The government’s $25 billion settlement with the nation’s five biggest mortgage servicers over so-called “robo-signing” practices could boost short sales, as loan servicers will receive credit when they approve sales that include forgiveness of a portion of underwater homeowners’ debt.

Although the settlement is only expected to help a fraction of homeowners who owe more their properties are worth — perhaps one in 20, according to one estimate — it will also help bring certainty back to housing markets by removing some of the obstacles that have been keeping homes stuck in the foreclosure pipeline.

Announced last month, detailed terms of the agreement between mortgage servicers and a coalition of state attorneys general and federal agencies were filed today.

Broadly, the settlement calls for mortgage servicers to pay $5 billion in fines and commit to a minimum of $17 billion in homeowner relief, including principal reductions. Another $3 billion is earmarked for helping underwater borrowers refinance.

“We will see an increase in short sales, because lenders and loan servicers will get the same credit for doing a short sale, as if they did a loan modification or principal reduction,” said Rick Sharga, executive vice president of Carrington Mortgage Holdings LLC.

The Wall Street Journal reported Sunday that the structure of mortgage write-downs was a major point of contention in the year-long negotiations leading to the settlement.

Allowing debt forgiveness on approved short sales to count against the required $17 billion in principal reductions helped secure a settlement that will reach more borrowers, the paper said. Loan servicers will also get partial credit even when it’s investors, rather than the banks themselves, taking the loss, the Journal said.

A researcher at the Brookings Institution told the Journal that the settlement could help about 5 percent of underwater borrowers, or about 500,000 homeowners.

“We will probably see a short-term increase in forcelosure activity, because the servicers and lenders at last have a sense of certainty about what they can and cant do,” Sharga told Inman News. Part of that increase will also be among loans that don’t meet the criteria of the agreement.

For loan servicers to get credit for a principal reduction, a loan must be at least 30 days delinquent, have a pre-modification loan-to-value (LTV) ratio of at least 100 percent, satisfy specified debt-to-income ratios (DTIs), according to an analysis of the settlement by the lawfirm K&L Gates. At least 85 of occupied properties must have had an outstanding principal balance at or below the highest Fannie Mae and Fanni Freddie conforming loan limit cap as of January 1, 2010.

Because servicers won’t get 100 percent credit for all types of relief that are provided, the actual amount of relief provided could total as much as 32 billion, state attorneys general said in announcing the settlement.

“In terms of the overall housing market , our position is this will have very little effect on anything,” Sharga said. “Consumer advocates don’t think it went far enough, and people who look at housing markets realize that the number of properties and the amount of money involved won’t have a measurable effect on markets.”

Federal housing officials addressed those and other concerns today.

“This agreement does not — and is not intended to — solve or resolve all the issues and abuses related to the housing crisis,” officials with the Department of Housing and Urban Development blogged today. “This agreement is very narrow as to what it releases banks from. This settlement is intended to address the servicing aspect of the crisis, which did not cause the housing crisis.”

The settlement doesn’t prevent the government from punishing wrongful securitization conduct that will be the focus of the new Residential Mortgage-Backed Securities Working Group, HUD noted. State and federal authorities can also pursue criminal enforcement actions related to conduct by servicers, including civil rights, fair housing, fair lending and other violations.

Also, if the remaining six to 14 loan servicers sign on to the settlement, it would grow to about $30 billion with more than $45 billion in benefit to homeowners, HUD said.

Cade Holleman, executive director of the Irvine, Calif.-based National Association of Women REO Brokerages, said the day is fast approaching when brokers and agents who have concentrated heavily in real-estate owned properties will have to diversify.

Short sales, refinancings, and loan modifications are each “pulling REO inventory out of the game,” he said.

“You’ve got to keep your eye on that process,” Holleman said.”You can no longer be 80 percent REO,” but must diversify into short sales and property management.

By Inman News, Monday, March 12, 2012.

Inman News®

Due to the decline in housing prices, many home sales are “short sales” in which the purchase price offered by the buyer is less than the mortgage amount owed by the seller.

In a recent column, we discussed how some lenders go out of their way to grab both a tax deduction for the mortgage debt not paid while also attempting to go back to the seller and collect that same mortgage debt.

When a lender agrees to a short sale, it can either retain the ability to collect from the seller the amount of mortgage debt owed that is not satisfied by the purchase price, or it can discharge all or a portion of the unsatisfied debt amount.

If a lender discharges debt, it reports this discharge of debt to the Internal Revenue Service on a 1099-C Cancellation of Debt Form. The issuance of the 1099-C allows the lender to take a tax deduction for the loss represented by the amount of debt discharged, and this same amount of debt discharged becomes taxable income to the home seller.

A lender is now able do one or the other, not both. Some consumers are confused by how lenders can collect the mortgage debt owed after agreeing to the short-sale price. Others feel they are protected from the practice under a law passed five years ago.

In December 2007, Congress passed the Mortgage Forgiveness Debt Relief Act. This law provides some relief for homeowners who lose their house through foreclosure or short sales, or who restructure their mortgages with a lower principal amount. The law enables individuals to exclude from tax up to $2 million of certain mortgage debt canceled by lenders.

According to Nathan Gordon, government affairs director for the Washington Association of Realtors (WAR), some short-sale negotiations do not include language of the forgiveness — that the difference between what is owed and what is paid will actually be “forgiven.”

“In cases where, for whatever reason, that is not negotiated as part of the short sale, a recent court case ruled that even if the bank gives the borrower a 1099, (the bank) still can go back after the borrower for the remaining amount for up to three years, because both the bank and the borrower have up to three years to amend their IRS returns,” Gordon said.

“The Mortgage Forgiveness Debt Act really doesn’t speak to this specific point. The MFDA merely says that until the end of 2012, if you do get a 1099 from the bank as a result of a short sale, that you do not have to pay taxes on the forgiven amount even though it is technically unearned income.”

Gordon said the distinction to keep in mind is that currently a 1099 does not necessarily indicate that the debt is forgiven, just that, for the time being, the bank is writing it off as a loss on their taxes. WAR is backing legislation that would clarify all short-sale terms for the homeowner.

“Should our bill (Senate Bill 6337) pass, that would all change and a 1099 would be a concrete declaration of forgiveness of the short sale.”

While you don’t have to pay tax on the forgiven amount, there is no relief or tax deduction for selling your home at a loss. There is no benefit for folks who bought at the peak or made expensive remodels, then had to sell in a hurry and actually got less for their home than the cash they had invested in it.

Uncle Sam will not let you show a loss on your primary residence if you sell for an amount less than the purchase price. If you’ve planned on writing that down on your 2011 federal return, think again.

By Tom Kelly, Wednesday, March 14, 2012.

Inman News®

Tom Kelly’s new e-book, “Bargains Beyond the Border: Get Past the Blood and Drugs: Mexico’s Lower Cost of Living Can Avert a Tearful Retirement,” is available online at Apple’s iBookstore, Amazon.com, Sony’s Reader Store, Barnes & Noble, Kobo, Diesel eBook Store, and Google Editions.

By SUSAN GALLEYMORE

A trend in recycling structures not traditionally considered “real estate” is changing how potential home and business owners, not-for-profit organizations, government agencies and the U.S. military view shipping containers.

The use of rudimentary containers to ship cargo began in the late 17th century. By the 1950s, Malcolm McLean of Sea-Land Shipping, pushed by the U.S. military to standardize their design, was building strong, uniform, theft-resistant, stackable shipping containers that were easy to load and unload by truck, rail and ship, and easy to store.

In 2005, an estimated 18 million containers made a combined total of about 200 million trips. Many containers measure 20 feet or 40 feet in length, and a 40-foot-long shipping container offers 304 square feet of floor space.

A trade imbalance has led the containers piling up around U.S. hubs, and storing them increases the cost of doing business.

One response to the problem: Re-engineer the containers. As architects and designers around the world evolve and refine creative reuse, containers are reshaping as disaster-relief shelters, coffee shops, student housing, custom homes, retail towers, even storing physical books after they are digitized.

The U.S. military, for example, has deployed “Containerized Housing Units,” or CHUs (pronounced “SHOOS”): Army and private military contracting companies use the converted shipping containers to house troops, contractors and others.

The units offer hard floors, windows, air conditioners, beds for up to three people, and some are outfitted with refrigerators.

According to the U.S. Army Environmental Command, the first multistory commercial structure built of recycled steel containers on a U.S. Army base opened in Fort Bragg, N.C., in April 2008.

Twelve containers, each measuring 9 feet 6 inches in height, 8 feet wide, 40 feet long and made of 14-gauge steel, form the two-story, 4,322-square-foot 249th Engineers company Operations Building that houses two company detachments.

Living in former shipping containers may have begun as a fringe novelty, but it is far from such these days. Many entrepreneurs are exploring new niches amid the growing assortment of shipping container-based structures.

Alex Klein of Container Home Consultants Inc. has been involved in shipping container conversions for 30 years, while Heather Levin said she appreciates container homes after noticing how much of her hard-earned dollars went to a bank as mortgage loan interest.

Victor Wallace of ContainerHomes.info authored the free downloadable book, “The 30 Most Influential Shipping Container Homes Ever Built!” His website presents extensive tutorials and videos for container conversions and also offers a free download of the book with designs from around the world.

21st Century Homes & Structures builds modular homes and claims it is the “original approved shipping container home manufacturer in New York … certified since 1985.”

That company reports that its modified shipping containers are “eco-friendly, (energy-efficient), hurricane-resistant, pest-free, affordable and green.” The company offers units in sizes ranging from 480 square feet to 1,280 feet, and prices starting at $89 per square foot. That does not include excavation site work and foundations. The company offers turnkey packages and ships throughout the U.S.

An Argentinian-born woman living in California identified by faircompanies.com as “Lulu” (no last name given), was reportedly forced by the recession to downsize, and found and modified a free shipping container. She took a couple of months to gather mostly recycled components to remodel the unit, faircompanies.com reported, and it took another month to convert the original 360-square-foot space into a home for herself and her small daughter.

With hot water on demand from a small camping device, and camping stoves for cooking, Lulu noted that her home features a separate bathroom and second bedroom, and she plans to add a teahouse and a greenhouse.

One New Jersey-based company, Sea Box Inc., offers a 1,000-square-foot, three-bedroom home — the Modular Systems Housing Unit — built from shipping containers. The structure also features a living-dining room, kitchen, bathroom and storage.

For multifamily housing, we can deliver and erect a four-story, 16-unit apartment building, fully furnished and move-in ready, in three days,” according to Robert A. Farber, director of contracts and counsel for Sea Box.

“All of these living quarters will last more than a hundred years, are impervious to pest infestation (termites can’t bite through steel), and can withstand hurricane-force winds that would destroy conventional housing,” he also said in an email message, adding that the company bid for a job to potentially supply tens of thousands of housing units built from shipping containers to New York City in the event of a major natural disaster.

The company offers a range of designs, he said, “including offices, laundry facilities, machine shops, personnel shelters, and even a giant movie screen: 90 feet high.”

Sea Box structures have also been used by the U.S. military in Iraq, Afghanistan and other nations, he said, and “We’ve sold two-story container configurations, which individually house 2,000 computer servers used to power the search engine Bing.”

By Inman News, Wednesday, March 14, 2012.

Inman News®

The index of leading economic indicators — designed to forecast economic activity in the next three to six months — rose 0.7% in February, following a revised 0.2% increase in January. The February reading was the highest level since June 2008.

Initial claims for unemployment benefits for the week ending March 17 fell by 5,000 to 348,000, the lowest reading since February 2008. Continuing claims for the week ending March 10 fell by 9,000 to 3.35 million.

The combined construction of new single-family homes and apartments in February fell 1.1% to a seasonally adjusted annual rate of 698,000 units, after an upwardly revised gain of 3.7% in January. The January figure was revised from 699,000 units to 706,000 units. Compared to a year ago, housing starts are up 34.7%. Applications for new building permits, seen as an indicator of future activity, rose 5.1% to an annual rate of 717,000 units.

