NAR Information on Revised TILA Disclosure Requirements Take Effect on July 30, 2009

Lenders will be subject to new disclosure requirements for mortgage loans under the Federal Reserve Board Truth in Lending Regulation (Reg Z). The new requirements apply to loan applications filed on or after July 30, 2009. The new rules are complex and compliance will be a challenge for lenders. REALTORS® will want to learn the basics so they can advise clients of potential delays and the new procedures. Here are key highlights of the changes:

– The new requirements apply to all mortgages secured by a borrower’s home, including primary and second homes and refinancings. Investor loans continue to be exempt.

–Lenders must give good faith estimates of mortgage loan costs within 3 business days after the consumer applies for a loan (early disclosure). The lender may not collect any fees before the disclosure is provided, except for a reasonable fee for obtaining a credit report.

–The closing may not take place until expiration of a 7 day waiting period after the consumer receives the early disclosure.

–If the annual percentage rate (APR) increases by more than 0.125 percent, the lender must provide a corrected disclosure to the borrower and wait an additional 3 business days before closing the loan. The APR includes not only the interest rate on the loan but certain other costs related to settlement, so it will be important for any fees that affect the APR to be as accurate as possible, as early as possible, to minimize the need for a corrected TILA disclosure.

–The consumer may modify or waive both waiting periods for a documented personal financial emergency, but must receive the disclosures no later than the time of the modification or waiver.

NAR Stats – July 2009

Loan modifiers in Arizona must be licensed in 2010

Consumer Advisory – Mortgage Modification and Foreclosure Rescue Scams

By Danielle Hale, NAR Research Economist

Buy a home and you get a tax break! As part of the Housing and Economic Recovery Act of 2008, a First-time Homebuyer Tax Credit is now available. However, this limited-time tax break ends in mid-2009. A homebuyer tax credit has been available for first-time homebuyers in Washington, D.C. for many years, and now first-time homebuyers nationwide can take advantage of a similar benefit. In this commentary, I’ll give a quick overview of the credit-something every Realtor® should know.

Who is Eligible?
First-time homebuyers who purchase a principle residence on April 9, 2008 and before July 1, 2009 are eligible for the credit. A first-time homebuyer is someone who has not owned his/her principle residence for a 3-year period before the date of purchase, and someone who has never taken advantage of the DC first-time homebuyer credit. In the case of married couples, both must be first-time homebuyers. For other groups purchasing a home, the statute is unclear. Purchasers should consult a tax advisor.

How does it work?
The credit directly reduces the total amount of taxes owed and is refundable. When the buyer files his/her taxes, for the year he purchased his home (2008 or 2009), he will be able to subtract the amount of the credit from his Federal income tax liability, increasing his refund or reducing the amount he owes.

How big is the tax credit?
The tax credit is equal to 10% of the purchase price of the home up to $7,500. The full credit is available for single buyers whose adjusted gross income is less than $75,000. If the buyer’s adjusted gross income is greater than $75,000 and her home purchase qualifies her for the full credit, the credit phases out according to the chart below.

For married couples filing jointly, the credit begins to phase out at an adjusted gross income of $150,000 per this chart.

What about Repayment?
The tax credit is not completely free money for buyers to keep. It has a payback provision that makes it similar to an interest free loan. Two years after the credit is claimed, buyers begin repayment so that the credit is paid back in full over the course of 15 years. For those qualifying for the full credit, the payback amount is $500 per year. Those getting less than the full credit pay equally over the 15 years (which is a rate of 6.67% per year). If a qualifying home is resold before the credit is repaid, the seller will have to immediately pay the outstanding balance of the credit. If the home is sold at a loss, then nothing more is owed.

What’s valuable about a credit you have to repay?
Money today is worth more than an equal amount of money in future, which economists call the time-value of money. First, money loses its purchasing power over time due to inflation. Second, you can use the money today to earn interest and repay the principal later-all the while keeping the interest for yourself. For this reason, multimillion-dollar lottery winners prefer taking a lower lump-sum amount than the multimillion dollar amount spread out over many years. Real examples in the PDF will help you illustrate this point to potential buyers.

Are there other conditions I should know about?
• Buyers cannot claim both the DC and the national First-time Homebuyer tax credit
• Purchases by non-resident aliens and purchases financed by proceeds from a qualified mortgage issue are not eligible.
• Any single family residence located in the United States that will be used as a principal residence is eligible. Generally, this is the place where an individual spends most of his/her time. This includes single-family detached housing, condos or coops, townhouses or any similar type of new or existing dwelling.
• The credit will not result in an individual owing additional federal taxes under the Alternative Minimum Tax.
• Home purchases between relatives and other gifts of residences are not eligible for the credit.
• Other tax benefits of homeownership are still in place. Mortgage interest deduction, capital gains tax exclusion, and property tax deduction are some well-known examples.
For more specific questions about the tax implications of the credit, please consult a tax professional.

