Homeowners Call for Repeal of Protectionist State Laws
American Homes Getting Greener
Refinancing Your Mortgage Makes Sense for Many
The New Credit Card Reform Law
Rethinking Remodeling
The Impending Healthcare Battle

The American Homeowners Grassroots Alliance (AHGA) has cheered legislation to repeal a state law that prohibits real estate agents from rebating part of their sales commission back to the home buyer. AHGA was also delighted to learn earlier in May that the Justice Department had required a South Carolina multiple listing service (MLS) to rescind its policy of denying access to discount real estate brokers. MLSs are public utilities that distribute home listings to the consumer websites of most of the real estate brokers in their geographic area. These policies force home sellers to list their homes with other brokers who charge higher commissions if they want their home listing to be disseminated widely on the Internet. With over 90% of home buyers doing their home searches on the Internet, these kinds of restrictions violate U.S. antitrust laws.

Several states have passed laws that prohibit home buyers in most states from receiving real estate commission rebates from real estate brokers and/or agents. Home buyers are in short supply in many areas right now, and some real estate brokers and agents are willing to share part of their commission with home buyers to entice them to use their services. Passed at the behest of real estate broker franchises, real estate broker trade associations and state real estate commissions, the laws limit competition. They also protect high U.S. real estate sales commission rates, which are significantly higher than in most other developed countries.

Many homeowners have already taken advantage of today’s low mortgage interest rates and refinanced their home mortgags. Rates have hovered near 5% for 30 year fixed rate mortgages this year, and more homeowners should consider refinancing while these low rates are still available. Increases in federal spending as a result of the stimulus program will lead to more federal borrowing, and are bound to create upward pressure on interest rates. As home values continue to drop, more new buyers will enter the market. This will also increase mortgage demand and push up mortgage interest rates. There is already evidence of increased buyer activity in California, where home sales in some areas are up 70% to 80% so far this year. “Housing affordability is at an all-time high, mortgage rates are historically low, and interest rates are the lowest they’ve been since the days of Eisenhower,” National Association of Realtors Chief Economist Lawrence Yun observed recently.

A caution is that jumbo mortgages are hard to find, although the situation is beginning to improve. Jumbo mortgages are those larger than Fannie Mae and Freddie Mac limits, which are up to $417,000 in most areas, and up to $729,750 in a few high-cost cities.

Some homeowners with adjustable mortgages are complacent because their current interest rates are low. But they are not much lower than the currently available 30 year fixed rates, and it is very unlikely that adjustable mortgage rates will go down further. Switching to a 30 year fixed rate will put a permanent cap on their monthly payments. As a compromise some might want to refinance into a mortgage that is fixed for five years or so – ING bank is currently offering a 30 year mortgage with a fixed 4.5% rate for the first five years.

Some homeowners who plan to move in the next year or two are holding off because they figure they are unlikely to recover their mortgage origination costs in that amount of time. Mortgage origination costs include such things as brokers’ fees, appraisals, and a host of other charges limited only by the creative minds of lenders, and can amount to thousands of dollars. The breakeven point – the point where your cumulative monthly savings covers the origination cost of the new mortgage – is not that hard to figure. With new lower payments, many homeowners whose current mortgage interest rates are only 1.5 -2% higher that the currently available 30 fixed rate mortgages could recover the origination cost of a new lower interest mortgage in as little as a year. A mortgage broker or lender can do that calculation for you. When you consider that plans often change – you may not end up moving as soon as you planned – the peace of mind coming from the assurance of low mortgage payments that can never increase as long as you own your home may be worth the effort.

There are several other reasons that homeowners who currently have equity in their homes should consider refinancing to a fixed rate mortgage now. One is that many are not far from owing more on their mortgage than their home is currently worth. U.S. home prices continue to decline according to the S&P Case-Shiller home-price indexes. For the first quarter 2009, the Index posted a 19.1% drop from a year earlier, the biggest quarterly decline in its 21-year history. If you wait to refinance, even if 30 year fixed rates stay low, you may have to put cash into the transaction in order to qualify. That’ will be a problem for those homeowners who don’t have significant savings.

Another reason to refinance now is the economy. Job losses continue to mount. If you lose your job, you’ll be unlikely to qualify for a new mortgage unless you are lucky enough to have a working spouse or significant other with a high enough income to qualify on their own. If you refinance now and reduce your monthly mortgage payments as a result, you’ll have a better chance of weathering the financial storm until you get a new job.

In addition, lowering your monthly mortgage payment or locking in a long-term low rate can free up cash for repaying credit card or other non tax deductible debt, or replenishing your investments or retirement accounts, reducing stress in the process.

