Agenda - Council - 08/24/1982 - Laserfiche WebLink

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I I I I I I I I I I I I I The Washington Scene FANNIE MAE TO PROVIDE MARKET FOR GROWING EQUITY MORTGAGE LOANS The Federal National Mortgage Association (Fannie Mae) has announced that it will provide a market for a new type el mortgage under which the loan is paid off faster than is true of tradi- tional morlgages. Known variously as "growing equity," "rapid payoff," and "equity building" loans, these are fixed- rate mortgages with gradually increasing monthly payments. The payment increases are used to reduce principal, so that the loans pay down faster than other kinds of fixed or adjustable-rate morlgages. Because the loan is paid off in substantially less time than a conventional mortgage, the hornebuyer pays significantly less total interest over the period of the loan. Fannie Mae will buy these loans for its own portfolio through negotiated transactions with individual lenders, and, beginning in September, will commit to issue and guarantee securities backed by them. The loans to which it has committed to-date provide for annual increases in the monthly payments of from 2'~ to 7F2%, resulting in a loan payoff in a maximum of 15 years and a min- imum of 9 years 10 months. Some of the loans also entail more traditional graduated payment fealures which lower monthly payments in the early years of the loan by deferring part of the payments to later years. Loans with these features still, however, pay off in about 10 to 15 years. Fannie Mae said it has already committed to purchase about $.50 million of the loans and has ap- proved another $36 million from a number of lenders. These transactions have been accomplished on a negotiated basis as will future purchases of similar loans for the corporation's own portfolio. PROPOSAL WOULD EXPAND TRAVEL DEDUCTION FOR CONSTRUCTION WORKERS Representative Fortney H. "Pete" Stark (D-Calif.) has introduced a bill to disallow the "one-year rule" utilized by the IRS to determine whether construction workers can deduct travel expenses to and from work when they are employed away from home. Under the IRS rule, a job that lasts longer than 1 year is automatically determined not to be tempo- rary, and travel expenses are disallowed. Under the new proposal, a job that is more than 30 miles from the worker's principal residence would be deemed to be temporary: · For the first 2 years the worker is employed at the job · After 2 years, if justified, based on a review of the facts and circumstances. The proposal also states that no deduction will be disallowed solely because a construction worker's employment at a job site is of an indefinite duration. FEDERAL BUDGET PRACTICES OBSCURE COST OF RURAL HOUSING ASSIST,~NCE A recent Congressional Budget Office (CBO) study, Rural Housing Programs: Long-Term Costs and Their Treatment in the Federal Budget, states that current budget practices obscure the costs of the Federal government's mortgage lending activity in rural areas. This makes it more difficult for the Congress to assess the consequences of annual funding decisions. Some other CBO findings: