Directors for the National Association Realtors on Monday formally signed off on a real estate stimulus proposal that includes a temporary $7,500 tax credit for all buyers, with no repayment requirement, and a temporary federal buy-down of mortgage rates to 4.5 percent or less. The tax credit, as proposed, is intended for all buyers — not just first-time buyers.The group’s plan also calls upon the federal government to make permanent the temporary increase in FHA, Fannie Mae and Freddie Mac loan limits to $729,750 in high-cost areas. The limits are scheduled to roll back to $625,000 on Jan. 1.

And the plan reiterates the association’s long-standing aim to permanently block banks from engaging in real estate brokerage and management.

Dale Stinton, NAR CEO, said that the group’s proposal would cost an estimated $100 billion per year and its temporary relief measures would run for two years.

Realogy Corp. floated the idea of government-financed interest-rate buy-downs in October, saying they could unleash pent-up consumer demand for housing (see story). Traditionally, sellers have used interest-rate buy-downs as an incentive, paying lenders extra points up front to obtain a reduced interest rate for a buyer, often for the first two or three years of a loan.

Stinton said NAR arrived at the 4.5 percent or lower interest-rate buy-down level for a 30-year fixed-rate mortgage as “a result of some surveys and focus groups and talking to some brokers around the country,” and that the group’s research indicates that a buy-down in interest rates to 3 percent to 4.5 percent would get the market rolling again.

“We think in a couple years things will come back to where they should be,” Stinton said. He said interest-rate buy-downs could be funded as a part of the $700 billion federal plan to bring liquidity back to the financial markets.

Under the proposal, the rate buy-downs would apply to the purchase of “all new and/or existing homes sold up to $1 million in price,” and “There are a number of ways in which the government ultimately could decide to structure and fund this program, which could be addressed as part of the stimulus packages currently being discussed in Washington.”

Stinton said, “It’s a small price to pay, in my opinion, to stop the hemorrhaging,” adding that a more prolonged market slump could prove far more costly.

He also said that past stimulus efforts fell short in getting “the demand side moving again.”

“We have to find a bottom to this market, from the real estate point of view and from an economic point of view,” he said.

Several directors proposed to amend the language in the four-point plan, though most amendments failed as NAR officials urged directors to adopt the given language as a starting point for federal lobbying efforts.

Although Congress is expected to consider passage of another stimulus bill when it returns for a “lame duck” session, some economists have recommended that it focus on government-funded infrastructure projects like roads and bridges that create jobs and stimulate spending (see story).

Also at the NAR board of directors meeting, association officials announced the approval of the charter for the group’s federal credit union launched by the group.

The group’s budget, approved at the meeting, anticipates that membership could drop to about 1.06 million in 2009, down from an earlier projection of about 1.08 million. The revised projection is also down from a peak membership of 1.36 million in 2006 and a level of 1.24 million as of Oct. 31, 2008.

Offering a few concessions to the real estate industry, the Bush administration is moving forward with regulatory changes that it expects will dramatically alter the way mortgage loans and settlement services like title insurance are marketed and sold to consumers.

The new rules, which would not be enforced until 2010, would require loan originators to stick closely to cost estimates provided to borrowers on a new, standardized disclosure form. The rules would also provide incentives for lenders to package settlement services such as title insurance with loans.

Officials at the Department of Housing and Urban Development claim the new rules will help borrowers comparison-shop between competing loan offers or complete loan packages, saving them an average of nearly $700 at the closing table.

“Millions of families go to the settlement table … without clearly understanding what they are paying for,” Housing Secretary Steve Preston said in announcing changes several years in the making. “In many respects, it’s clear that the current way people buy and refinance their homes isn’t serving us very well at all and has contributed to the current housing crisis.”

The new rules are intended to help borrowers avoid paying excessive loan origination and closing costs, and understand potential issues like payment shock from adjustable-rate mortgage (ARM) loans, balloon payments, and prepayment penalties for refinancing.

