Realtors Take to Capitol Hill to Fight For Homeowners

This article is from Rick Turley, the President of the SF Bay Region of Coldwell Banker, our boss.

Bay Area home buyers, sellers and real estate agents better get familiar with a few acronyms – MID, QRM and GSE – because they’re likely to hear a lot about them in the months ahead. These are the equivalent of WMD to the housing market. And what happens to them could have a very real impact on local home values and the health of our market.

As a Director at NAR, I represent Coldwell Banker in a committee consisting of leaders of large brokerage firms across the country, assembled to give guidance and feedback to the NAR executive team. The NAR legislative meetings held last week in Washington DC, also offers the opportunity each year for Realtors to meet with Congressional leaders on Capitol Hill. Along with hundreds of other NAR committee members from all 50 states, including some of our very own Bay Area CB Realtors, we called upon our respective elected officials to discuss our fragile housing recovery. Congressional leaders are looking at anything and everything during this time of historic national debt, and they need to understand the devastating impact that some proposed changes in housing policy could have on our local market.

Lawmakers are considering a variety of policy revisions, including reducing or even eliminating the mortgage interest deduction (MID); tightening Qualified Residential Mortgage (QRM) rules for borrowers, and eliminating Government Sponsored Enterprises (GSE) Fannie Mae and Freddie Mac, which are critical to keeping mortgage money readily available.

We met with Senator Diane Feinstein, and Representatives Speier, Honda, and Eshoo about the importance of maintaining the mortgage interest deduction, especially here in the Bay Area. The deduction is something all of us take for granted as we file our annual tax returns. It’s one of the foundations of homeownership in this country and helps bring housing within reach of millions of Americans.

If lawmakers lower the maximum loan amount to $500,000 – one of the plans under consideration – it may not have a big impact in places like the Midwest or South, where homes typically sell for $200,000 to $300,000. But it would have a huge impact for high-priced markets like ours in the Bay Area.

Members of Congress don’t consider the high cost of living in areas like ours when they propose changes like this. Most assume $800,000 will buy a mansion for the wealthy. But those of us who live here understand that it may just get you a modest starter home. I doubt that first-time buyers in many Bay Area cities who are using both of the couple’s income to qualify for a $750,000 to $800,000 home feel very wealthy.

“Tax incentives for home ownership have been a part of our tax system for decades and are deeply woven into our economic fabric,” a local Realtor Association president told lawmakers. “Reducing or eliminating the MID is a de facto tax increase on home owners, who already pay 80 to 90 percent of U.S. federal income tax.”

Changes to QRM rules would require significantly higher down payments for both homebuyers as well as those trying to refinance their mortgage. Buyers would face a minimum of 20 percent down, while those refinancing mortgages would be required to have 25-30 percent equity in their properties in order to get a loan.

We understand Congress’ interest in trying to reduce the default rate among borrowers, but this isn’t the answer. As the Mortgage Bankers Association pointed out in a white paper, high down payment and equity requirements will not have a meaningful impact on default rates. But they will require millions of consumers, who are at low risk of default, to either put off buying a home or pay unnecessarily higher interest rates.

Finally, a number of bills making their way through Congress have provisions that would significantly reduce or eliminate Freddie Mac and Fannie Mae within the next few years. Since both GSEs purchase mortgage loans and repackage pooled loans that are sold on the secondary market, this could have a significant impact on the availability of home loan financing.

Realtors urged lawmakers to tread very carefully in reforming Fannie and Freddie. Without a secondary market, mortgage interest rates would be unnecessarily higher and outright unaffordable for many Bay Area buyers. While GSE reform is necessary, the federal government must have a continued key role in the secondary mortgage market to ensure capital and liquidity in the market.

This is not the time for Congress to consider radical housing policy changes. Just as we are seeing a gradual recovery in the housing market, any one of these legislative changes could halt the progress we’ve made. All three could be catastrophic. I urge you to join me in contacting your local representatives in Congress to urge them to take these facts into consideration as they look at any changes to our nation’s housing policy.

That’s it for now. Have a good week!
Rick

Rick Turley
President, San Francisco Bay Area
Coldwell Banker Residential Brokerage

Financing Vacation Homes

It's not as easy as it was in 2005 to finance a vacation home purchase - but still possible. This New York Times article provides all the details:

http://www.nytimes.com/2011/05/01/realestate/01mortgages.html?_r=1&ref=realestate

Interested in purchasing a vacation home? We can help.

Judy Clarke
The Clarke Team
Bay Area Real Estate
650-489-5399
sold@clarketeam.com

Great News - onerous 1099 landlord reporting law repealed!

Congress repealed a law in early April that would have required ALL landlords (even those who rent out a room in their home) to file a 1099 for any services paid to vendors over $600 starting next year.

Whew! That will save lots of time and money. Thank goodness for the National Association of Realtors!

