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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Mick Mørmøny who wrote (45476)	12/7/2005 8:50:39 AM
From: Mick Mørmøny	Respond to of 306849

Down-payment assistance programs deserve better regulation Perspective: Government should tighten rules on home buyer 'gifts' Wednesday, December 07, 2005 By Marcie Geffner A preliminary round of applause is in order for a federal government report that has identified new risks associated with down-payment assistance programs. Yet much more is needed in the way of government investigation and regulation of these programs, which help otherwise unqualified home buyers purchase a home with the aid of a charitable "gift" that funds a portion of their down payment or closing costs. The General Accounting Office report found that homes purchased with a "gift" from a down-payment assistance program were appraised at and sold for prices that were 2-3 percent higher than the prices of comparable homes sold to buyers who did not receive such assistance. The report also found a 76 percent increase in foreclosures on Federal Housing Administration-insured mortgages obtained with charitable down-payment assistance and said the FHA has ignored $1.8 billion in potential losses by not accounting for the heightened risk of foreclosure on those mortgages. Those findings suggest that down-payment assistance plans aren't always the charitable good deeds that their proponents insist they are. Foreclosure is one of life's most painful financial and emotional experiences, and it isn't "charitable" to help a family or individual who can't afford a home to buy one at an inflated price only to lose it to foreclosure. Home buyers who receive such "gifts" yet are unable to keep their home are victims, not beneficiaries, of this supposedly charitable bounty. The Nehemiah Corp., the nation's oldest down-payment assistance provider, has supported the argument that more rules, regulations and oversight are necessary and long overdue. The organization a year ago unveiled a code of conduct based on its own best practices that expressly prohibits inflated home sales prices "based upon the buyer's receipt of down-payment assistance." Other providers should adopt this code until more regulations with teeth are promulgated, implemented and enforced. Here are some suggestions: In light of the GAO report, a moratorium should be placed on FHA-insured mortgages for home buyers who receive a down payment "gift" in order to help protect the FHA mortgage program from the current increased risk of foreclosure on such mortgages. The moratorium could be lifted once mortgage experts have analyzed the outstanding and foreclosed gift-assisted mortgages, identified the factors that contributed to the higher foreclosure rate and figured out how to apply those factors as underwriting criteria on such mortgages. Down-payment assistance providers say they've educated prospective home buyers about their responsibilities, but who has educated lenders, mortgage brokers and appraisers about these programs? State laws already regulate mortgage providers and appraisers and prohibit inflated valuations in home sales transactions, but lenders and appraisers also should be required to understand the increased risk of foreclosure and any other perils associated with these mortgages. Other state-level requirements and penalties are perhaps also necessary to prohibit inflated valuations in such cases. The Internal Revenue Service should conduct a thorough investigation of sellers who may have taken fraudulent income tax deductions for "charitable" contributions to down-payment assistance organizations. Program operators claim they inform sellers that such "donations" aren't tax deductible, but the nonprofit status of these organizations could suggest otherwise to some taxpayers. Tax accountants may be equally in the dark and in need of more information. The IRS needs to ask and answer this question: Sans an illegal tax deduction or an inflated sales price for their home, what motivates sellers to donate money to these programs? The IRS also should review whether the organizations that operate these programs truly meet the required criteria for their nonprofit tax-exempt status. Down-payment assistance programs are touted as charitable efforts that help people buy homes. But when concerns about these programs seem to outweigh their successes, it's reasonable to question whether they are the best way to help those in need of such assistance. There is no shortage of credible housing-related organizations that could put home sellers' genuine charitable contributions to good use. Some down-payment assistance providers make donations to such organizations and lend money to community groups for neighborhood revitalization projects. Those are good works, but the down payment assistance programs deserve a much closer examination. Marcie Geffner is a real estate reporter in Los Angeles. inman.com

To: Mick Mørmøny who wrote (45476)	12/7/2005 9:40:36 AM
From: Mick Mørmøny	Read Replies (1) \| Respond to of 306849

U.S. Housing Market Seen Declining in 2006 Wednesday December 7, 8:41 am ET By Alex Veiga, AP Business Writer U.S. Housing Market to See Sustained Decline in 2006, According to New Economic Report LOS ANGELES (AP) -- The U.S. housing market will see a sustained decline next year, causing a drag on the nation's economy but falling short of triggering a recession, according to a new economic report. "We expect housing to start slowing the economy this quarter or the next," Edward Leamer, director of the quarterly University of California, Los Angeles, Anderson Forecast, wrote in the report to be released later Wednesday. The cooldown in the housing sector is likely to be spread over several years, with as many 500,000 construction jobs and 300,000 financial sector jobs lost, the report said. "Some jobs in manufacturing might well disappear as a result of weakness in housing, but this may be offset by jobs brought home or not lost to foreign competition," Leamer wrote. The forecast said eight of the last 10 economic recessions were started by housing market slowdowns. Previous UCLA Anderson Forecasts have suggested a decline in housing construction would begin by mid-2005. The current report cites several signs that the decline could be underway: -- New construction of housing in October was down 5.6 percent from the previous month, with new construction of single-family housing accounting for a 3.7 percent dip. -- New home sales have declined. -- Applications for home mortgages have trended downward since late September as rates increased. -- In some regions, homes are remaining unsold longer and the pace of housing construction is outpacing population growth, which could spell a decline in demand. "On all these grounds, we believe housing is due for a sustained decline," economist Michael Bazdarich wrote in the Anderson Forecast. "The remaining questions are how hard the fall will be and when it will begin." The forecast for California, where housing prices lead the nation and housing-related jobs have been driving economic growth, resembles the national outlook. Economist Ryan Ratcliff said the state's housing market will see a slowdown in spending along with job losses in construction and related sectors. He expects California home prices to plateau while sales and new construction see moderate decreases during two years of weak growth. "If the housing market slows more than we are expecting, a recession is not out of the question," Ratcliff wrote. Counties showing signs of a cooldown include San Francisco, where housing sales have been off 20 percent since peaking in June, 2004. San Diego County has seen sales slow about 13 percent, while monthly price gains have plummeted to low single digits. California's job picture has been lackluster in recent months. The rate of employment growth has slowed after a significant number of jobs were added in July and August. Construction has remained the fastest-growing sector. But Ratcliff predicts a slowdown in construction activity through 2007 and moderate construction job losses. biz.yahoo.com