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Homeowners Get Government Holiday
Goodies
Top Ten 2008 New Years Resolutions for American Homeowners
American Homeowners Benefiting More from Technology
Bouquets and Brickbats
Help us Set the 2008 Policy Priorities of American
Homeowners
Homeowners Get Government Holiday Goodies
A series of late-year actions from various branches of
government in 2007 provided reason for holiday cheer for
American homeowners.
Congress improved its 2007 track record on
issues affecting homeowners before recessing for the
December Holidays. Thanks to a spate of legislation in
December, Congress improved its performance from a “do
nothing” to an “at least did something” branch of
government, catching up to the Bush administration in terms
of beginning to address issues such as the subprime mortgage
crisis.
Some of Congress’s December
accomplishments that will help American homeowners:
●
The Senate passed the
FHA Modernization Act. Under the Senate's bill FHA's
maximum mortgage amounts would be capped at
$417,000. An earlier version passed by the House of
Representatives would allow loan amounts to rise
according to local median price levels. Those limits
would approach or exceed $500,000 for some of the
more expensive cities in the East and many parts of
California. The final limits will be negotiated
between the House and Senate early this year. The
Senate bill requires a minimum 1.5% down payment,
while the House bill would allow no down payments.
The current minimum down payment is 3%. The White
House has indicated that President Bush will sign
the bill.
●
The Senate passed, and
President Bush signed the Mortgage Forgiveness Debt
Relief Act. Instead of foreclosing, in some cases
mortgage lenders are letting homeowners with
mortgage balances that exceed the homes market value
sell the homes for what they can get and forgiving
the remaining debt. Unfortunately the amount
forgiven was considered taxable income to the home
seller, who was usually so broke that they couldn’t
pay it. The legislation eliminates income tax
liability on such amounts resulting from a "short
sale" or loan modification agreement on their
primary residence (it does not apply to “second”
mortgages). The same bill extends the deductibility
of private and FHA mortgage insurance premiums
through 2010-another plus for homeowners with family
incomes of less than $100,000 per year. On average,
this annual tax break will amount to $350 per
taxpayer. This will make refinancing more affordable
for many subprime borrowers and will also help bring
more first time buyers into the market, which will
help stabilize home values.
●
A federal bill
with strong mortgage practice reforms has passed the
House, but a more modest Senate bill introduced in
December will not to get to the floor until some
time this year. If passed and signed by the
President the restrictions on mortgage lender
practices that lead to the mortgage meltdown will
tighten substantially.
●
The passage of the energy bill
by Congress will also help American homeowners, although its
effects will take time to materialize. The legislation,
which will help curb global warming, sets higher energy
efficiency standards for home appliances such as
dishwashers, clothes washers, refrigerators, freezers, and
light bulbs. The lighting standards are projected to reduce
homeowners’ annual electricity bills by nearly $13 billion
by 2020. Corporate Average Fuel Economy, or CAFE, standards
will be raised from the current average of 25 miles per
gallon for passenger cars, light trucks, and SUVs to 35 mpg
by 2020. The higher vehicle fuel economy standards may save
American homeowners up to $1,000 a year in gasoline costs by
the year 2020. Because gasoline and home heating oil both
are distilled from petroleum the effect will also be to help
increase the supply of home heating oil. Dramatic price
increases in home heating oil prices have created financial
pressure on low and moderate income homeowners in the
northeast, where oil-fired furnaces are most common.
The Federal Executive branch also took
several steps in December that should help victims of the
subprime mortgage crisis and help prevent its recurrence.
●
The Bush administration
and a number of major mortgage lenders negotiated a
voluntary five-year rate freeze plan for some
homeowners with subprime adjustable-rate mortgages.
Under the agreement homeowners who are up to date on
their mortgage payments, but who can demonstrate
that they wouldn’t be able to keep up with payments
when their rate adjusts, will be able to freeze
their current teaser rates for up to five years. The
plan will help a modest number of homeowners who fit
the criteria, but it will help mortgage lenders even
more: they will lose far less in a rate freeze than
they would have in a foreclosure. It also offers
potential cover to other mortgage lenders who have
yet to face the looming crisis and/or fear the
repercussions when they disclose the problems to
their company’s investors. The company’s management
can tell their investors that they are supporting
the program as part of a public goodwill initiative
rather than having to admit that their management
created the problems by ignoring sound underwriting
practices in the first place.
●
Also in December, the
Federal Reserve proposed new regulations to
eliminate many deceptive mortgage lending practices
in the future. While it won’t help homeowners facing
foreclosure today, it will help reduce the chance of
subprime mortgage crises in the future. It would
require that lenders employ sound underwriting
practices in the future - home buyers would have to
provide proof of income, and it reaffirms the right
of predatory lending victims to sue mortgage
providers. It also requires better and clearer
consumer disclosure on amounts home buyers would
have to pay every month, and places limits on
prepayment penalties. Substantial prepayment
penalties are often a barrier for cash strapped and
equity deficient subprime borrowers who wish to sell
their home or refinance their mortgages into fixed
rate products. In the future there will have to be a
window of opportunity for borrowers to refinance
without a prepayment penalty before the teaser rate
expires.