Mortgage Forgiveness Act Signed into Law

President Bush has signed H.R. 3648 , The Mortgage Forgiveness Act of 2007, into law, sparing homeowners the tax burden associated with canceled mortgage debt.

Prior to this action, forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure, was considered taxable income. The new law, however, temporarily waives these taxes for debts forgiven (as high as 35%) from the beginning of 2007 to the end of 2009. The bill also extends the tax deduction for mortgage insurance premiums through 2014.

“This is going to make a happy holiday for many homeowners,” President Bush said yesterday before signing the bill in to law. During the press conference he added the following:

“When you’re worried about making your payments, higher taxes are the last thing you need to worry about. So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. And it’s a really good piece of legislation. The provision will increase the incentive for borrowers and lenders to work together to refinance loans – and it will allow American families to secure lower mortgage payments without facing higher taxes.”

“There’s more work to be done,” Bush added, saying that Congress needs to pass legislation to strengthen Freddie Mac and Fannie Mae, to modernize FHA, and to allow the government to issue tax-exempt bonds for refinancing existing home loans.

H.R. 3648 Summary

There’s no denying it — remodeling, repairing and decorating your home can be an expensive undertaking. But with a little creativity and some wise shopping decisions, you’d be surprised at how much you can save on your next project!

Lumber: There are a number of different lumber grades available, and the higher grades also carry higher price tags. If you don’t need the increased structural capacity or better appearance of the higher grades, save some money by selecting a lower grade that’s appropriate for the intended use. Also, many lumber yards have piles of lumber that are culled out because it’s warped, split or otherwise unsuitable for sale at full retail. You can often pick this material up at sizable discounts, and it’s perfectly good for jobsite uses such as blocking, temporary bracing, etc.

Beams: Another place to save some money is with the purchase of beams. Many structural-engineered lumber beams come in long lengths that are cut on site at the lumber yard, leaving drops that are too short for long spans. You can often pick these up cheap, and they can be used as headers for doors and small windows, or in other framing applications.

Large versus small packaging: Some construction items, such as nails, screws and other hardware, are available in both small and large packaging. Buying in larger packages saves you money on a per-pound basis, so long as you have a need for the items now or in the foreseeable future. If you only intend to use a few of the items, you’re better off buying the smaller packages — even though you pay a little more per pound, you don’t waste money on excess you’ll never use.

Bulk buying: Along those same lines is buying in bulk. Items such as sand, topsoil, gravel, bark, and other bulky construction and landscaping materials can be purchased in bags, but you really pay a premium on a per-cubic-yard basis for that convenience. If you have a pickup truck or a small trailer, picking these materials up yourself in bulk will save you quite a bit of money. For even larger quantities, paying a small fee to have them delivered will still result in a sizable per-yard discount over bagged material.

Concrete: For small jobs such as setting a fence post, you can’t beat the convenience of bagged concrete mix. But once your project gets up around a quarter of a cubic yard, bagged concrete becomes a whole lot harder on both your wallet and your back. Many towns have small-yardage concrete companies that are much more economical, and you can also have a full-size concrete truck deliver the wet material for a very reasonable “short-load” fee.

Small pieces of plywood: Many home centers and lumber yards have smaller, precut pieces of plywood and other materials, and you can save yourself some money if you only need a small piece for a one-time project. However, these small panels are quite expensive on a per-square-foot basis, so if you have a future need for the plywood and a place to store it, you’re definitely money ahead by buying a full sheet and cutting it yourself.

Tools: When a home-improvement project calls for a particular tool that you don’t currently have, consider how often you might use that tool in the future. If it’s a basic item, such as a circular saw or even a paint brush, that will see a lot of use over the years, then buy the best you can afford. It’s safer, easier to use, and its long life will more than pay for itself when compared to cheaper tools that require periodic repair or replacement. A tool you might only use a few times could be a lesser expensive model, so long as it’s safe. If the tool will more than likely be a one-time use, consider renting instead of buying.

Sweat equity: Got a little more time than money? If you’re having work done on your home, talk with the contractor about what things you can reasonably do — and the key word is reasonably — to save some money. Perhaps you can do your own painting, or scrap things out and clean up the site at the end of each day. But whatever your agreement is, get it in writing!