Existing home sales fell 0.9% in February to a seasonally adjusted annual rate of 4.59 million units from an upwardly revised 4.63 million units in January. The inventory of unsold homes on the market increased 4.3% to 2.43 million, a 6.4-month supply at the current sales pace, up from a 6-month supply in January.

New home sales fell 1.6% in February to a seasonally adjusted annual rate of 313,000 units from a downwardly revised rate of 318,000 units in January. The initial January reading was 321,000. The December rate was revised higher to 336,000 units, the highest level since the economic recovery began. On a year-over-year basis, new home sales are up 11.4%. At the current sales pace, there’s a 5.8-month supply of new homes on the market.

The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending March 16 fell 7.4%. Refinancing applications decreased 9.3%. Purchase volume fell 1%.

from Prospect Mortgage Economic Update

Exclusion of Gain from Sale of Residence

Many people are aware that they can sell their primary residence and not pay taxes on a significant amount of gain. Under Section 121 of the Internal Revenue Code, you will not owe capital gains taxes on up to $250,000 of gain, or $500,000 of gain if you are married and filing jointly, when you sell a home that you used as your primary residence for at least two of the previous five years. Taxpayers can take advantage of this exclusion once every two years.

Property Converted from Investment to Primary Residence

Taxpayers used to be able to trade into a rental, rent the home for a while, move into it and then exclude all or some of the gain under Section 121. Provided they lived in the home as their primary residence for at least two years, they could sell it and exclude the gain under Section 121 up to the maximum level of $250,000/$500,000. In recent years Congress enacted two amendments to Section 121 in order to limit the benefits of Section 121 when the property has been used as a rental.

First, if you acquire property in a 1031 exchange and then convert it to your primary residence, you must own it at least five years before being eligible for the Section 121 exclusion.

Second, the amount of gain that you can exclude will be reduced to the extent that the house was used for something other than a primary residence during the period of ownership. The exclusion is reduced pro rata by comparing the number of years the property is used for non-primary residence purposes to the total number of years the property is owned by the taxpayer.

For example, a married couple uses a tax deferred exchange under Section 1031 to acquire a house as investment property. The couple rents the house for three years, and then moves into it and uses it as their primary residence for the next three years. The couple sells the property at the end of year 6, netting a total gain of $800,000. Instead of being able to exclude $500,000, the couple will not be able to exclude some of the gain based on how many years they rented the house. Since they rented it for three years out of six, 50% of the gain, or $400,000, will not be able to be excluded. Because of this new limitation, the couple will be able to exclude $400,000 of the gain rather than $500,000.

Exceptions

There are a couple of exceptions to this restriction. If the house was used as a rental prior to January 1, 2009, the exclusion is not affected. Using the example provided above, if the three year rental period occurred prior to January 1, 2009, the exclusion would not be reduced and the couple would be able to exclude the full $500,000.

Another important exception is that property that is first used as a primary residence and later converted to investment property is not affected by these restrictions on excluding gain. For example, if you own and live in a house for 18 years and then you move out and rent the house for two years before selling it, you can receive the full amount of the exclusion. Because your investment use occurred after the last day of use as a primary residence, all of the gain accumulated over your 20 year ownership of the property can be excluded, up to $250,000, or $500,000 for married couples.

Combining Exclusion with 1031 Exchange

Fortunately, the rules are favorable to taxpayers who have more than $250,000/$500,000 of gain and are looking to combine Section 1031 with Section 121 to both exclude and defer tax. When the property starts out as a primary residence and then is converted into an investment property, you can exclude gain under Section 121, and then defer tax on the remaining gain, provided you comply with the requirements of both Section 1031 and Section 121.

The Internal Revenue Code still provides investors with favorable options for exclusion of gain and tax deferral. The rules can be complicated, but with the right planning taxpayers can still make the most of their real estate investments. For additional information about the 1031 exchange process or to open an exchange contact us at First American Exchange.

