Housing Rescue Initiatives Proceed
Homeowners Offer Tax Simplification, Improvement Ideas
Earth Day Home Energy Ideas
States Becoming Active on Home Ownership Policy Issues
Some Glimmers of Good News on the Home Front
Housing Rescue Initiatives Proceed
The drive for housing rescue
legislation is growing and expanding.
Progress is being made in the House and
Senate and at the state level. Unfortunately foreclosures
continue to increase faster than troubled mortgages can be
resolved through other means. As a result home values in
most areas continue to drop, and may continue to do so until
new efforts stem the tide.
On April 8 the U.S. Senate passed The
Foreclosure Prevention Act of 2008, a $15 billion housing
bill which would allow homeowners who currently don't
itemize deductions to deduct state and local property taxes
of up to $1,000 for families and $500 for individuals. This
would help the 40% of homeowners who do not itemize,
generally older homeowners with small or no mortgage
interest deductions. However it would not be much help to
those with troubled mortgages, who would have plenty to
deduct if they had enough money to make their mortgage
payments. The Foreclosure Prevention Act of 2008 would also
authorize states to issue an additional $10 billion of
tax-exempt housing bonds, $4 billion for cities to buy
vacant foreclosed properties, and $150 million for housing
counselors and provisions to modernize Federal Housing
Administration (FHA) loan guarantee programs. FHA loan
limits would be permanently increased to $550,000. To
stimulate housing demand, the Act provides a $7,000 tax
break, spread over two years, to purchasers of foreclosed
homes. Home builders and other businesses hit by the
economic downturn would get a large share of the $15 billion
in the form of tax rebates.
The American Homeowners Grassroots
Alliance and most other consumer advocacy organizations were
disappointed when a provision that would have allowed
bankruptcy court judges to alter troubled mortgage loan
terms of homeowners forced to file for personal bankruptcy
was dropped from the bill. While judges can alter mortgage
terms on business loans in bankruptcy proceedings, including
mortgages of investors in residential real estate, mortgage
lenders previously managed to pass legislation denying
bankruptcy court judges the ability to lower homeowner’s
mortgage interest rates, extend loan durations or forgive
part of the loan principle, as they routinely do in business
bankruptcies. By some estimates as many as half a million
homeowners could avoid foreclosure through 2009, by allowing
judges to alter the terms of mortgages on primary
Foreclosure auctions have a very corrosive
effect on all home values. Because foreclosure auction
buyers often have to pay cash and the sales aren’t subject
to home inspections, auction sales frequently bring only
60-70% of what similar homes can be sold for in the current
market. Those foreclosure sale prices are matters of public
record available to other potential buyers of homes in that
neighborhood, and as a result they drive down the values of
all other nearby homes, including the homes of responsible
homeowners who have paid off their mortgages or who have
never had problems making mortgage payments.
The House Committee
on Ways and Means passed the
Housing Assistance Tax Act of 2008
on April 7. This alternative would provide tax credits to
first-time home buyers, expand low-income housing
assistance, and allow low income families to deduct property
taxes, among other provisions. It does not doesn’t include
retroactive business tax deductions.
On April 23, the House Financial Services
Committee passed a $15 billion loans and grants package to
enable local governments to buy foreclosed homes and land.
Part of the grant money would be used to buy housing for low
income families. These proposals will be combined with other
housing rescue legislation and proposals to reform Fannie
Mae and Freddie Mac prior to consideration as a package by
the entire House of Representatives.
has been active on the housing rescue front as well.
Henry M. Paulson
proposed the creation of a federal
Mortgage Origination Commission to create minimum
professional standards for loan officers and track state
programs to license and regulate mortgage sales
professionals. In addition the "FHASecure" program is being
modified so borrowers with lower credit scores will have the
potential of refinancing into an FHA fixed rate loan.
Homeowners who have been late on up to two monthly payments
in the prior year, may now be able to get 3 percent equity
FHA-insured mortgages. Homeowners who were late on three
payments could also refinance through FHA, but they would
have to make a 10% down payment or have 10% equity, which
will be an unattainable standard for most. Their lenders
would also have to be willing to write down principal
balances to the 90 or 97% of the homes fair market value.
The plan is similar in concept to elements of more ambitious
legislation proposed by House Financial Services Committee
Chairman Barney Frank and Senate Banking Committee Chairman
Chris Dodd seeks to rescue as many as 2 million borrowers
(versus 500,000 under the FHA secure plan estimates). The
Frank/Dodd proposal provides for more flexible underwriting
standards and would cost $10 - 20 billion.
Democratic Presidential candidates Barak
Obama and Hillary Clinton have endorsed Chairmen Frank's and
Dodd's legislative package. After largely resisting major
proposals, Senator John McCain is also now supporting a more
significant federal government role to help homeowners. He
now supports federal government guarantees for refinanced
mortgages for homeowners facing foreclosure, which he
estimates would cost between $3 billion and $10 billion.
McCain also supports the creation of a Justice Department
task force to investigate criminal violations by mortgage
lenders, something that other policy makers have not
States are becoming more active as well.
Nine states have either begun or are preparing refinance
programs intended to help challenged subprime borrowers.
Pending federal legislation would help them expand existing
tax-exempt housing bonds to fund mortgage programs. Other
states have made various efforts to curb the kinds of
mortgage lending practices that have contributed to the
problems. Among them are several bills in Maryland that
would subject some of the worst mortgage scams to criminal
prosecution, prohibit prepayment penalties in cases where
homeowners were talked into signing over their houses to
third parties, and extend the minimum foreclosure process
duration from 15 to 150 days. Other states have extended the
foreclosure process as well.
The big question, assuming the pending
legislation passes, is whether all of these efforts will be
enough to collectively staunch the growing number of
foreclosures and continuing drop in housing values. There
were 1.5 million foreclosure actions in 2007, and U.S.
foreclosures in March totaled 7,500 a day. The Case Shiller
index of home prices in 20 major metro areas dropped 12.7%
in February, 2007 compared to last February (and almost 15%
since July 2006). Other economic numbers continue to trend
downward, and some economists project an additional 10% drop
before home values level out. Also of concern is that
existing programs intended to encourage lenders to
restructure troubled mortgages have had little impact. For
these reasons we fear that unless Congress puts some teeth
behind those programs by allowing bankruptcy court judges to
alter the terms of homeowner’s mortgages when appropriate,
the downward trend will continue without significant
Earth Day Home Energy Ideas
April 22 was Earth Day, and it's
good time to think about helping the environment and saving
money at the same time .
With gasoline, home energy costs, food and so many other
costs rising, anything we can do to save energy helps not
only the planet but also our own pocketbooks. To help
homeowners find ways to save energy you can use the American
Homeowners Foundation's Free Energy Audit. The audit leads
you on a 10 minute self guided tour through your home and
will help you identify inexpensive do-it-yourself steps you
can take to reduce home energy costs.
There are many other things you can do as well: buy products
with less packaging, products that use less toxic chemicals,
and permanent items instead of disposables. With gasoline
now $3.60 a gallon, take steps to reduce your gas
consumption, which will save money and help the environment.
Properly inflated tires can improve gas mileage by 3%, so
get an inexpensive tire gauge ($2-5) and monitor tire
pressure regularly to keep them close to recommended levels.
Properly inflated tires also last longer, so you’ll save on
tire expenses as well. Reduce the miles you drive by
combining trips, walking, or taking mass transit, and buying
products or services online rather than driving to the mall.