Seconds, roll ends and discontinued items: Many retailers have items such as appliances and plumbing fixtures that they sell at sizable discounts because they are slightly blemished, have minor scratches or are in the store because someone misordered them. Flooring companies often have “roll ends” of carpet and vinyl for sale at a fraction of their original price, and that are perfect for smaller rooms. Many paint stores will have sales on mismatched or mistinted paint, or wallpaper that was misordered. Tile stores often have a sizable inventory of discontinued tiles, stones, grouts and other materials at great prices. If you can be a little flexible and creative in your design thinking and are willing to do a little research, you’ll find there are bargains all around you!

The top findings were collected responses from buyers who recently purchase a home and reported in the NATIONAL ASSOCIATION OF REALTORS®’ 2007 Profile of Buyers’ Home Feature Preferences.

1. What single home feature do buyers say they want most in a new home?

Central air conditioning – Staying cool is important to buyers in all regions of the country. Nearly three-quarters of home buyers ranked central air conditioning as “very important” for their new home, and 83 percent of buyers purchased a home with central air. Other highly desired home features: a garage for two or more cars (57 percent), a walk-in closet in the master bedroom (53 percent), and a backyard or play area (50 percent).

2. What’s the median size of homes purchased between late 2005 and early 2007?

1,840 square feet – Home sizes are growing. The size of the typical home purchased by survey respondents increased by 100 square feet since 2004, according to the survey results. Meanwhile, the median age of recently purchased homes decreased to 12 years from 15 in that same time span.

3. Repeat buyers tend to be choosier than first-time buyers. In particular, repeat buyers place much more emphasis on these home features:

Oversized garages and master bedroom walk-in closets – Sixty-five percent of repeat buyers said they wanted a garage with two or more spaces, compared with 41 percent of first-time buyers; 61 percent said they wanted a walk-in closet in the master bedroom, compared with 38 percent of first time buyers. Although repeat buyers placed more importance than first time buyers on nearly all home features surveyed — with the exception of a backyard or play area, and proximity to work — big garages and walk-in closets are two features that repeat buyers were much more likely to seek in their new home.

4. Within three months after buying a home, nearly half of all buyers remodeled or made improvements to which part of the house?

Kitchen – Six in ten buyers took on remodeling or home improvement projects soon after buying a home, according to the survey, and the kitchen was most often involved. Nearly half (47 percent) of home buyers remodeled or made improvements to their kitchen within the first three months. Other common projects include remodeling bathrooms and bedrooms, and adding new appliances and lighting. Overall, the typical buyer spent $4,350 on home improvement projects within the first three months.

5. Which home feature saw the biggest jump in buyer popularity since 2004?

Oversized garage - The most significant change between the 2007 survey and the previous 2004 survey was in the number of buyers who said oversized garages were important in their home purchase decisions. In that time frame, oversized garages (for two or more cars) gained 16 percentage points to 57 percent. What’s more, 56 percent of buyers who purchased a home without an oversized garage said they would have paid extra for one, while in the 2004 survey only 6 percent said they’d be willing to pay extra. Other features growing in popularity: hardwood floors, granite countertops, and cable readiness.

6. What three features did buyers say they’d be most willing to pay extra for in a home?

Central air conditioning, walk-in closets, and hardwood floors – Buyers aren’t afraid to spend money on the features they really want, according to the survey. Sixty-five percent said they’d be willing to pay extra for central air conditioning — in fact, they’d pay a median of $1,880 extra for a home with it. Sixty percent said they’d pay extra (a median of $870) for walk-in closets, and 57 percent said they’d pay more (a median of $1,900) for hardwood floors. Buyers were willing to pay the most for a waterfront property, an extra $4,760.

7. A home’s energy efficiency is most important to which segment of buyers?

New-home buyers - Of all buyers, nearly half reported a home’s energy efficiency was “very important”, but new-home buyers were particularly concerned. Sixty-five percent of buyers of homes one year old or newer said energy efficiency was “very important” in their home search. On the other hand, 32 percent of those who purchased homes 51 years or older said energy efficiency was “very important”.

8. Where do first-time home buyers tend to purchase a home?

Suburb or subdivision – Suburbs are still the most popular place to live, even for first-time buyers. Slightly more than half of this buyer segment purchased a home in a suburb or subdivision, compared with 20 percent who purchased a home in an urban or central city area, and 20 percent in a small town. Only 10 percent of first-time buyers bought a home in a rural area.

9. What’s the most common type of home purchased?

Single level – Overall, 47 percent of buyers purchased a single-level home, while 44 percent of buyers purchased a two-level home. Nine percent of buyers bought a home with three or more levels. In general, the older the home buyers, the more likely they are to buy a one-level home.