Preston said HUD plans to publish the new regulations under the Real Estate Settlement Procedures Act, or RESPA, in Friday’s Federal Register. If Congress does not stand in the way, the RESPA rule changes would take effect within 60 days after publication.

HUD will allow a one-year transition period, during which companies that want to start doing businesses under the provisions of the new rule can do so. But lenders and mortgage brokers would not be required to use the new, standardized Good Faith Estimate and HUD-1 settlement statements until Jan. 1, 2010.

That day may never arrive, as industry opponents could still appeal to Congress to block implementation of the rule, or ask the incoming Obama administration to propose a new RESPA rule that would supersede it.

Industry opponents say HUD — which has been attempting to update the 34-year-old law since 2002 — has overestimated the benefits of RESPA rule changes to consumers, while underestimating the costs to loan originators, title insurers and settlement services providers.

Some industry groups, including the National Association of Realtors and the American Land Title Association, maintain HUD’s proposed incentives for packaging settlement services with loans could actually reduce competition by promoting further industry consolidation.

To encourage packaging, the proposed rule changes put forward by HUD in March would allow lenders leeway to pass on volume discounts to consumers and use average-cost pricing.

That could allow big lenders to pressure settlement services providers into reducing their prices in order to be included in the lenders’ preferred packages, Anthony Lindsey, CEO of GlobeCrossing LLC, testified on behalf of NAR at a congressional hearing in September.

HUD has said such pressure by lenders will save consumers money. But NAR thinks that in the long run, small settlement service providers will be driven out of business, leaving the companies that survive free to raise their rates, Lindsey said at the hearing (see story).

To prevent last-minute changes in fees charged for settlement services, HUD proposes placing “tolerances” limiting fee increases for services provided by a lender or a company recommended by the lender to 10 percent. No tolerances would be imposed on fees when consumers select their own settlement services.

“This is a consumer revolution that occurred today, and I don’t think people will fully appreciate it until it’s implemented in January 2010,” said Jeff Lazerson, president of Mortgage Grader. “We were the only industry that I can think of that the written estimate wasn’t worth the paper it was written on.”

Laguna Niguel, Calif.-based Mortgage Grader operates one of a growing number of Web sites that not only allow consumers to shop for mortgages online, but fully disclose the fees charged. Lazerson believes HUD’s RESPA rule changes will be a boon for Mortgage Grader and Fair Closing Costs, another site his company operates that helps consumers shop for settlement services (see story).

But ALTA maintains that HUD lacks the legal authority to impose tolerances, which effectively changes the good faith estimate into an offer. Although HUD officials say tolerances will remain a part of the final RESPA rule, they will allow 30 days to “cure” violations.

Mortgage brokers and mortgage bankers also have issues with HUD’s proposed disclosures, pointing out that the Federal Reserve will require a different set of disclosures to meet Truth in Lending Act (TILA) requirements.

In an Aug. 7 letter, 243 members of the House of Representatives asked HUD to withdraw its proposed RESPA rule changes and limit itself to working with the Federal Reserve to create simplified disclosure forms that also meet TILA requirements.

HUD, which received more than 12,000 public comments after announcing the proposed rule changes in March, said it would attempt to strike a balance between the needs of consumers and the real estate and lending industries in its final rule. But HUD refused to withdraw the rule.

In a speech this summer, Preston called it “absolutely reprehensible” that so many lawmakers were “fighting to stall progress, especially when they know so many families are in trouble because they didn’t understand the terms of their mortgage.”

Today, Preston struck a more conciliatory note, saying that HUD hopes changes to the final rule “will convince our industry partners and those in Congress that we have approached this rule-making process in a thoughtful manner.”

But HUD’s changes appeared to be mostly minor. HUD dropped a proposed requirement that settlement agents read a “closing script” that takes borrowers through their settlement statement to make sure it jibes with the good faith estimate, or GFE. Industry opponents said reading the script would be costly, time consuming and impractical.