Participate in your employers telecommuting program if they
have one. Telecommuting one day a week will significantly
reduce your gas consumption and wear and tear on your
vehicle. It will also help reduce rush hour traffic jams and
reduce pressure on your state’s transportation
infrastructure. If your employer currently does not have a
teleworking program, suggest that they consider it or other
options, such as ten hour shifts four days a week. Most cars
get their best highway mileage at 55 mph. Mileage starts
dropping dramatically at higher speeds so don’t exceed
highway speed limits, and use your cruise control to save
even more by maintaining consistent gas use.
Other lifestyle changes can help as well. Wear lighter
weight clothes in the summer and you can set your thermostat
higher, saving on air conditioning costs. Wearing sweaters
and other warmer clothes in the winter and you can set the
thermostat lower, saving on heating costs. Programmable
thermostats are inexpensive (as little as $30), and can save
many times their cost through reduced energy use.
Repairing things rather than replacing them helps the
environment and can usually save money. Switch to electronic
billing, statements, and payments as much as possible and
you'll save a lot of trees, not to mention postage. Recycle
as much as possible, and not just paper, plastic and glass.
Find recycling centers in your area that will take old
consumer electronics, such as computers, monitors and TVs.
The Consumer Electronics Association’s website,
mygreenelectronics.org identifies recycling locations by ZIP
code. When you buy new electronics make sure they have the
Department of Energy’s Energy Star certification (a list is
at www. energystar.gov). As the saying goes "one man's trash
is another man's treasure." If you doubt that, take a look
at some of the stuff for sale on eBay or Craig’s list. Try
to find new homes for serviceable things you no longer use
through such alternatives or yard sales rather than throwing
them in the trash.
In early April, the Senate agreed to extend solar and wind
energy tax credits in its housing package. The provision
allows up to $500 for installation of energy-efficient
products in homes and extends the tax credit for wind, solar
and other renewable sources of electricity. Some form of
energy tax credits, perhaps including credits for energy
efficient new homes and/or remodeling projects to improve
your home's energy efficiency, is likely to pass in the
House. As conventional energy costs continue to rise and
renewable energy technologies continue to drop in cost and
improve in efficiency, they are becoming increasingly viable
The National Association of the Remodeling Industry (NARI)
reported that there is a growing interest in "sustainable
design". Sustainable design helps homeowners reduce energy
costs, consumption of natural resources, and health risks
from products in home building or remodeling projects. For
example, spray-in cellulose insulation is made from 80
percent post-consumer recycled newspaper, which is a very
effective seal to heat and cold. Solar water heaters can pay
for themselves through energy savings in four to eight
years. Appliances and fixtures that conserve water can
significantly cut water bills. Many new building materials
are non toxic, and have no volatile organic compounds (VOCs)
that bother many who are sensitive to airborne irritants.
Increased interest in recycled materials such as reclaimed
wood, bamboo flooring and recycled glass countertops have
far less impact on the environment than other alternatives.
Remodeling can be an excellent alternative to replacing your
home, especially since homes are so hard to sell right now.
In addition the two transactions (selling plus buying the
next home) can easily cost 10% of your current home's value
by the time you figure in the real estate commission,
mortgage loan points, etc.). But be careful - complaints
about remodeling contractors are the most frequent complaint
received by the American Homeowners Foundation, and also the
most frequent complaint to the Better Business Bureau in
most years. The American Homeowners Foundation's free
Top Ten Remodeling Tips can help you avoid many of the
pitfalls. The Foundation also offers an inexpensive
home remodeling contract form to protect your interests.
Homeowners Offer Tax Simplification, Improvement Ideas
There are many things Congress
could do to help the rapidly growing number of homeowners
with offices in their homes.
As the nation’s homeowners struggled to complete their taxes
by April 15, the American Homeowners Grassroots Alliance
(AHGA) on April 10 urged Congress to simplify and improve
the tax code. In
Testimony submitted to the House Small Business
Committee, AHGA suggested a number of reforms that will help
between 34.3 million and 36.6 million home office
households. At least 18 million are home-based businesses,
according to U.S. Census figures. They include
Internet-centric businesses, such as the millions of eBay
Power Sellers who derive all or most of their income from
Internet commerce, service businesses such as website
designers, real estate agents, mortgage brokers, and
millions of other home-based businesses. The rest are
employees of businesses of all sizes or governments at all
levels who telecommute from home.