●
As expected, the Federal
Reserve Board lowered interest rates a quarter
percent in December in response to a slowing
economy. While it will have at best only a minor
effect on mortgage interest rates, any reduction at
all in mortgage interest rates will help some
victims of predatory subprime mortgages refinance
into safer products. However, the action also
signals that the Federal Reserve Board recognizes
the growing risk of recession and will be willing to
make further cuts if needed.
●
Federal and state regulators
brought a number of actions that should help reduce illegal
kickbacks in the title insurance industry. Lenders require
home buyers to purchase title insurance, making it a
necessary but expensive cost of home ownership. It is also
very profitable – title insurers pay out less than 2% of
premiums in claim settlements. The remainder of a home
buyer’s one time title insurance premium, which can be
$2,000 or more at closing, goes to a variety of marketing
costs, in some cases including illegal kickbacks for
referrals from mortgage brokers or lenders or real estate
agents. Late last year, federal and state regulators reached
settlements with six major home builders and one of the
largest title insurers in the country. In November First
American Title Insurance agreed to pay a substantial fine
and close 84 "affiliated partnerships" with builders, real
estate brokers, mortgage brokers, and mortgage lenders.
These companies performed no services and were simply shells
functioning as referral mechanisms for substantial and
undisclosed kickbacks. Such kickbacks, which sometimes
amount to as much as half of a home buyers title insurance
payment, violate the Federal Real Estate Settlement
Procedures Act (RESPA). Enforcement actions like these will
help reduce illegal kickbacks in the title insurance
business, which raise the cost of homeowners’ title
insurance to without conferring any benefits. The American
Homeowners Grassroots Alliance has long urged the
Department of Housing and Urban
Development, which enforces RESPA, to address
the problem systemically by creating new lines on the HUD-1
settlement form where all other forms of compensation,
including to or from affiliated partnerships, must be
disclosed to homeowners along with their source.
●
Not all of the holiday news was
good news for American homeowners. In what will hopefully be
only a temporary setback, a December decision by an
administrative law judge was a lump of coal in an otherwise
festive season. Throughout last year, the Federal Trade
Commission (FTC) successfully forced eight multiple listing
services (MLSs) to sign consent orders in which they agreed
to stop discriminating against home sellers who use discount
real estate brokers by keeping their listings off of public
Internet real estate websites. Most (over 80%) home buyers
now use those public websites in their home searches, so the
MLS policies discriminate against buyers as well, by hiding
listings that may be a perfect fit for their needs. The
efforts of the FTC to stop this practice, along with efforts
of both the FTC and the Justice Department to stop other
efforts of the real estate brokerage sector to protect high
commissions and limit competition, have greatly benefited
American homeowners. In this particular case, the National
Association of Realtors chipped in $300,000 to help the
local MLS fight the case according to the real estate trade
publication Inman News, and the MLS won the first round. The
case is being appealed to the commissioners of the FTC,
where the administrative law judge’s decision will hopefully
be reversed.
Top Ten 2008 New Years Resolutions for
American Homeowners
One of the best New Years Resolutions homeowners can make is
to eliminate expenses that are unnecessary and have no
benefit.
This is a tall order for many
of us, with implications ranging from how you finance your
mortgage to the energy efficiency of your home. Nevertheless
it’s a very worthwhile exercise which will affect your
current and future lifestyle. Many have already made some of
the following ten 2008 New Years Resolutions for American
Homeowners, but few probably addressed them all. We
challenge you to implement all of them!
Resolution #1: I will get my home
finances in order.
Despite all the disaster
stories about the mortgage meltdown, mortgage interest rates
are relatively low and widely available to creditworthy
homeowners. This is therefore a good time to review how you
are financing your home. You may be able to save money,
reduce financial risks, improve your financial status and/or
use the opportunity to incorporate home financing in your
long term financial planning. This is especially true if you
currently have a subprime and/or adjustable rate mortgage.
If you have an older
mortgage, there’s a pretty good chance you can get a lower
interest rate – and therefore lower monthly payments - if
you refinance your mortgage today. Since most of your
mortgage payments in the early years consist of interest,
you will also end up with a larger mortgage interest tax
deduction with a new mortgage. If you don’t take any cash
out and your new rate is lower, your actual monthly payments
will also be lower. Paying less money while getting a bigger
tax deduction is a good proposition. Also, the cost of
private mortgage insurance (PMI) is also tax deductible for
mortgages originated after 2007.
If you have an adjustable
rate or interest only mortgage that has not yet reset, you
have done well in this period of low mortgage interest
rates. But don’t assume that your good luck will continue.
The increase in monthly payments could be frightening when
mortgage rates increase in the future. Worse, the large
number of adjustable rate loans is expected to trigger as
many as one million foreclosures when their teaser rate runs
out in 2008. This may be the best time to refinance to a
safer fixed rate mortgage if your current income will
qualify you for the monthly payments.