References: Internal Revenue Code §121; Housing Assistance Tax Act of 2008 (H.R. 3221).

from

The Exchange Update

A Newsletter For 1031 Tax-Deferred Exchanges by First American Exchange Company

Homebuyers may be attracted to the big bargains that foreclosures and preforeclosures can offer. But distressed properties can involve tricky, lengthy transactions, and there’s a lot to think about before jumping in.

In fact, some home shoppers have shunned short sales altogether, preferring a more reliable process to a reduction in price. Getting all parties to agree to a short-sale price can be problematic, and lenders have been known to change their minds when more bidders surface.

Given the difficulty and uncertainty of negotiating a short-sale transaction, you would think lenders would bend over backward to make things easier for the consumer once the deal is finally done.

But it appears some lenders are seeking an additional pound of flesh long after the frustrated, exhausted and often financially drained seller has moved on.

Short sales occur when owners, often in distress, sell their homes for less than the amount they owe their lenders. The lender may then write off the remainder of the debt and receive tax benefits.

Some lenders, however, will also assign or sell the remaining debt obligation to third-party debt collectors, often for pennies on the dollar. The third-party debt collector can then use the legal system to continue to pursue the former homeowner for the balance owed.

This has become such an issue that legislators in Olympia, Wash., have taken action. Senate Bill 6337, proposed by David Frockt, D-Seattle, would protect short-sale sellers from being pursued by lenders or their assignees for the difference between the sale price and remaining loan balance.

“The banks will basically have to make a choice,” Frockt said, “to either write off the amount and take the tax benefit, or pursue the owner — but they cannot do both.”

When a lender agrees to a short sale, it can either retain the ability to collect from the short-sale seller the amount of mortgage debt owed by the seller that is not satisfied by the purchase price, or it can discharge all or a portion of the unsatisfied debt amount.

If a lender discharges debt, it reports this discharge of debt to the Internal Revenue Service on a 1099-C Cancellation of Debt Form. The issuance of the 1099-C allows the lender to take a tax deduction for the loss represented by the amount of debt discharged, and this same amount of debt discharged becomes taxable income to the short-sale seller.

After the taxpayers bailed out the mortgage industry, many borrowers are still unable to get a loan modification to stay in their homes. Now the industry has a sketchy-to-lousy national reputation, and more stringent qualifying standards are not helping their case.

In light of all this, how can some lenders knowingly seek both a tax deduction for the mortgage debt not paid while also seeking to collect that same mortgage debt?

“Yes, we have heard of this happening,” said Deborah Bortner, director of consumer services for the Washington state Department of Financial Institutions.

“I hear it mostly from attorneys or others who assist those in obtaining a short sale. I understand that the documentation provided by the institutions doesn’t always make it clear whether they will pursue a short sale or not. The consumer only finds out later when contacted by someone trying to collect the deficiency.”

In some instances, mortgage debt collection rights have been referred to third-party debt collection companies, even though short-sale sellers have paid income tax on the amount of this discharged debt.

“This is another step to help the short-sale process that is keeping many homeowners from the tragedy of foreclosure,” said Faye Nelson, president of the Washington Association of Realtors. “Nearly 40 percent of the inventory in the Puget Sound region right now is short sales. State legislators recognize that protecting this process is critical to homeownership and the housing market.”

By Tom Kelly, Wednesday, March 7, 2012.

Inman News®Tom Kelly’s new e-book, “Bargains Beyond the Border: Get Past the Blood and Drugs: Mexico’s Lower Cost of Living Can Avert a Tearful Retirement,” is available online at Apple’s iBookstore, Amazon.com, Sony’s Reader Store, Barnes & Noble, Kobo, Diesel eBook Store, and Google Editions.

A rising trend of super-efficient, solar-powered new homes allows homeowners to combat rising energy costs by giving back to the power grid. Some owners are even realizing a small profit from their home’s power-generating capacity.

Intelligent house layout and design, and home features such as dual-pane windows, air-tight ductwork and high-caliber wall and attic insulation, are curbing energy consumption. And when coupled with solar energy, captured through photovoltaic panels, these homes are becoming their own mini power plants that feed electricity to the grid.