Instead of a closing script, HUD has created a new page on the HUD-1 settlement statement that’s intended to help consumers compare their final loan terms and closing costs to the GFE themselves.

The GFE has been reduced from four pages to three, and each designated line on the final HUD-1 will now include a reference to the relevant line from the GFE.

HUD had not released the text of the final proposed rule when it announced its imminent publication, but promised that it would be posted later today. Having not seen the actual language of the rule, industry groups were guarded in their comments.

“I think those are good things, they represent movement in the right direction,” said Ed Miller, ALTA’s chief counsel and vice president of public policy, of the changes HUD officials revealed at a press conference. “The script was not workable. It didn’t take into the effect of laws and regulations at the state level, and we are happy HUD was responsive to our complaints.”

But while those changes address some industry concerns, it’s unclear if HUD has left in place some or all of the packaging incentives that could have a big impact on settlement services providers.

It’s believed that HUD has removed provisions allowing volume discounts from the final rule. If that’s the case, the change, taken in conjunction with a 30-day right to cure fees that exceed tolerances, “could mitigate a lot of the problems” with tolerances, Miller said.

If lenders lowball estimates of fees for settlement services simply to win business, settlement service providers shouldn’t be held responsible, Miller said.

“Most industry groups had concerns about tolerances and volume discounts put together,” Miller said.

HUD and the Federal Reserve also remain on a path that will lead to the federal government requiring two sets of different — and in some ways incompatible — loan disclosure forms: one for RESPA, and one for TILA.

TILA disclosures will require lenders to disclose annual percentage rate, or APR, which incorporates some fees into calculating what it will cost borrowers to pay the loan back. HUD’s GFE provides the interest rate on the loan, not the APR — a practice some say could stump consumers.

“If you’re handed (HUD’s GFE) and the TILA (disclosure) form at the same time, and one shows APR and the other the interest rate, you create confusion right from the get-go,” Miller said.

HUD says it’s trying to help consumers choose not just the best loan — the focus of TILA disclosures — but the best loan package, including settlement services. Because APR does not include all fees, it may not be a good indicator of who’s offering the best deal.

“HUD was completely right in that thinking,” Mortgage Grader’s Lazerson said. “The APR stuff is just a smoke screen for lenders to make more profit at the consumer’s expense.”

John Courson, chief operating officer of the Mortgage Bankers Association, said HUD could address the issue by using an “all in” APR that includes all fees.

“That number can be shopped apples to apples,” Courson said. “The borrower can change the APR depending on what they do or don’t want to finance into the rate.”

Courson said the MBA is disappointed in the “continued inability of the Fed and HUD to work together to harmonize disclosures.”

Preston told reporters today that while HUD agrees there may be opportunities down the road to work with the Fed on more compatible disclosures, RESPA reform needs to be done quickly.

The Obama administration will reportedly be able to roll back any regulatory changes that have significant economic impacts if they are made after Nov. 20.

“Our initial reaction is we appreciate HUD’s effort — they’ve made a good start … but we think they could do more,” Courson said.

While HUD appears to have adopted a number of the MBA’s suggestions in creating the final GFE and HUD-1 statements, Courson said, disclosures of yield-spread premiums sometimes paid to mortgage brokers should be more clear.

HUD’s standardized GFE does not identify yield-spread premiums by name, but it would require that the rebates be applied to a borrower’s closing costs. HUD says that would allow borrowers who choose to pay a higher interest rate in order to reduce their closing costs to do so, without mortgage brokers pocketing the rebates without their knowledge.

Mortgage brokers, however, complain that banks don’t disclose service-release premiums when they sell loans in the secondary market that they don’t have to report.

HUD officials said they were intent on creating disclosure forms that didn’t create consumer bias for or against mortgage brokers or bank loan officers.

In seven rounds of consumer testing, borrowers were able to select the lowest-cost loan 92 percent of the time, whether it was originated by a mortgage broker or lender, said HUD Assistant Secretary for Housing Brian Montgomery.

