National Mortgage Database Concerns Mount


Mortgage Forgiveness Debt Relief Act Extension:

National REIA’s lobbying arm in Washington, D.C. has initiated meetings with members of Congress and committee lawyers in both houses of Congress to discuss extending the Mortgage Forgiveness Debt Relief Act. Passed in 2007, the Mortgage Forgiveness Debt Relief Act assisted sellers utilizing short sales by eliminating a requirement to pay taxes on the amount banks write-off when accepting a short sale. The expiration of the Act has curbed the utilization of short sale transactions. Recently, the Senate Finance Committee passed S. 2260 (Expiring Provisions Improvement Reform and Efficiency Act known as “EXPIRE”) that among other things would extend the Mortgage Forgiveness Debt Relief Act through 2015.

The primary obstacle in the Senate is that the Act is not being considered as a stand-alone issue, but rather is being considered with a number of other issues. Action on the legislation stalled in the Senate when attempts were made to amend the legislation to reduce taxes on medical devices. The proceeds from those taxes are utilized to fund the Affordable Care Act, so obviously it is a politically-sensitive matter. The House Ways and Means Committee has not yet acted on the extension of the Mortgage Forgiveness Debt Relief Act, but prospects for passage in the House are very strong and likely the House is simply waiting for the Senate to act on the extension.

While the extension is caught up in a political fight over the Affordable Care Act, National REIA’s lobbyist in Washington believes the extension will ultimately be approved. Short sale transactions have suffered since Congress failed to renew the extension, so the urgency of passage is understood by National REIA’s D.C. lobbying arm. In terms of timing, the three most likely scenarios are as follows: passage this summer, passage after the November election before the new Congress convenes, and passage in the spring of 2015. All supporters of the extension will continue to push for Congress to act on this matter as quickly as possible.


National Mortgage Database Concerns Mount

Earlier this year, the Consumer Financial Protection Bureau (CFPB) announced a pilot program creating the National Mortgage Database. The database is designed to make it easier for consumers to review and understand mortgage documents by allowing online access. The database is coming under fire from activists on the political right and left because the amount of data the CFPB is collecting far exceeds mortgage information. The database will include sensitive data such as social security numbers and complete financial histories of borrowers. There is growing concern that the database could be compromised and lead to a serious financial privacy breach.


Interest in “Shadow Inventory” Problem Continues

The “shadow inventory”, defined as homes either abandoned or are currently occupied with mortgages that are seriously delinquent, continues to concern housing officials and the media. While the shadow inventory has consistently declined over the past several years, the current estimate of 1.6 million homes (approximately half of which are currently occupied by borrowers who have stopped making payments) remains an issue for regulators. Institutional buyers and residential investors have put a dent in the shadow inventory, as have government refinancing programs. However, it is clear that the government cannot modify its way out of this problem, and the shadow inventory continues to distort housing inventory numbers. Residential investors can play a significant role in normalizing the shadow inventory numbers, and the government recognizes that. Housing market professionals can expect more aggressive modification attempts by the government, and targeted principal reduction programs may also be on the table.

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