If you have substantial home
equity when you refinance your mortgage you can take cash
out for worthy uses such as remodeling. Since the remodeling
is financed through a mortgage, the interest on the cash you
took out for the remodeling project is tax deductible. This
is a big plus compared to using your credit card to pay for
remodeling costs, because credit card interest isn’t tax
deductible. If you currently have substantial high interest
credit card debt and/or a higher interest short term second
trust on your home, it may make sense to use the proceeds to
retire those as well. However, there are limits on the
mortgage interest deductibility if you finance for more than
the original cost of the home plus improvements. Check with
IRS (www.IRS.gov
or 800-829-1040) or your tax advisor for the limitations
before you take cash out.
Resolution #2: I will stop lending
the government money interest free.
More than 101.2 million taxpayers got more than $229 billion
in income-tax refunds in 2006. The average refund was
$2,264. Refunds from IRS may sound like good news, but the
IRS didn’t pay those taxpayers any interest on that refund,
which accumulates through the year. Taxpayers who received
refunds would have been better off if they reduced the
amount withheld from their income tax every paycheck by
enough to break even with IRS at years end, and put the
extra amount in their paychecks into investments that earn
interest or dividends. If they are also paying interest on
credit cards (which isn’t tax deductible), it would probably
make even more sense to use the difference to reduce their
credit card balances.
Some taxpayers save their
income tax refunds, but others blow it on things they could
live without. The latter is a big mistake, especially with
the growing number of economists who see a growing
likelihood of a recession in 2008. It may be wise to hold
off until next year on a purchase of a new car, boat or
other major expense that can be deferred another year.
Resolution #3: I won’t let fears of
dropping home values, the mortgage market meltdown, and the
growing risk of a recession stop me from purchasing a home
in 2008.
Many homeowners have decided to put off the consideration of
a home purchase because of these concerns, but in many cases
those fears are unwarranted. If you want to move in 2008 you
should take a closer look, because this year could be an
excellent time to buy a home.
As previously stated, the
risk of a recession is certainly increasing, and this is
certainly no time to push the limits of your financing
ability. However, many homeowners are in a strong financial
position, thanks to good savings habits and accumulated home
equity. While they need to make sure they keep plenty of
liquid assets against the risk of a recession, in fact many
homeowners have more than sufficient liquid assets for that
purpose and are in a position to buy a home if they wish to.
The direction of home values
is of little consequence if you plan to stay in the same
area. According to the National Association of Realtors, the
median moving distance in 2006 was 13 miles. This means that
if the value of your current home has declined, so did the
value of the home you’ll be buying if you stay in the same
area. The price difference will probably remain about the
same in most cases (and this relationship holds true if
homes are appreciating in your area). The future outlook for
home values will also be about the same, so the direction of
home values will have relatively little consequence for most
home buyers.
The mortgage meltdown/subprime
crisis will make home financing difficult for many who could
only qualify for subprime mortgages previously, and more
expensive for home buyers with impaired credit when they can
get financing. Despite this bad news for some homeowners,
mortgages are still widely available at attractive rates for
the majority of home buyers, who have excellent credit
histories, and a good financial profile. In addition the
government has begun to step in to help those at the margins
- FHA loans have been made more accessible, Fannie Mae and
Freddie Mac programs have been allowed to expand, and more
proposals to help home buyers are in the works.
On top of all this, the
inventory of homes for sale is at an all time high in many
areas. Yes, that means you’ll have to work harder to sell
your home, but it also means you will never be as likely to
find a replacement that fits your needs exactly as you are
today. Because homes are moving slowly in today’s market, it
makes far more sense to first sell your home before you
commit yourself to buying your next home. Even so, some
sellers in this current soft market will accept a home sale
contingency in a purchase offer, but usually only if they
are first convinced that the prospective buyers will be
pricing their home extremely competitively. That’s not
unreasonable - pricing competitively is something you must
do in this market anyway if you expect to sell your home.
The bottom line is that for many, if not most homeowners,
2008 is a great time to buy a home, and the gloom and doom
on the housing and economic front should not stop you from
looking into it.
Resolution #4: I will increase my
saving and reduce or eliminate high interest loans.
Refinancing your mortgage is often the first step in this
process (see resolution #1), and curtailing your interest
free loans to IRS the second (see resolution #2). Next, make
sure you are taking advantage of all matching employer
contributions to a company IRA if you have one and if at all
possible make the full tax deductible annual contribution to
your 401k, 403(b), regular or Roth IRA, or other
tax-deferred retirement accounts.
In order to pay their
mortgage off sooner, many homeowners make additional
payments above the required monthly amount to their mortgage
lender. They would have been better advised to get mortgage
with a shorter term (15 years, for example), because they
would have received a slightly lower interest rate as well.
While debt reduction is a worthy goal, many homeowners would
be much better off from a financial and tax standpoint to
instead put extra money into tax-deferred retirement
accounts. Not only would they get employer contribution
matches in some cases, but the accumulated interest or
dividends will either be deferred or tax free until you
withdraw them at retirement. A 2005 study found that more
than 38% of households would have earned 11 - 17 cents more
on the dollar by investing in tax-deferred retirement
accounts instead of prepaying the mortgage. Those extra
earnings would have resulted in additional annual savings of
almost $400 per household.
