Public Policy Watch

NAR and Capital Consortium Efforts Continue to Support Mortgage Liquidity

 

Commercial REALTOR^® members have especially benefited from many Capital Consortium activities that have increased commercial mortgage liquidity. The National Association of REALTORS^® (NAR) continues to work with the other Capital Consortium members (Commercial Mortgage Securities Association, Mortgage Bankers Association, The Bond Market Association, and Real Estate Roundtable) on regulatory and legislative efforts of that nature.

NAR is currently leading an effort to have the Consortium refocus on a September 27, 2000 joint proposed rule (from the Office of Thrift Supervision, the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation) that is still pending. The FDIC has indicated they hope to finalize the proposed rule in 2001.

This proposed rule, if adopted, will increase certain bank risk-based capital requirements (relating to Residual Interests). This will in turn make issuing and buying Commercial Mortgage-Backed Securities less profitable for financial institutions. As reported earlier, Commercial Mortgage-Backed Securities are an essential source of commercial mortgage liquidity.

Energy Bill Has Benefits for Commercial Practitioners

Before its August recess, the U.S. House of Representatives passed energy bill H.R. 4 that contains items of potential benefit to commercial practitioners, namely:

-a deduction for energy efficient commercial building property;

-a business credit for construction of new energy efficient homes; and

-a deduction for qualified energy management devices and retrofitted qualified meters.

Allowance of Deduction for Energy Efficient Commercial Building Property

Taxpayers will get a tax credit equal to the energy efficient commercial building property expenditures they make during the taxable year (up to $2.25 per square foot of improved area). The credit is taken when the building is placed in service. All residential rental property, as well as rehab or reconstruction projects, qualify. To qualify for the credit, these expenditures must ensure that a building’s overall annual energy and power consumption for lighting, heating, cooling, ventilation, and hot water systems is equal to, or less than, 50 percent of the consumption of a reference building meeting 1999 industry standards. The credit is for properties placed in service after December 31, 2001 and prior to January 1, 2007.

Business Credit for Construction of New Energy Efficient Homes

Eligible contractors will get a credit against tax up to aggregate adjusted basis of all energy efficient property installed in qualified new energy efficient homes during construction up to a maximum of $2,000 per dwelling. To qualify, new energy efficient homes must have heating and cooling consumption certified to be at least 30 percent below a 1998 industry baseline.

Energy efficient property means any efficient building envelope component and any energy efficient heating or cooling appliance. Qualified energy efficient building envelope components are insulation, exterior windows, doors, coated metal roof, or other systems that are specifically designed to reduce heat gain of such dwelling.

The credit is for dwellings purchased after December 31, 2001 and prior to January 1, 2007. Rehab, reconstruction, and manufactured homes also qualify.

Allowance of Deduction for Qualified Energy Management Devices and Retrofitted Qualified Meters

Taxpayers who are a supplier or provider of electric energy or natural gas can deduct the cost of each qualified energy management device up to $30 per device for the taxable year the device is placed in service. A qualified energy management device is one that will permit the reading of energy price and usage signals on a daily basis and is purchased to enable consumers to manage their energy use based on energy price and usage signals.

For more information, contact Damian O'Doherty at

damian@gcaar.com or (202) 887-6888.

DC Establishes Third Party Construction Inspection Program

The DC Department of Consumer and Regulatory Affairs (DCRA) has established a full-scale third-party construction inspection program to help with building inspections in the District. Through this program, DCRA will manage construction inspections by accredited third-party inspection agencies.

 

"This program has been applauded by the building industry. They have encouraged us to expand third-party inspections," said Carlynn Fuller, Interim Director.

 

Since 1990, the government has used third-party inspectors for elevators and boilers. Now, third-party inspectors will be used for all construction permits including, but not limited to, architectural, plumbing, concrete, and steel.

 

With the full implementation of the third-party inspection program, the building permit process can be accelerated. While large builders are excited about this program, Ms. Fuller said that smaller contractors and homeowners may not want to incur the increased fees associated with these inspections, and therefore may continue to use DCRA inspectors.

 

Third-party inspectors can set their own fees based on the market. As long as there is a building boom, third party inspectors are likely to charge what the industry can demand. DCRA inspectors will be available to those not interested in third-party inspectors. Government inspection fees are incorporated into permit processing costs.

 

In order to qualify as a third-party inspecting agency, DCRA requires that a number of provisions be met, including a statement of qualifications and a notarized sworn affidavit containing a statement of independence.

 

Ms. Fuller said that DCRA is committed to making certain that the third parties abide by the highest ethical standards in the discharge of duties.   As a result of this commitment, DCRA reserves the right to recall any project assigned to an inspection agency at any time and for any reason. DCRA also has final inspection approval on all projects. DCRA officials expect that 15 percent of all requested inspections will go to third-party inspectors.

NAR Expresses Concern Over Proposed Changes to Standards for Appraisal Practice

NAR has expressed concern over proposed changes to the Uniform Standards of Professional Appraisal Practice (USPAP). Those changes do not provide clear guidance on confidentiality issues for appraisers under USPAP. In fact, the newly drafted regulation does not clearly indicate what laws practitioners should follow regarding confidentiality when the laws themselves are at odds with USPAP standards. This is particularly important given that all appraisers must abide by USPAP standards.

For more information, contact, Peter Morgan at NAR at (202) 383-1233, or Doug Miller at NAR at (202) 383-1117.