In 2009, U.S. homeowners paid an average $2,200 for energy use in their homes, according to the U.S. Department of Energy. A growing number of homeowners have the opportunity to erase that cost.

“It’s too good to believe,” said Dave Spencer of his net-zero-energy home in Gainesville, Fla. Last month, his energy bill was $2.01 — and that was just because of service fees — after receiving more than $10 in credit for energy his home generated.

Both semiretired, Spencer and his wife, Sandy, moved into the 1,752-square-foot home last October and have not paid for any energy yet, he said.

Sounds too good to be true?

The Spencers’ new home is part of a niche, though growing, segment of the U.S. housing market — net-zero-energy homes, many of which use solar energy to achieve net-zero energy use vs. consumption, and thus achieve a year-end positive energy generation-to-use balance.

In the sun-sparse days of winter, energy consumption often exceeds generation, but in the sunny days of summer, energy generation often far exceeds consumption.

As of February 2012, 37 homes have been rated net-zero energy or better on the industry-standard Home Energy Rating System e-scale of the U.S.-standard auditor. This number could grow 1,000 percent or more in 2012 if projects continue as planned.

“Interest has been off the charts,” said Todd Louis, vice president of Tommy Williams Homes, the Florida-based building company that built the Spencers’ home. So far, the company has built and sold four, and has plans to build 35 to 40 more in 2012.

The price of their net-zero-energy homes are still $30,000 to $40,000 higher than those that are not net-zero-energy, said Williams, but that margin is dropping with a decline in photovoltaic costs. The Spencers paid $250,000 for their home.

Shea Homes, a large builder in the West, announced last month that it plans to make net-zero-energy or near-net-zero-energy homes the standard model for new homes in all 10 of its retirement communities in Nevada, Florida, Washington, California and Arizona.

If interest in the communities mirrors last year’s level, that could mean 500 to 600 solar-paneled, high-efficiency homes, more than 80 percent of which will be net-zero energy, said a Shea Homes spokesperson. (To achieve net-zero energy, solar-power-enhanced homes have to be on lots that allow a certain amount of sun exposure.)

Don Asay and his wife bought one of the new Shea Homes, which feature blown-in cellulose wall insulation, dual-pane windows, a 20-amp outlet for an electric car in the garage, and solar panels, when he heard about the solar deal. He was already looking at a house in a Las Vegas-area 55-plus community built by Shea Homes.

Shea Homes has long featured extremely energy-efficient designs, though the upgrade to solar panels could be costly — around $30,000, said Asay. He and his wife were considering the upgrade, but when the announcement was made that the new net-zero homes, with solar, were only $7,000 more than the previous base model, they jumped: “Sign us up.”

Nexus EnergyHomes, in the Northeast, has already built hundreds of single-family net-zero homes in Philadelphia’s museum district, in South Carolina and Maryland, and has plans for hundreds more, including an exclusive, net-zero-energy, 59-home subdivision in Frederick, Md.

A growing trend

Net-zero-energy homes are at the leading edge of the U.S. green building trend, which has blossomed with rising energy costs; accessible, affordable home-efficiency building technologies; and a growing sustainability-minded consumer base.

A recent Yahoo Real Estate report found that 50 percent of 1,545 U.S. adults polled said being green is a requirement of their dream home.

The market is listening.

Residential green construction has skyrocketed from 2 percent of new homes in 2005 to 17 percent of new homes in 2011, according to a McGraw-Hill Market survey report. The same report found that 61 percent of customers are willing to pay more for homes that are energy efficient and have other green features.

The paradigm of construction is changing,” said Philip Fairey, researcher at the Florida Solar Energy Center, an important partner in the recent growth of the net-zero-energy home movement. “Now, greater efficiency doesn’t cost you more,” he said.

And the cost of solar energy, he added, has dropped 50 percent over the last two to three years — from about $8 per watt to $4 per watt

“It’s not a huge trend yet,” said green homebuilding consultant Carl Seville, “but it’s growing slow and steady.” Right now, there are pockets of demand like Austin, Texas and the West Coast, he said, but the movement is slowly spreading.