Make sure that both your tax
deferred accounts and investments are diversified and you
aren’t overly exposed in any one investment, including
holdings in your employer’s stock. Even sound, well managed
companies can take a beating in the stock market. Make sure
you invest in mutual funds or stocks with consistently good
performance records. For example the Lipper Reports tracks
mutual fund performance by category (i.e. large caps,
energy, etc.) over 1, 3, 5, and sometimes even 10 years. If
there are 100 funds in that category invest only in those
that are consistently in the top quartile (which would be
the top 25 if there are 100 funds in the category) over each
of those periods, and you should do pretty well. Review your
investments annually (or even better quarterly) against that
standard to make sure they are maintaining their track
record.
Review your annual Social
Security Benefits statement to make sure that your earnings
have been accurately reported and that no one else is using
your Social Security number. If they have, they may also use
your social security card to get a drivers license and
credit cards in your name as well. You can order your
statement online at
www.ssa.gov.
Resolution #5: I will review my
homeowners and other insurance to make sure I’m adequately
protected.
Review your coverage with your agent to make sure you have
enough insurance. The insured value of your home should
reflect its current replacement value, including any
additions or improvements, as well as the value of its
contents. Make sure you are covering all important
circumstances. Insurance against flooding may not cover
internal pipe backups or wind damage during a hurricane for
example, and many insurers won’t provide flood insurance if
your home is in a coastal area or river basin (in such cases
you may be able to get flood insurance through the National
Flood Insurance Program). Many policies also have standard
fixed limits on certain types of contents (jewelry and furs,
antiques, cameras, electronics, etc.) so you may need an
additional “floater” policy to fully insure your home’s
contents.
Life insurance needs change
throughout your life. They are highest for young couples
with children, far less for empty nesters with enough
savings for their retirement. Depending on your situation
you may be able to cut back on insurance costs.
Resolution #6: I will reduce my
home’s energy consumption.
There are many ways to reduce your home energy costs. The
American Homeowners Foundation has a free home energy audit.
All it takes is a ten minute tour of your home with the
audit questionnaire and a few simple tools you probably
already have, and you will likely find numerous ways to
reduce both your energy costs and global warming. For a free
copy, email
AHF@AmericanHomeowners.org
, and put “Free Energy Audit” in the subject line. We will
email you back the free home energy audit.
Among some of the
“no-brainers” are replacing old manual thermostats with
programmable thermostats, which typically will pay back
their costs in several months, and replace standard light
bulbs with compact fluorescent bulbs, which have dropped in
cost recently. Also make sure your exposed hot-water pipes
are insulated, furnace filters are changed regularly, leaky
faucets are repaired, and run only full loads in the
dishwasher and clothes.
Resolution #7: Whenever appropriate
I will take advantage of new options to reduce real estate
services costs when I buy or sell a home.
Internet-based real estate service companies will provide
rebates of as much as 2% of the selling price of the home
you buy if you use them to assist you in your home purchase
(state real estate associations have managed to make real
estate commission rebates illegal in several states, but the
U.S. Department of Justice, the Federal Trade Commission and
consumer groups like the Consumer Federation of America and
the American Homeowners Grassroots Alliance are working to
repeal those laws). Try to get an exclusive buyers agent (EBA)
to represent you when you buy a home. EBAs represent only
buyers, never sellers. Many of the state real estate
associations have also managed to convince their
legislatures to allow traditional real estate brokers to
simultaneously represent both the buyer and the seller of
the same home, creating a potential conflict of interest you
want to avoid if possible. This practice is called “dual
agency” and in those states a real estate agent may refer to
himself as a “buyers agent”, even though the brokerage is
actually representing the seller of the property you’re
considering.
With the market as soft as it
is, buyers should consider selling their present home before
buying its successor. There’s a large inventory of unsold
homes in most areas, so finding your next home shouldn’t be
a problem. Selling your current home will probably take much
longer, especially if you don’t want to be forced to accept
an unusually low price. For that reason most sellers aren’t
willing to accept purchase offers contingent on the sale of
your current home, unless you are pricing your home very
competitively and/or only asking for a month or two to sell
it. While it is inconvenient, moving into a short term
rental if necessary after you sell will allow you to take
full advantage of your negotiating leverage when you buy the
next home.
Another tool that can
simplify some of the chores related to buying are service
aggregator web sites that let you compare rates from
different local providers of electricity, local, long
distance and cellular telephones, oil and gas, TV and
Internet services, and newspapers by zip code. Among them
are
www.connectutilities.com,
www.whitefence.com and
www.allconnect.com. Some aggregator web
sites charge a fee for their services and all of services
providers in each area may not be available on each website.
Resolution #8: I will look for
economical ways to increase the value and livability of my
home.