Here's a link to a detailed article:
http://speakingofrealestate.blogs.realtor.org/2011/04/08/600-1099-landlord-reporting-law-repealed/

Here are some interesting ideas for remodeling if you can't afford to move up to a new home at this time:

Homeowners unable to purchase a new home – either due to stricter loan guidelines or because they are underwater on their current mortgage -- may want to consider remodeling certain areas of their home to make it more suitable to their current lifestyle. Currently, homeowners can find bargains for items such as kitchen cabinets, granite in the bathroom, and landscaping services.

The costs for custom cabinets are down approximately 20- to 30-percent, due to lower material costs and cabinetmaker discounts. Some cabinet manufacturers are responding to the fall in demand by reducing or eliminating surcharges for custom-size cabinets, decorative finishes, and higher-end wood types.

In the bathroom, homeowners can find discounts of up to 50 percent on granite, due to inventory backlogs and new foreign competition, and on porcelain sinks, due to a surge in Chinese imports.

Experts say homeowners are continuing to focus upgrades less on recouping their investment and more on the enjoyment factor, which is one reason there has been a surge in outdoor living spaces. Costs of installation are down 20 percent or more amid a construction labor glut and consumers are finding it easier to negotiate prices with landscapers.

Interesting alternative to refinancing to remove spouse from loan

Here's a link to an interesting article from the N.Y. Times. It offers an alternative solution to refinancing to remove a spouse's name from the mortgage after a divorce. May not work for everyone, but definitely something to consider:


http://www.nytimes.com/2011/04/10/realestate/10mortgages-refinancing-divorce.html?_r=2&ref=realestate

Prompt Decision for Qualification for Short Sale Act of 2011

Here's an article from the National Association of Realtors website which brings a little hope to the heart of Realtors and troubled homeowners alike. Caution - talk to an attorney and a CPA before deciding which path to take if you cannot make your mortage payments.

Washington, April 13, 2011

A new bill to improve the process for approving short sales may soon bring relief to distressed home owners who are unable to keep their homes and hope to avoid foreclosure. The bill, introduced in the U.S. House yesterday and strongly supported by the National Association of Realtors®, would impose a deadline of 45 days on lenders to respond to short sale requests.


The legislation, the “Prompt Decision for Qualification for Short Sale Act of 2011,” was offered in Congress by U.S. Reps. Tom Rooney (R-Fla.) and Robert Andrews (D-N.J.).


“The current short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a home owner from foreclosure,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I.


“Realtors® and consumers continue to raise issues about delays in the short sale process, because lenders are unable to decide whether to approve a short sale. After many months of delays, and with no response from lenders, potential buyers are losing patience and cancelling their contracts, often resulting in the property entering foreclosure. A short sale minimizes the negative impact on sellers and generally costs the lender less than a foreclosure,” said Phipps.


NAR has been actively pushing the lending industry to improve the process for approving short sales, which represent about 13 percent of recent home sales according to NAR data. Phipps praised Reps. Rooney and Andrews for their efforts on the bill and urged Congress to pass the bill quickly.


“As the leading advocate for home ownership and housing issues, Realtors® want to help more home owners avoid foreclosure by facilitating a short sale when a family is absolutely unable to keep their home; however, that can only happen if lenders and servicers approve short sale offers in a reasonable amount of time,” said Phipps. “Streamlining short sales transactions will reduce the amount of time it takes to sell the property, improve the likelihood that the transaction will close and reduce the overall number of foreclosures. This benefits sellers, lenders, buyers and the entire community.”


The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

New Year’s Resolution: Remodel the Bathroom?

From the House Values Home Essentials Newsletter of January, 2011: It’s no secret that bathrooms are a popular room to remodel—because of outdated features, different decorating taste from the previous owners or simply normal wear and tear on a very functional room of your home. If the New Year has you thinking about remodeling a bathroom, here are a few things to consider:

• Timely or Timeless Style - Before you remodel, picture what it will look like in a couple years when you sell your home. Will you still enjoy that trendy sink? Make sure future buyers will, too. Otherwise they’ll factor in the cost of their own remodel when making an offer.


• Costs—Good News - Right now many contractors are eager for work, and prices are lower for their materials and labor, so now may be an ideal time to make your bathroom more livable.


• Resale Value - You may have heard during the housing boom that bath remodels add value to your home. These days you can recoup about 64% of the costs of a minor bathroom remodel, according to Remodeling magazine’s “2010-11 Cost vs. Value Report.” If your bathroom is especially in need of updates, you may recapture more.


• Too Much? Think Small - If you’re not ready for a full remodel, then a fresh coat of paint, new towels and a pretty framed print can do wonders to update your bathroom—and give you a new look for 2011.

Remember: you and your family are the ones using your bathroom on a daily basis, so think about whether it makes you feel good when you brush your teeth every morning.

If you’d like more information about how a remodel can affect the value of your home, please don’t hesitate to call or email.