“These changes would help all of these homeowners, the
economy, and the environment,” observed AHGA President Bruce
Hahn. “By reducing their tax burdens and improving economic
efficiency, they may also help many hard-pressed homeowners
avoid foreclosure.” he added
Among AHGA’s suggestions:
• Simplify and liberalize home office tax deductions
• Provide new tax incentives to encourage working from home
• Provide faster write-offs of business equipment used in
• Allow a penalty free withdrawal or loan from IRA or 401k
for all expenses
attendant to home office creation
• Prohibit state and local sales taxes on goods or services
sold over the Internet
• Repeal the federal excise tax (FET) on communications
• Repeal state "convenience of the employer" rules that
creates dual state
income tax liability
• Create new tax credits or deductions to encourage
broadband and cellular
providers to speed up the build out of networks to rural or other
homes that currently lack access to these services.
Remodeling can be a great idea, but
there are some important questions to be answered first.
May is National Home Improvement Month. The Nest, a
home-improvement website, says before undertaking any major
remodeling projects, you should ask yourself these important
= How long do I plan to stay in
my house after the renovations? The longer you plan to live
there, the more creative you can be. But if you’re planning
on selling the house in the next five years, keep potential
buyers in mind with your choices. For instance, go with
neutral colors in the kitchen and bathroom, and consider
maple cabinets. Some people hate oak, others hate cherry,
but the majority can live with maple.
Am I doing just cosmetic fixes or am I ready for an all-out
overhaul? It’s OK to make small changes one at a time, but
think long-term about the next step. For example, if you’re
buying a new sink, buy one with enough holes on the deck for
the faucet, sprayer and soap dispenser you might want to add
on later. (Cutting more holes into stainless steel or
porcelain after the sink is installed is an onerous job you
don’t want to get stuck with.) And if you know you’re going
to buy new cabinets later, don’t replace the countertop with
expensive granite now. The chances of reusing it are very
slim _ either it breaks when you try to remove it, or it
doesn’t match the footprint of the new cabinets.
Am I prepared for the home upheaval? Be realistic about how
long these changes might take. Renovations can go on for
months, so you need to be prepared to make do without that
bathroom, kitchen or bedroom. When checking references
before you hire your contractor, be sure to ask if the
company finished the work on time. You’d be surprised how
quickly a week can turn into a month. And if you’re bunking
up with your in-laws during renovation, that month can seem
like a year.
Are the renovations keeping with the style of my home? Any
big changes you make to a home inside should reflect what
future buyers will expect from the outside. If you live in a
Victorian house, don’t make it too contemporary. People who
see a historical exterior will expect a historical interior,
so stay true to the details. The same goes for a
contemporary or modern home, where future buyers may not
expect old-fashioned details like antique crown molding.
Are my DIY choices reasonable? You may consider yourself
handy, but many do-it-yourself jobs demand your time more
than anything else. If you have a full-time job, are you
capable of taking on a second one? Some makeovers that are
not technically difficult can take longer than you think.
For that reason, if you start any job yourself, try to
sample it before committing to the whole thing. For example,
while refinishing cabinets with a new stain isn’t rocket
science, sanding down each one can take forever.
States Becoming Active on Home Ownership Policy Issues
of issues impacting how you buy or sell a home, and the
costs involved, are cropping up at the state level.
State real estate associations and consumer advocacy
organizations were on the same side in several cases. In
Illinois the U.S. Department of Justice, American Homeowners
Grassroots Alliance, the Consumer Federation of America, and
the Illinois Association of Realtors all opposed a state
bill that would have prohibited real estate commission
rebates to home buyers.
