or prohibit late fees, penalties and mortgage rate increases while the homeowner is in bankruptcy proceedings. The bill is identical to legislation (S.2133) introduced by Sen. Arlen Specter (R-PA). The House Judiciary Subcommittee on Commercial and Administrative Law last week approved the Emergency Homeownership and Mortgage Equity Protection Act (H.R.3609), introduced by Rep. Brad Miller (D-NC), which would allow bankruptcy judges to modify the loan terms on a debtor’s primary residence during Chapter 13 bankruptcy proceedings.
Rep. Paul Ryan (R-WI) and other members of the Republican Study Group introduced a bill (H.R.3818) that would repeal the existing alternative minimum tax (AMT) structure and would give taxpayers the option to pay their taxes using the existing individual income tax system or using a new “simplified tax” system. The bill would allow fewer deductions and would have only two income tax rates—10 percent for taxable income up to $50,000 for single filers or $100,000 for joint filers, and 25 percent on taxable income above those amounts. The bill would make the capital gains and dividend tax rate reductions permanent.
Prior to adjourning for the Columbus Day recess, Sen. Mike Crapo (R-ID) and Sen. Tim Johnson (D-SD) introduced legislation (S.2126) that would allow individuals to defer the recognition of reinvested capital gains distributions from mutual funds. Under the Generating Retirement Ownership through Long-Term Holding (GROWTH) Act, mutual fund investors would pay capital gains taxes only when the investment is sold.
The Toll Road Prohibition Act of 2007 (H.R.3802), introduced by Rep. Leonard Boswell (D-IA), would prohibit the collection of tolls on highways, bridges and tunnels constructed using Federal funds.
The Military Financial Assistance Act of 2007, introduced by Rep. Earl Perlmutter (D-CO), would extend for one year the ability of individuals called to active duty to make penalty-free withdrawals from retirement plans. H.R.3816 would also extend the authority to use tax-exempt bonds to finance homes for veterans without regard to the first-time homebuyer requirement.