Some multiple listing services, like Chicago-area’s Midwest Real Estate Data did recently and a growing number of others around the U.S., are adding verified green features to their listings, making an investment toward a net-zero-energy home more easily recognized by prospective buyers.

Efficiency (and behavior) first … then generation (reduce, then generate)

It’s not so much that homes are generating so much more energy with photovoltaics, said Seville, but rather that builders are becoming more savvy about home design and energy efficiency.

A well-designed, well-built home without energy generation can get pretty close to net-zero energy efficiency, he said, and energy generation takes it over the top.

Homeowners can do some simple things to make their homes more efficient. For about $1,000, said green-home consultant Jerry Yudelson, homeowners can transform their home from poorly performing to within the top 10 percent echelon of energy-efficient homes.

Start with insulating walls and ceilings, he said, then go for windows; both steps will minimize “energy freeways.” And then consider energy-efficient appliances, like Department of Energy-rated Energy Star-designated models, he said.

Then there’s behavior. “It’s the single largest issue,” said Seville. Turn off lights when not in use. When it’s nice outside, turn off the thermostat and open the windows for fresh air. Practice minimal heating and cooling use.

And beware of vampire loads: connect TVs, VCRs and other electronics to a power strip, and control their operation through it. For example, the average TV uses half its electricity over its life when off, he said.

With an influx of federal money for research, and federal tax credits that refund up to 30 percent of the cost of a solar-energy system on a home through 2016, power generation is within reach for a larger group of homeowners.

Homes rank second behind vehicles as the highest greenhouse gas emitters in the U.S., responsible for 17 percent of total U.S. carbon dioxide emissions, according to the EPA.

By Paul Hagey, Monday, March 5, 2012.

Inman News®

If your clients are considering buying or refinancing a home, you should let them know that the Federal Housing Administration (FHA) will soon increase mortgage insurance premiums on FHA home loans.

The Department of Housing and Urban Development (HUD) announced it would increase the annual mortgage insurance premium (MIP) by 0.10% for FHA loans under $625,500. This would raise the fee from 1.15% to 1.25% of the total loan amount. This annual premium increase — which is broken down into monthly payments — takes effect April 1, 2012.

In addition, HUD announced it would raise the FHA’s upfront annual mortgage insurance premium (UFMIP) from 1% to 1.75% effective April 1, 2012.

Starting June 1, 2012, the MIP for FHA loans over $625,500 will increase 0.35%, raising that fee to 1.50% of the total loan amount.

The primary reason for the changes is to bolster capital reserves for FHA’s Mutual Mortgage Insurance Fund. Congress has mandated the fund keep 2% in reserves. Last year, that reserve had slipped to 0.2%. The changes are expected to generate about $1 billion annually for the fund.

The increase in mortgage insurance costs applies to the purchase or refinancing of all FHA loans regardless of the amortization term or loan-to-value (LTV) ratio. The increases will not apply to borrowers already in an FHA-insured mortgage, a Home Equity Conversion Mortgage (HECM), and other special loan programs to be outlined in a forthcoming FHA Mortgagee Letter.

For your customers considering refinancing or making a purchase, they might want to act before the new mortgage insurance premiums take effect.

from Prospect Mortgage Industry Insider

Q: I’m a new condo owner. I’m not handy at all, but I figured I’d better learn some of the basics or get ready to shell out the bucks for a contractor to do what I should do myself.

I’ve got two questions for you guys:

• How do I learn the basics of home repair?
• What tools should I buy?

A: Congratulations.

We applaud your desire to do the work yourself. There’s a lot you can do to save time and aggravation, not to mention money, by not hiring work out.

To start your education we suggest that you do two things. First, read. Go to the library and borrow some books on basic construction. Flip through them and focus on what strikes your fancy. Don’t forget magazines. Especially check out Fine Homebuilding magazine. Although advanced, it’s a good place to get tips on some basic skills.

