The Mortgage Forgiveness Debt Relief Act Has Expired. Renewal Could Benefit Millions.
, Posted: February 14, 2014
At year end 2013 the Mortgage Forgiveness Debt Relief Act expired. Unless Congress extends it, debt on principal residences that has been forgiven or written down after 2013—through short sales, deeds-in-lieu, foreclosures or loan modifications will generally be treated as taxable income. We argue that the act is an important facilitator of principal-reduction modifications. Failure to renew is likely to generate little net revenue.
Single-Family Securitized Financing: A Blueprint for the Future? Posted: January 17, 2014
In November 2013, Invitation Homes LP, the Blackstone subsidiary that is the largest of the REO-to-rental operations, completed the first securitized financing of REO-to-rental properties (Invitation Homes 2013-SFR1). The private placement was very well received by the market, producing more favorable terms than many had anticipated. In this short article, we walk through why the deal was done, how it was structured, and what the financing means for the market.
GSE Reform: Diversification is Critical in Sizing the Capital Requirement in the New Regime
, Posted: January 15, 2014
The GSE Reform Debate has thus far succeeded in building a broad (though not universal) consensus that Freddie and Fannie should be replaced by a system in which private capital bears the first loss, with a catastrophic government guarantee behind it taking the residual risk. Investors would continue to have access to mortgage backed securities with a full faith and credit guarantee, but, in contrast to the current situation, the bulk of the credit support would come from private capital. The Corker-Warner proposal, S. 1217, for example, has this structure.
FHA Loan Limits: What Areas Are the Most Affected?
, , Posted: January 15, 2014
On December 31, 2013, the Federal Housing Administration (FHA) reduced the loan limits for its single-family insurance program in 652 counties, while increasing them in 89 counties. The changes result from the expiration of provisions of the Economic Stimulus Act of 2008 (ESA).
Sunset Provisions on Reps and Warrants: Can They be More Flexible While Still Protecting the GSEs?
, Posted: November 27, 2013
Loans sold to investors must meet certain quality standards, and lenders who sell loans to the government-sponsored entities (GSEs) promise that they are delivering loans that meet specific underwriting and eligibility requirements. These lender representations and warranties are a contract, and when breached, entitle the GSEs to pursue specific actions, such as a loan repurchase or put-back, whereby the seller must buy back the poor-quality loans. Increasingly, lenders cite uncertainty about potential exposure to GSE repurchase requests for the tight credit box.
The Folly of the Debt Ceiling Posted: October 24, 2013
The United States is starting down the road of third-world budgeting practices in a fiscal mess of its own making, warned Institute fellow Rudolph Penner in this commentary for CNNMoney.com before the debt-ceiling debacle.
Private Equity Is a Business: Sun Capital and Beyond Posted: September 24, 2013
Private equity has grown exponentially: it now controls and operates a large number of the companies in our economy. But private equity is just that: private. Its operations are confidential and difficult to parse. This article attempts to demystify the business of private equity. It also describes the unanimous decision by the 1st Circuit that a private equity fund is a trade or business for purposes of ERISA. Finally, the article discusses the tax implications of "trade or business" status for private equity funds and recommends further guidance from Treasury.
Employer Penalties Do Not Drive Coverage
, , Posted: July 03, 2013
On July 2nd, the Obama administration announced a 1-year delay in the implementation of employer penalties associated with large employers (50 or more workers) who do not offer affordable coverage to their full-time workers (30 or more hours per week). Our prior analyses show these penalties are not the driving force behind the ACA's coverage expansions. Nor are the penalties a significant source of federal revenue. Contrary to some initial reactions, the employer responsibility requirement is not a critical factor in meeting the goals of the law.
Taxing Private Equity Funds and Their Partners: A Debate on Current Law Posted: June 25, 2013
The following is the text of a debate that occurred between Rosenthal and Needham at the May meeting of the American Bar Association Section of Taxation in Washington regarding the proper tax treatment of private equity funds and their partners under current law. The introduction should be attributed solely to Rosenthal. The views expressed by Rosenthal are his own and do not necessarily reflect the views of the Tax Policy Center, the Urban Institute, or the Brookings Institution. The text of the debate has been edited for purposes of clarity and print.
Finding Just the Right Tax Rate Posted: May 22, 2013
In a contribution to the New York Times' Room for Debate, Kim Rueben argues if the tax rate for marijuana is too high, people will continue to buy weed from the guy on the street. However, setting the tax rate too low leaves revenue on the table and use might boom.