Equity in your home is much more critical to getting a mortgage loan today. If your current mortgage balance is less than 80% of your home’s current value you will have the most refinancing options and get the lowest rates. The recent federal "Making Home Affordable” program may apply to some homeowners with mortgage balances between 80% and 105% of their home’s value if their mortgage was bought by Fannie Mae or Freddie Mac. Usually, a local real estate agent with knowledge of your neighborhood will be willing to give you a ballpark estimate of your home’s current market value, and this should be close enough to help you narrow down your refinancing options.

On May 22, President Obama signed federal legislation that will help consumers and reduce losses by credit card companies. According to Creditcard.com, the average outstanding credit card debt was $10,679 at the end of last year. The legislation would prohibit retroactive interest rate hikes and require that card companies' give 45 days’ notice before raising interest rates. It would also prohibit the practice of applying payments to the portion of a borrower's balance with the lowest interest rate, and bar credit card companies from charging interest on the parts of the credit balance that were paid on time. Banks must send a monthly statement at least 21 days before it’s due, and consumers must be 60 days late in their payments before they are considered in default. The Credit Card Holders' Bill of Rights sets no rate caps, fees, or price controls, nor does it dictate any business models to card companies.

The sudden increases in interest rates and late fees have ruined the credit of millions of consumers and forced some into bankruptcy. Many consumers cannot meet unexpected and large increases, and these increases have often been forced on consumers with otherwise excellent payment records and credit histories. The credit card companies lose money when they force a consumer into bankruptcy, and the new law will provide breathing room that will allow many consumers to take steps to avoid that situation. Credit card companies have argued that the new advance notice and fee restrictions will cut their profits and force them to increase their interest rates. Any reduction in consumer bankruptcy filings will also add to their bottom line, so the impact of the new law on credit card interest rates may be negligible.

Most of the provisions of the Credit Card Holders' Bill of Rights won't become effective until next year. An exception is the provision requiring that customers get 45 days' notice before interest rate increases are allowed, which becomes effective in 90 days. That will be late August, so there could be quite a few short notice rate increases before then.

Rethinking Remodeling

As always, the Foundation recommends that homeowners who use remodeling contractors utilize a comprehensive written contract to protect their interests. Complaints about remodeling contractors continue at the top of the Foundation’s and Better Business Bureaus complaint list. You can order one of the Foundation’s remodeling contract forms here.

The next big pocketbook Congressional battle will likely be over health care.

The housing crisis and other elements of the economic crisis have captured much of the attention of homeowners, policymakers, and the media over the last several years. While there have been numerous policy responses already, more may be needed. It is clear at this point that Congress and the Administration will make adjustments and/or do more if necessary to help homeowners and the ailing economy.

The next issue with an extremely large and broad impact on homeowners and other consumers’ pocketbooks is healthcare reform. Healthcare cost increases continue to exceed inflation by substantial margins, and employer contributions to employee healthcare programs continue to decline. The good news is that there is broader and deeper support for healthcare reform than ever before. AARP joined with the Business Roundtable and the National Federation of Independent Business, AHGA, and many other organizations in last year’s “Divided We Fail” campaign. The campaign’s message was that, despite different perspectives on the best solution, healthcare reform must be addressed in this Congress.,

There is also broad bipartisan agreement on some aspects of the issue – liberal and conservative legislators now generally agree that preventive care is a cost effective investment and must be expanded. The bad news is that many aspects of health care reform are complex, and as a result any improvements must be complex. Some solutions involve tradeoffs, and those tradeoffs create the opportunity for opponents of healthcare reform to create misleading advertising campaigns that undermine balanced voter consideration of the pros and cons.

In any event, healthcare reform will have a significant impact on homeowners’ healthcare benefits, options and pocketbooks, and it will help some more than others. The process will also be time consuming – the legislation will not get through Congress in a month or two. The American Homeowners Grassroots Alliance urges homeowners to study this issue carefully, because it will likely have more impact on them than any other issue to come before the current Congress.

President Obama has expressed his strong support for healthcare reform and laid out his views in a number of areas. He is deferring to Congress on the details, which may be mainly a strategic decision. In the 1990s, President Clinton sent Congress a detailed healthcare package which ultimately did not pass. Many democratic leaders didn’t fully support all aspects of the Clinton plan, making it more susceptible to attacks from opponents. President Obama’s approach will assure a greater sense of ownership by those in Congress who shape the legislation, reduce the complexity of Congressional negotiations, and hopefully speed the process. President Obama will still be able to weigh in at the 11^th hour on remaining areas of difference.

The Senate Finance Committee will soon begin consideration of healthcare legislation. Committee Democrats are in the late drafting stages. Senate Finance Committee Chairman Max Baucus last November proposed a comprehensive universal coverage plan in his "Call to Action," (http://finance.senate.gov/healthreform2009/finalwhitepaper.pdf) which will probably serve as the jump-off point for the legislative process. Under the plan everyone would have a health insurance policy. Individuals could either keep their existing healthcare plans or participate in a federally subsidized nationwide insurance pool. Health insurance companies would not be allowed to discriminate based on pre-existing conditions.