If you are like most, you probably have a list of things
that need to be fixed or upgraded in your home, and a
remodeling project may be on the list as well. Many of the
things on the list may have been on the list for many weeks,
if not months. You may have noticed that those jobs seldom
get done by themselves, and some conditions get worse over
time.
Start by putting your home
“to do” list in priority order. Put on top the kinds of
repairs that can cost more if neglected (a leaky roof for
example), or which will continue to cost you money until
they are fixed (a broken refrigerator seal, leaky faucet or
toilet, etc.). Usually the parts are the least expensive
part of a repair. If you are at all handy force yourself to
take the time to fix things yourself.
If you’re not handy or won’t
have the time to fix everything in the next few months call
a handyman or specialist for the things you can’t handle. A
good independent handyman should be able to do most things
you need at a far lower rate than a plumber would charge to
fix your toilet or an electrician would charge to fix a
broken appliance. Ask your neighbors for recommendations of
good handymen, and find out their hourly rates. The handyman
franchises, which advertise heavily in local media, can cost
as much as a specialist, however. If you can get a
specialist (i.e. electrician or a plumber) for about the
same price, that’s a smarter choice. Reporting services like
Angies List, which carry consumer ratings on local
contractors, can be very helpful in identifying which
contractors are the most reliable and least expensive.
More extensive remodeling
projects will probably require a remodeling contractor. Many
projects can return 100% of the investment when you
eventually sell your home, and improve your lifestyle in the
meantime. Another plus of remodeling is that if it will make
the home better suit your needs in the future, it can be a
lot less expensive than selling your home and buying another
which has features. By the time you finish selling your home
and buying another, you can easily spend 10% of your home’s
selling price on real estate commissions and various
settlement costs for both homes. You can do a lot of
remodeling for that amount.
The best candidates for a
good return on your remodeling investment are things like
updating badly dated kitchens or baths, or adding a second
bathroom in a one bath home. The National Association of the
Remodeling Industry periodically publishes
return-on-investment data on most types of remodeling
projects. Don’t over improve to where your home’s value
substantially exceeds that of the neighbors or you’ll have
trouble recouping your investment when you eventually sell.
You can also help keep costs down if you are willing to do
some of the easier finish work yourself, like painting or
trim work.
Check the references of
remodeling contractors thoroughly. Consumer complaints
regarding remodeling contractors consistently at the top of
the Better Business Bureau’s and the American Homeowners
Foundation’s complaint list. To avoid disputes always
use a comprehensive contract when you hire a remodeling
contractor. The American Homeowners Foundation offers a
comprehensive eight page model contract, which you can order
at
www.AmericanHomeowners.org.
Resolution #9: In the face of
growing signs of recession, I will be cautious in 2008.
Because of the growing threat
of a recession, 2008 is not a good year to become over
extended. Whatever else you do, make sure that you have
enough cash or liquid reserves to weather unforeseen events,
such as company layoffs or family illnesses. If that means
waiting until next year to buy a new car or new home, so be
it. Prices and interest rates may be a little higher next
year, but so will your savings. A little wait to avoid a
significant financial risk is well worth it.
Resolution #10: I will engage in
the political process to influence issues of economic impact
to me and my home.
Home ownership is a
nonpartisan condition, yet the votes of legislators and
rules of regulators will have a lot to do with your economic
future. Home equity is the single largest form of savings
for most homeowners and many of those votes will impact the
value of your home. Those votes will also impact your
mortgage interest rates, your taxes and other major expenses
for most homeowners, such as healthcare. All of them will
impact your ability to buy a home and your lifestyle. For
many years American homeowners have been the true “silent
majority”. With a Presidential election this November the 75
million American homeowners can no longer afford to remain
silent. We must raise our voices to policymakers at all
levels in 2008 to protect the value of our homes and the
institution of home ownership (See “Help us Set the Policy
Priorities of American Homeowners” in this issue for more
information.)
top
American Homeowners Benefiting More from
Technology
Technology helps homeowners more every year.
Homeowners are among the
biggest beneficiaries of technology innovations. Every year
new technologies help homeowners save more money and/or make
our lives easier. The growing importance of Internet
commerce was underlined by the 2007 holiday season. While
retail sales overall remained flat between Thanksgiving and
Christmas, Internet sales of consumer goods during that
period rose 20%. Much of that reflected homeowners skipping
the drive to crowded shopping malls and opting instead to
save money on gas and reduce global warming by ordering
online (a choice made even easier by the growing number of
merchants who offered free shipping and fast deliveries
during this holiday season).
Homeowners are increasingly
using the Internet to help them buy or sell homes and
everything else. Craig’s list and eBay are becoming popular
places to buy and sell homes, cars, and hold a yard sale.
Home sellers often turn to discount real estate brokers who
for a modest fee will put their listings on a network of
public real estate websites where most home buyers (over
80%) now conduct their home searches.
At a recent Justice
Department symposium, the head of DoJ's Antitrust Division
hailed the progress in the U.S. voice, video and high-speed
Internet markets. Recent progress in telecommunications has
been "nothing less than breathtaking," according to
Assistant Attorney General Thomas Barnett. The evidence
includes the growing versatility and popularity of wireless
devices, faster residential Internet connections, and
increasing competition in the television market.