10. What did new-home buyers most wish their home had more of?

Storage – Can a home ever have enough storage? Nearly half of new-home buyers said more storage space would make their residence ideal. Among all buyers — of homes both old and new — 40 percent would have preferred more closets and nearly 60 percent wish for a larger kitchen. Regardless, more than 90 percent of home buyers said they are satisfied with the home they purchased.

Bush to unveil aid for at-risk borrowers
Noelle Knox
USA Today
Aug. 31, 2007 12:00 AM

Some homeowners with risky subprime adjustable-rate mortgages will be able to refinance before they lose their homes to foreclosure, with the help of steps President Bush will announce today, senior administration officials said Thursday night.

An estimated 80,000 homeowners with bruised credit and subprime ARMs they can no longer afford will be able to refinance their loans, which the Federal Housing Administration would insure.

The move will mark a historic expansion of the role of the FHA, a Depression-era agency that has traditionally served low- and moderate-income families and first-time buyers but not delinquent borrowers. Nearly 16 percent of subprime borrowers are behind on their ARMs, and an estimated 2 million subprime ARMs totaling about $600 billion will reset to higher rates through the end of next year.

To qualify for the new benefit, homeowners will have to prove they paid their loans on time before they reset to a higher rate. They also must have at least 3 percent equity in their homes.

The program, which doesn’t need congressional approval, should take effect early next year.

Arizona’ subprime-loan and foreclosure woes are mounting. The state ranks behind only Nevada for the most subprime loans in the country. Notices of trustee sales, which are precursors to foreclosures, climbed to 2,478 in metro Phoenix last month. That’s a five-year high.

“Homeowners are looking for help. It sounds like this plan is a start,” said Jay Butler, director of Realty Studies at Arizona State University’s Morrison School. “Many people who got subprime loans should have gotten FHA mortgages in the first place.”

Investors now make up as much as one-third of metro Phoenix’s home foreclosures. But there are many homeowners looking for help, and there is less to be found in the tighter lending climate.

Jay Luber, vice president of First Horizon Home Loans of Phoenix, said if government can loosen up any money for mortgages through the FHA or other programs, it will help people facing foreclosure who can’t refinance now.

Under current rules, the maximum loan the FHA can guarantee is $202,000 in most states and up to $362,000 in high-cost states such as California and New York.

The officials said Bush will also call on Congress to pass his proposal to reform the FHA, in part by raising those loan limits to $262,000 in most states and $417,000 in pricier areas. They spoke on the condition of anonymity because they weren’t authorized to speak on the record.

Bush also wants the FHA to be able to help other risky borrowers, beyond the 80,000, by broadening its lending criteria. To compensate for the added risk that the borrowers might default, the FHA would charge them higher premiums on the loans. Also, Bush wants to eliminate the 3 percent down-payment requirement, though borrowers would have to pay at least some of the closing costs to secure the loan.

The senior officials avoided using the word “bailout,” but the plan is sure to incite critics.

“If you’re going to help someone to refinance, you’re going to bail out the person who financed him in the first place,” Peter Wallison of the American Enterprise Institute said Thursday night. “This will only cause the problem to arise again.”

Wallison said the lenders who provided the financing in many of these cases likely knew that the borrowers couldn’t meet the financial obligations of the loan.

“If we’re going to allow (lenders) to be refinanced out, what we’re doing is saving them from their own greed. … It might be good politics, but it’s very bad policy.”

In another bold step, Bush will propose a temporary change in tax law. It would let homeowners avoid taxes on forgiven debt if a lender agreed to alter the loan terms.

The Business Journal of Phoenix – July 18, 2007
by Jan Buchholz

Four of the 10 fastest-growing suburbs in America are in the Valley, according to a survey released this week by Forbes magazine.

The data — culled from U.S. Census Bureau growth statistics and provided to Forbes by Demographia, a St. Louis firm — show Buckeye as the second fastest-growing suburb in the United States from 2000 to 2006.

Buckeye grew from a population of 10,147 to 29,615, a jump of 192 percent. Surprise came in third, growing from 32,000 to 86,000, a 166 percent increase. (Officials in Surprise say the current population tops 100,000.)

Goodyear’s population during the six-year time frame increased 143 percent, from 19,500 to 47,400, giving it the fourth position on the list.

Avondale came in ninth, with a population increase of 102 percent, from 37,000 to 75,400. Also on the list at No. 24 was Gilbert, with a 70 percent increase, from 113,000 to 192,000.

The fastest-growing suburb in America was Lincoln, Calif., northeast of Sacramento. Rounding out the top 10 were Plainfield, Ill., outside Chicago; Beaumont, Calif., east of Los Angeles; Frisco and Wylie, Texas, both near Dallas; and Woodstock, Ga., north of Atlanta.

Twenty of the 100 fastest-growing suburbs were in Texas and 18 were in California.