Dear Ginny: If the house I’d like to purchase doesn’t pass inspection, will the entire transaction be canceled and money refunded?

Oh, if only life (and real estate) were so black-and-white — being a grown-up would be so much easier! Unfortunately, home inspections are not pass-fail. Rather, they are part of your due diligence duties as a responsible home buyer. They give you the information you need to decide whether to proceed with the purchase and/or renegotiate terms with the seller. Your ability to cancel the deal and get your deposit money back is governed by the terms of your contract, and standard practices vary from state to state.

Mindset Management

Before you even begin inspections — in fact, before you start house hunting, cultivate clarity about your position on the condition of your target property. Be introspective about your level of tolerance — if any — for actually doing or managing repairs and upgrades, your ability to fund repairs, and your interest in living in your home while work is being done. Get clear on what I call your Vision of Home — what do you want your daily life to look like after you buy your ideal property? Do you want to spend your spare time throwing sophisticated soirees in your pristine digs or bribing your buddies to pitch in at your painting parties? Do you want to move in to Pottery Barn chic or are you excited at the prospect of working hard to customize your place to your exact specifications. Are you OK with painting and replacing flooring, but not much else, or do your handyman skills put Bob Vila to shame?

Even if you decide that your dream digs will be in move-in condition, you must understand that no property is perfect. The older a property is, the less perfect it is likely to be, though older properties often have compensating factors, like charm and higher-quality materials and workmanship than modern construction. Early on in your house hunt, ask your Realtor to brief you about what the norm is in terms of condition in the neighborhoods, price range and property type you’ll be shopping from. And it’s up to you to brief your Realtor on your level of fixer-friendliness, or lack thereof.

Finally, to get the three basic inspections — pest, property and roof — costs an average of about $700 in a metropolitan market — more for luxury homes. If you have inspections, hate the results and choose to back out of the transaction at a time when you can get your deposit back, you will still be out the cost of inspections. Some buyers are tempted to skimp on inspections for that reason, but that is foolhardy.

The upfront costs of inspection are an investment in avoiding drama and huge expense later. I once had a client who was in contract to buy a home that had been gutted to the studs and rehabbed in its entirety — the windows and appliances still had their tags on! Nevertheless, we ordered a property inspection and were told that two-thirds of the foundation needed to be replaced, which would run about $80,000. For a second opinion, I called a foundation specialist who disagreed with the original inspector — he said the entire foundation needed to be replaced, which he could do for about $90,000, but that to prevent the drainage problems from recurring, a $30,000 drainage system needed to be installed. Had my buyer neglected to have an inspection because everything was new, she would have been signing up for a huge, nasty surprise later on.

Need-to-Knows

In most areas there are very few or no requirements a home must “pass” before it can be legally sold. Where there are, they tend to be very basic requirements, like lead testing, smoke detector installation or water heater strapping to resist earthquakes. (Note that government loans may have additional requirements, like no broken windows, etc.) The real test of a property is whether it “passes” your requirements for condition. Many times, in order to know this, you must collect all your inspection reports, make decisions about what recommended repairs you feel you would need to complete in order to feel comfortable owning the property, and collect bids to determine how much the repairs will cost. From there, you and your Realtor should decide whether to ask the seller to contribute to or complete any repairs, and precisely what to ask for. If the repairs are too major or the inspection report findings too grim, you might elect to simply cancel the deal and look for another property.

This begs the question of whether you can cancel the deal and get your money back if the inspection results don’t meet your approval and you are unwilling or unable to either (a) resolve the condition issues with the seller or (b) to take the property as-is. Different states have different standard practices on this matter, but most fall into two camps: contingency-period states and objection-period states.