Cross-platform competition, such as telephone companies
offering video, and cable companies offering phone service,
has "clearly benefited consumers" by giving them more
choices and lower prices, Barnett noted.
This has been achieved thanks
a combination of regulatory and legislative actions,
forbearance, and industry investment. The Federal
Communications Commission imposed new rules on local
governments in late 2005 setting time limits for decisions
on franchise applications from potential competitors to
local cable TV company monopolies. State legislatures have
also gotten involved, many of them passing similar state
laws in 2007. As a result, competition in TV services is
breaking out at the state and local level, reducing the cost
of cable TV services by an average of 15%, according to FCC
figures. The new opportunities are stimulating
infrastructure investments. Wireless carriers invested more
than $23 billion in build-outs in 2006; fiber-optic services
companies spent $25 billion; and the cable industry invested
more than $12 billion during the same period, according to
Standard & Poor's. Research also continues apace on wireline
Internet access – which would let consumers access the
Internet through their home’s electric wiring if the
technology can be perfected.
Competition is also sparking
more consumer choices in telecommunications. Verizon
Wireless announced that it will open its network to any
compatible device in 2008 and AT&T allows customers to use
any compatible phone on its network. An FCC spectrum auction
in 2008 will bring new competitors to the wireless market,
including companies like Google to bid on parts of the
spectrum reserved for networks open to all devices that
might operate on that network.
The build out is making
Internet access increasingly available to rural and
underserved homeowners and other consumers. Higher Internet
speeds will also help stimulate the growth of teleworking,
which includes both telecommuting and the growing number of
Internet-centric home based businesses (eBay alone has
several million “power sellers” who make a full or part time
living off of Internet commerce. Both help reduce auto
pollution and its effects on global warming. In addition,
they reduce the demands on the U.S. transportation
infrastructure which can potentially result in billions of
dollars in tax savings for expenditures on transportation
infrastructure maintenance and expansion.
Healthcare will also benefit
by the telecommunications build out. Under development are a
number of wearable wireless medical monitoring devices,
which will enable many of the millions of chronically ill
homeowners to remain in their homes while their conditions
are remotely monitored 24/7. Homeowner and federal medical
program savings through the avoidance of nursing home,
hospital and other medical costs could run into billions of
dollars. Health IT legislation wending its way through
Congress will enable patients to maintain comprehensive
medical records online so that doctors they authorize will
be able to make more accurate diagnoses, and have advance
knowledge of any allergies to certain prescription drugs,
etc.
Homeowners and their families
spend substantial amounts on entertainment, and barriers are
tumbling in digital music. Until last year most of it was
controlled by digital rights management (DRM) software that
restricts what you can do with a song download. In 2006 EMI,
a major music label, began selling music without copy
controls on Apple's iTunes and other stores. Wal-Mart and
Amazon.com then opened MP3-download stores, with less
restrictions on downloads than iTunes. Apple responded by
cutting prices and expanding the selection of its DRM-free
offerings; Microsoft, in turn, added a million MP3s to its
Zune store. This leaves us to wonder how long it will take
before the movie studios react in a similar manner.
Technology innovation and
competition will no doubt continue to deliver new benefits
and savings to homeowners in 2008. Let’s hope that it
continues to make our lives easier, and helps to offset the
growing costs of so many other goods and services that are
essential to American homeowners.
top
Bouquets and Brickbats
Many organizations and individuals have had a
significant impact on homeowners and home ownership in
2007, and some of them deserve bouquets and others
brickbats for their efforts.
 Bouquets are in order for many for their
service to American Homeowners in 2007:
●
To the Federal Trade Commission and the Department
of Justice’s Antitrust Division for their ongoing
and tireless efforts to stop anticompetitive
initiatives of real estate brokerage organizations
●
To the
millions of real estate brokers, agents, mortgage
lending executives, and professionals in other
fields who help American homeowners buy, sell,
finance and improve their homes. We should never
lose sight of the fact that the vast majority of
these ethical and knowledgeable professionals truly
care about their clients, provide homeowners
valuable services, and do not support the
protectionist and anticompetitive policies of a few
associations and companies in their respective
fields. Special kudos to those entrepreneurial
professionals who continue to break new ground by
developing innovative new business models that offer
new benefits to American homeowners.
●
To the
many hundreds of real estate writers and editors who
continue to share their wisdom and knowledge with
American homeowners, enabling them to make wiser
decisions about matters related to home ownership.
Bouquets also to real estate writers, TV producers
and others who keep American homeowners informed
about policy efforts that affect homeowners’
pocketbooks and their ability to buy and sell homes.
Roses also to consumer organizations like the
Consumer Federation of America that have fought for
homeowner rights and small trade associations
representing new real estate brokerage models that
are fighting for their own right to exist. The “Best
Line of the Year” award goes to syndicated columnist
Lou Barnes. In a December column he made the
constructive policy suggestion that the government
could solve most of the mortgage meltdown problem by
prohibiting predatory rate resets on subprime loans.
