This Month: A NMHC report from Washington DC

CONGRESS PASSES DEBT COLLECTION RELIEF MEASURE

Before adjourning, both Houses of Congress approved a Financial Regulatory Relief bill (S. 2856) that amends the Fair Debt Collection Practices Act (FDCPA) to the benefit of apartment firms and their attorneys when pursuing legal action to evict a resident or to collect back rent. Generally, the FDCPA requires those seeking to collect a debt to notify the debtor that they have 30 days to dispute the debt.
Under current law, owners acting on their own behalf to collect past-due rents or to evict are not subject to the notification requirements, and this does not change.

However, without this change, when an apartment owner or manager retains an attorney to communicate with the resident about collection efforts or to initiate a lawsuit for non-payment issues or eviction, the FDCPA notice requirements are triggered. This has added a layer of confusion and delay to the eviction process.

The new legislation clarifies that if the communication is a formal legal pleading, such as an eviction lawsuit, no FDCPA notification is required. NMHC supported broader relief to address conflicts between the FDCPA and state landlord-tenant laws that result in unnecessary delays. However, Congress decided to advance a much narrower bill to resolve several controversial provisions unrelated to the FDCPA portion. NMHC will continue to press for broad relief. In the meantime, owners and managers are encouraged to issue rent demand notices in their own name and not in an attorney’s name.

CAPITOL HILL UPDATE

Congress began a six-week recess on September 30 to campaign for the midterm elections without finalizing many priority bills, raising doubts about what can be accomplished in the post-election lame duck session scheduled for mid-November. Despite pressure from Senate Finance Committee Chairman Charles Grassley (R-IA) to pass a package of popular tax extenders (including brownfield expensing) that were dropped out of a tax bill passed in May, Senate leaders stuck to their strategy of combining the extenders with a minimum wage increase and estate tax reform. The fate of the package, which would among other things retroactively extend and expand brownfield expensing provisions, is unclear.

Legislators also failed to take action on a measure (S. 190) to create a new regulator for Fannie Mae and Freddie Mac, despite the Treasury Department’s announcement last month that the Administration was no longer demanding that the legislation include strict limits on the government sponsored enterprises’ (GSE) portfolios. This requirement had been a stumbling block in bringing the bill to the Senate floor for a vote.

Two housing-related bills did pass the House in the final week before the recess. They include an NMHC-supported bill (H.R. 6115) to extend the Section 8 mark-to-market program through fiscal 2011 and make programmatic changes sought by apartment owners. Another bill (H.R. 5503) would raise the maximum high-cost area wide adjustment to 170 percent of the basic mortgage limit and raise the maximum project-by-project adjustment to 215 percent in high-cost areas and 170 percent in other areas. Prospects for Senate passage of both bills in November are favorable.

Both houses of Congress did manage to pass substantial changes urged by NMHC and others to federal disaster relief law. The revisions were incorporated in the FY07 Homeland Security Appropriations bill (H.R. 5441), which President Bush is expected to sign. Specifically, the bill requires the creation of a National Disaster Housing Strategy (NDHS) that is developed in conjunction with HUD, state and local governments and other federal agencies. The bill also amends current law to explicitly allow disaster victims to use their cash assistance for security deposits and utility bills. It also directs the FEMA Administrator to create a pilot program to make better use of existing rental housing located in disaster areas. As part of the pilot program, FEMA will enter into lease agreements directly with property owners and will make repairs to the properties.

The House also passed the Private Property Rights Implementation Act (H.R. 4772) expanding the jurisdiction of federal courts over state-based eminent domain claims. H.R. 4772 is one of the many bills introduced in response to last year’s Kelo decision. Opponents of the measure, including the U.S. Conference of Mayors, are concerned that this will handcuff local land use decisions by elevating judicial review to the federal level. There is no Senate companion measure. Another House-passed bill (H.R. 4128) designed to limit the use of eminent domain has been languishing in the Senate since November 2005.

FHA PREMIUM INCREASE RESCINDED

NMHC, our national organization, secured a substantial victory on September 22, when the U.S. Department of Housing and Urban Development (HUD) withdrew a proposal to increase the FHA multifamily mortgage insurance premium (MIP) from 45 to 77 basis points for FY 2007.

HUD announced the proposed increases at the end of June, but now says that as a result of the negative reaction from NMHC and others, it will not implement them. Instead, the Department will use the FY 2006 premiums for all commitments to be issued or reissued in fiscal year 2007, which began October 1.
A draft Federal Register notice announcing the withdrawal has been posted at www.nmhc.org/Content/ServeContent.cfm?ContentItemID=3930.

HUD’s proposal was particularly disturbing given the fact that after being pressured to tie the premiums to the actual cost of the program, HUD has actually dropped the MIP from 80 to 45 basis points over the past three years. In its withdrawal notice, however, HUD notes that "FHA will continue to evaluate alternative pricing strategies to maintain the integrity of the fund and achieve policy goals."