In New Jersey, which currently prohibits commission rebates,
the U.S. Department of Justice and the American Homeowners
Grassroots Alliance is supporting state legislation to
repeal the prohibition. New Jersey is one of 11 states that
restrict real estate licensees from offering rebates to
consumers. Unfortunately the New Jersey Association of
Realtors is not as enlightened as their Illinois colleagues.
NJAR is opposing the legislation, Assembly Bill 373 and
Senate Bill 139, introduced by state Assemblyman Patrick J.
Diegnan Jr., D-South Plainfield, N.J.; and state Sen.
Nicholas P. Scutari, D-Linden, N.J. AHGA commends these
legislators for standing up for the rights of homeowners.
Earlier this month, the Department of Justice announced that
the Montana Board of Realty Regulation had voted to repeal a
rule forbidding real estate brokers from offering rebates
and other incentives to their customers. The Board took this
action in response to an investigation by the Department's
Antitrust Division. "Amending this rule to allow rebates in
real estate transactions is a good change for Montana
consumers," said Thomas O. Barnett, Assistant Attorney
General in charge of the Department's Antitrust Division.
"As we have consistently seen in other states, the repeal of
rebate bans lead to increased competition between brokers
and lower prices for consumers of real estate brokerage
services." The Montana Board's action follows the lead of
other states including West Virginia, South Dakota, and
Kentucky, that have recently repealed anti-rebate
regulations in response to concerns raised by the Department
of Justice and the American Homeowners Grassroots Alliance.
To learn more about the importance of rebates and
competition in the real estate industry, visit the Antitrust
Division's "Real Estate and Competition" Web site at
The North Carolina Association of Realtors has led the
charge to oppose a measure that would increase the state's
real estate transfer tax. The proposal would hurt homeowners
and real estate agents and brokers. AHGA has joined with
NCAR in opposing the measure and has worked with other state
real estate associations opposing similar initiatives.
Some Glimmers of Good News on the Home Front
Despite all the bad news about
foreclosures and falling home values, we're beginning to see
a few rays of hope.
Among them are the return of first time buyers who have
accounted for half of the recent home purchases in some
markets. This is not so much a reflection of consumer
confidence, which is near an all time low, but of housing
prices. In many areas prices have dropped to the point that
more homes are now affordable for growing numbers of buyers,
thanks also to low mortgage rates. The Mortgage Bankers
Association of America's national survey reported an 8.1%
increase in mortgage applications during one week in April.
Admittedly, that is from a very low base, but it is still
encouraging. FHA-insured mortgage applications increased
While home inventories remain unusually large in many areas,
they are no longer increasing as fast as they did in the
last two years. Picky home buyers are finding it much easier
to find just what they want. Those types of buyers are
frequently more interested in getting the features they are
interested in than sitting on the sidelines and waiting for
the market to hit rock bottom.
Recent and pending legislative and regulatory changes are
bound to help to some degree, but the question is how much?
If Congress passes homeowner bankruptcy reform legislation,
the number of foreclosures could drop dramatically. This
will help reduce inventories and falling home values, and
restore some confidence to the marketplace. The now
permanent PMI tax deduction will certainly help first time
buyers and the modification of FHA loan rules is clearly
already helping quite a bit. While lenders are getting
pickier, home buyers with decent credit scores can get
mortgages without significant difficulty (although it's
getting harder to finance condos in many areas).
Lender's inventories of foreclosed properties have grown to
the point that many will likely soon be forced from their
current state of denial to repricing those homes at
market-clearing prices. As the surplus draws down, so too
will the downward pressure on home prices. Indeed, a decline
in inventories will very likely be the first leading
indicator that home prices are about to stabilize. While bad
news still outweighs the good, there are some positive
signs, and many efforts in progress that will likely help
more in the near future.
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)
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. 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? Any member may propose a position on a policy
issue, so please check the American Homeowners
Grassroots Alliance's 2008
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