Noting that the policy would bring shrieks from Wall
Street and economic conservatives, Barnes penned
this apt response: “If your idea of a market for
mortgage-backed securities is the back-alley
knee-capping of 3 million households, we have every
right to alter your ‘terms’."
●
To the many members of
Congress, democrats and republicans alike, who have
cosponsored legislation addressing important policy
issues that impact American homeowners, They have
set a shining example for their peers and
Congressional leadership, who we hope will come
together in a bipartisan and constructive fashion in
2008 to pass pending legislation that affects
homeowners, and other important bills that impact
the entire economy and all consumers.
Brickbats are also in order for those
whose actions or inaction injures American homeowners:
●
To the
leadership of organizations that have sought to
erect protectionist barriers that limit or eliminate
choices for American homeowners. These leaders,
mostly CEOs and corporate suits of national and
state real estate brokerage associations, multiple
listing services, and state real estate commissions
are hurting homeowners and sullying the reputations
of the millions of fine professionals in the field,
most of whom are more than willing to compete with
any real estate business model and do not support
the efforts of the few and the greedy to limit
competition in real estate services.
●
To the
federal banking regulators who were asleep at the
switch with regard to their responsibility to
monitor and enforce sound underwriting practices in
the mortgage lending sector during the build up to
the mortgage meltdown. Most of us have been
receiving mortgage lender email spam for years with
offers along the lines of “No money? No job? No
credit? No problem! We can put you in your dream
home today for no money down and monthly payments
only if you feel like making them!” Did these
federal banking regulators have some kind of special
spam filters that blocked these emails? Did they not
see similar TV and print ads or hear similar radio
commercials? Or were they too busy having lunch with
lobbyists from the mortgage lending sector to notice
them? The mortgage meltdown would not have happened
if these regulators (or more accurately
nonregulators) had done their jobs.
●
To the
CEOs and corporate boards of companies involved in
predatory lending who approved their company’s
engagement in practices that will likely cost
millions of American homeowners their homes and have
cost their company’s stockholders billions of
dollars. A few of those corporate boards have begun
to redeem themselves to stockholders by giving the
CEOs who got their company into the mess the chance
to seek new business opportunities. Unfortunately
the CEOs often departed with huge severance
packages, at the further expense of the firms
stockholders. Some of those stockholders
unfortunately including American homeowners who face
foreclosure as a result of predatory loans. Until
most of the corporate boards of companies involved
in predatory lending face up to their own
responsibilities and do some housecleaning we cannot
trust them to avoid repeating past poor judgments.
Unfortunately that’s unlikely to happen so it will
be up to Congress to pass legislation to prevent the
past predatory lending practices from becoming
prologue to more of the same in the future.
●
State
attorney generals, who have been sitting on the
sidelines and watching as the FTC and DoJ carry the
battle to protect their state’s homeowners. They
could be of great help if they would weigh in as
well, particularly in persuading their own state’s
legislators to oppose anticompetitive legislation
that would force homeowners to pay for services they
neither want nor need, and prohibit them from
receiving real estate commission rebates.
top
Help us Set the 2008 Policy Priorities
of American Homeowners
Please tell us your views on state and national policies
that will have a significant impact on homeowners in 2008.
Every year the American Homeowners
Grassroots Alliance publishes its annual “Issue Guide for
Federal and State Policymakers”. The Guide groups the
Alliances policy goals in ten subject areas. We share the
Guide with federal and state policymakers and the media so
they can gauge policies that have a significant direct or
indirect economic impact the nation’s 75 million homeowners.
The areas are
Budget and the Economy,
Consumer Protection,
Education,
Energy and the Environment,
Healthcare,
Housing and Real Estate,
International Trade,
Credit & Financial Services,
Tax, and
Technology and Communications.
Congress, federal agencies, the state
legislatures, and state regulatory bodies do not have
the bandwidth to address all the issues affecting
homeowners and their many other constituencies every
year. What they do focus on is determined by a number of
factors, including pressure from the media and their
constituents.
Among their constituents are the nation’s
75 million homeowners. If there is enough broad and vocal
support for new legislation and/or regulation, then
legislators and regulators will act. There are certainly
enough American homeowners to drive policy issues in 2008 if
we make a new years resolution to be activists in
determining our own destiny.
There were several notable successes in
2007, as noted in the first article in this month’s Home
Base. Many of our 2007 priority issues remain under
consideration in this Congress and will likely see action
after Congress returns to Washington this month. It will not
be easy. Unfortunately partisanship, gridlock, and animosity
between the Republican and Democratic parties continue to
increase. As a result, Congress is increasingly
dysfunctional and unable to resolve major issues affecting
homeowners and our economy. Indeed, American homeowners were
lucky in 2007 in terms of legislation actually passed in
2007 compared to many other segments of the population,
despite the fact that those accomplishments fall far short
of the steps that are still needed to address national
crises, such as the likely foreclosure on as many as 3
million subprime loans that will reset over the next several
years.