Second, watch television. We’ve said many times that we cut our building teeth watching “This Old House.” We learned a ton about carpentry from Norm Abrams and Tom Silva, plumbing from Rich Trethewey, and other tricks of the trades from master builders over the years. “Holmes on Homes” is also a good show to check out.

In the same vein, check out YouTube on the Internet. We’ve seen a number of excellent tutorials from hanging pictures to building the walls they hang on.

Then it’s time to apply what you’ve learned. Start with the simple stuff. If a door sticks, adjust the hinges. If a faucet leaks, replace the washer. If your laundry room needs shelves, build them. You’ll make mistakes, but they can be fixed. Pretty soon you’ll be comfortable. That’s how we started, and we ended up designing and building a house.

This leads to the answer to your second question: our suggestion for a basic set of tools. Our beginner set has only one power tool: an 18-amp cordless drill with bits and nut drivers. The rest are hand tools. Buy quality and they’ll serve you for a lifetime. Kevin still uses some of our grandfather’s tools. Here’s our list of must-have hand tools:

Hammer: The 16-ounce rip model is the hammer we’d have if we were limited to one. It’s a good all-purpose hammer. The claw is straight, allowing for pulling nails or ripping into walls. Buy one that feels well balanced in your hand. Make sure the one you choose is heavy enough to drive a nail efficiently but light enough to control.

Retractable utility knife: This all-purpose cutting tool has any number of uses.

Speed square: The square (really an aluminum triangle) is used for marking 45- and 90-degree lines. Get the 7-inch version because it fits easily in a tool pouch.

Tape measure: A 25-footer with a 1-inch-wide blade is the most useful. It’s long enough to measure pretty much anything and the 1-inch width allows the blade to extend up to 8 feet without buckling.

Level (or spirit level): This is a must-have for hanging pictures or for marking a plumb line as a guide to hanging wallpaper. The longer the level, the more accurate the line. We’ve found a 4-foot level to be a good size, with 3 feet being the minimum.

Crosscut handsaw: Before power saws there were handsaws. When you want to make a cut with optimum control, the handsaw is the tool.

Channel-lock pliers: To be used for loosening drains under the sink, among other things.

Four-in-one screwdriver: This versatile tool is a large and small flat head and Phillips head tool in one.

Adjustable crescent wrenches (6- and 14-inch): Crescent wrenches adjust to fit most nuts and bolts. The larger size gives more leverage and the smaller size fits more easily into tight places.

Basin wrench: Sooner or later you will have to change a water faucet in the kitchen or bath. When you do, this inexpensive specialty tool is used for detaching water supplies from underneath a sink.

Voltage tester: We suggest that most home electrical work be left to the pros. But the homeowner may try some very small fixes. Before working on any electrical circuit, make sure the power is off and test it with this tool.

By Bill and Kevin Burnett, Wednesday, February 15, 2012.

Inman News®

The Federal Housing Finance Agency recently announced changes to the Home Affordable Refinance Program (HARP) that will allow more borrowers to refinance and take advantage of historically low mortgage rates.

These changes to HARP (often referred to as HARP 2.0) are set to rollout this spring. Fannie Mae and Freddie Mac are currently updating their automated loan underwriting software. This is due to be completed in March 2012.

Some enhancements to HARP include:

• Removing the 125% loan-to-value (LTV) ceiling on fixed-rate mortgages backed by Fannie Mae and Freddie Mac when the automated underwriting software is updated eliminates the need for a new property appraisal. Depending on occupancy type, Prospect’s current LTV ceiling is between 105% and 125% with any HARP 2.0 LTV limitations forthcoming.
• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages.
• Extending the end date for HARP until on or before December 31, 2013.

HARP borrowers must meet the following criteria:

• The mortgage must have been owned or guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it’s a Fannie Mae loan that was refinanced under HARP from March 2009 to May 2009.
• The current LTV ratio must be greater than 80%.
• Borrowers must be current on their mortgage payments with no late payment in the previous 12 months to 24 months, depending on the LTV.

Owner-occupied, secondary residences and investment properties may be considered for HARP refinancing. There are many HARP refinancing scenarios available.

from Prospect Mortgage Industry Insider