What’s your opinion? Which are the most
important issues affecting homeowners and home ownership
that the Grassroots Alliance should work on in 2008? Please
take a few minutes to email us your suggestions. More
importantly please also share those suggestions with your
state and federal legislators! You can look up their email
addresses by zip code here.
On a brighter note, there are also some
positive and interesting developments underway that could
have a significant impact on the upcoming Presidential
election. They reflect the political values of most
homeowners, and may be able to contribute to achieving our
common policy goals. Most of the 75 million American
homeowners are politically moderate and are increasingly
exasperated by the growing inability of the Republican and
Democratic parties to work together to address the nation’s
challenges. In exit polls of voters in the 2000 election
homeowners split evenly in their political affiliations: 1/3
said they were democrats, 1/3 said they were republicans,
and 1/3 said they were independents. No doubt a significant
share of most of the Republican and Democratic homeowners
are politically moderate, and probably the majority of the
growing number of independents are political moderates, many
of them independents because they have been disenfranchised
by their political party.
Reflecting the concern of the growing
number of homeowners and other voters who have been
disenfranchised by the two national parties, a bipartisan
group of national political leaders are convening a January
7 meeting at the University of Oklahoma to spell out plans
to develop to form a “government of national unity” to end
the growing policy gridlock in the nation’s capitol. Their
intention is to support a moderate third party candidate for
President if the democratic and republican candidates are
unable to demonstrate a clear commitment to engaging in a
consensus form of government that reflects the political
philosophy of the majority of American voters. Participants
in the event include New York Mayor Michael Bloomberg, who
has been elected to office as both a Democrat and a
Republican, and who is now an independent (and a potential
unity party Presidential candidate).
The list of nationally recognized
political leaders from both parties attending the event is
impressive. The meeting is being convened former Senators
Sam Nunn (GA), Charles Robb (VA) and David L. Boren (OK),
and former presidential candidate and Senator Gary Hart.
Republican organizers include former party chairman and
Senator Bill Brock, Senator Chuck Hagel, former Senator John
Danforth (Mo.) and former New Jersey Governor Christine Todd
Whitman. Other national leaders who have pledged to attend
the event include former Secretary of Defense and Senator
William S. Cohen (ME), former Democratic Senator Alan Dixon
(IL), former Democratic Senator Bob Graham FL), and former
Republican Congressman Jim Leach (IA). The Oklahoma event
will focus on international challenges such as nuclear
proliferation and terrorism, and restoring U.S. credibility
in the world. If successful, there is a good chance that it
could expand its scope to important national issues that
affect our economy and are of great concern to the majority
of politically moderate U.S. voters. Former Senator and
University of Oklahoma President David L. Boren no doubt
reflected their sentiments when he observed that "Electing a
president based solely on the platform or promises of one
party is not adequate for this time…Until you end the
polarization and have bipartisanship, nothing else matters,
because one party simply will block the other from acting."
This event parallels the efforts by
unity08, an independent group that is further along in the
process. Unity08 is preparing an online nominating
convention to select a ticket combining a Republican and a
Democrat (or an independent candidate). They are polling
their 122,000 members on an ongoing basis to define and rank
their top issues. Currently the top 10, in descending order,
are Energy Independence, Health Care Reform, Involvement in
Iraq, Upholding the Constitution, Improving Education,
Illegal Immigration, Global Climate Change, Balancing the
Federal Budget, Lobbyist Corruption in Washington, and
America’s Role in International Affairs. The mortgage
meltdown is discussed under “Growth of the Economy,
currently ranked #14 by unity08 supporters.
Unity08 plans to work to achieve ballot
access for that ticket in all 50 states and hopes to elect
their candidates this November. More information about
Unity08 is at
www.unity08.com
top |
Please take
the time to contact your legislators and express your views
on the policy issues covered in this month’s Home Base. It's
easy - you can reach your legislators by email in a couple of
mouse clicks, and you can use the content in Home Base and
elsewhere on our website to help you develop your message.
To look up the phone number, email, and/or postal address of
your U.S. Representative or your two U.S. Senators, (or your
state representative or state senator)
click here.
The site can look them up by zip code for you if you don’t
recall their names.
Many legislators are also happy to meet personally with
their constituents when they are back home on weekends or
when Congress is not in session. Congress recessed in
December, and many are currently back in their
home states or districts. Many will be spending much of
their time at home until Congress gets back to real business
later this month.
A personal meeting is a
particularly effective way to get their attention and
reinforce your message, so please consider also requesting a
follow up face-to-face meeting in their home state or home
district offices near you when you contact them on policy
issues.
Is there a policy issue that is particularly important to
you which significantly impacts homeowners or home
ownership? We are in the process of updating our policy
positions for 2008. Any member may propose a position on a policy
issue, so please check the American Homeowners Grassroots
Alliance's 2007
Issue Guide to see whether it’s
already on our list. If it isn't on the list, we invite you
to send us an email and tell us why you think the American
Homeowners Grassroots Alliance should take a position and work on it.
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