If you are in a contingency-period state, like California, you put an earnest money deposit into escrow when your offer was accepted. From the date of acceptance your contract provides a certain number of days (17 days, unless you and the seller agreed otherwise) in which you can remove or exercise your contingencies. Contingencies are just your right to back out of the contract for various reasons — including that the condition of the property is not to your satisfaction. In your contract, you agree that at the end of your contingency period, you will either exercise your contingencies (backing out of the deal) or remove your contingencies (indicating that you plan to move forward and close the deal).

Most California contracts include an agreement that your deposit becomes nonrefundable and goes to the seller if you remove your contingencies and then later bail; in exchange, the seller agrees not to sue you if you breach the contract in this way. However, in a contingency state you must proactively sign a document that formally removes your contingencies for your deposit money to become nonrefundable — if your contingency period expires, and you haven’t removed your contingencies and you decide to bail, you are still legally entitled to get your deposit money back. The flip side is that if your contingency period expires and you don’t remove them, the seller can issue you a 24-hour notice forcing you to either remove them or cancel the deal.

Ideally, though, you will get your inspections and review the reports early on in the contingency period, to give yourself ample time to get repair bids, get your loan underwritten, and have the appraisal completed and reviewed with time to spare. If you are in a contingency state, and you decide to back out of the deal because of negative inspection results before you have removed your contingencies, you are entitled to receive your deposit money back, minus any inspection costs you have incurred.

If you are in an objection state, you have an objection period instead of a contingency period. If you do not make a repair request or back out of the deal within the objection-period time frame, your deposit money automatically becomes nonrefundable. Note that many bank-owned properties are sold under boilerplate contracts that create an objection period, even in contingency states. So, if you are in an objection state, you must make your move and cancel the deal before your objection period runs out, or you will not be able to get your deposit money back.

Action Plan

1. Get clear on how much fixing you are prepared to do or to pay for, before you start house hunting.

2. Communicate this to your Realtor.

3. When you get into contract, get clear on when your contingency or objection period expires. And read your contract and any addenda to be sure you understand how and when you are entitled to cancel the contract and get a deposit refund.

4. Don’t skimp on inspections — attend them and read the reports, collect repair bids, then decide whether you can resolve any condition issues with the seller.

5. If you can’t resolve all condition issues, cancel the deal, but make sure you do it before your contingency or objection period expires to ensure a quick and easy refund of your deposit money.

“Some people will say reverse mortgages are absolutely too expensive, while others will tell you they are the greatest deal on earth. What all the years of talking to seniors about reverse mortgages has taught me is that you can show somebody what something costs, but you cannot tell them what it’s worth to them,” said Ken Scholen, founder of the nonprofit National Center for Home Equity Conversion.

Seniors scrutinize costs. They preciously guard their pennies, even when they have quite a few to spend. According to a 2007 AARP survey, cost is the reason 63 percent of reverse-mortgage shoppers ultimately decided against applying for the loan. In fact, 69 percent of actual borrowers believed that reverse-mortgage costs were high, the survey revealed.

Some help is right around the corner. The Housing and Economic Recovery Act of 2008 is several hundred pages long and includes many different items that will have to be implemented during the weeks ahead. One critical item is the amount of origination fees lenders can charge on the country’s most popular reverse-mortgage program.

A reverse mortgage is a loan against a home that is not payable until the homeowner dies, sells the home, or permanently moves out of the home. Reverse mortgages allow homeowners age 62 and older to turn the equity in their home into cash without having to move, give up title or make a monthly mortgage payment. There is no minimum credit or income requirement to qualify for a reverse mortgage.

The Federal Housing Administration, a branch of the U.S. Department of Housing and Urban Development, insured 107,367 Home Equity Conversion Mortgages (HECMs) in 2007 compared with 43,131 for 2005. The HECM is the most popular reverse-mortgage program and accounts for nearly 85 percent of the reverse market.

The housing bill recently reduced the maximum fee to 2 percent on the initial $200,000 of the home’s value and 1 percent on the balance thereafter, with a cap of $6,000. Previously, HECM fees were capped at 2 percent of your home’s value or the county lending limit, whichever is lower.

The new formula for maximum origination fees will become effective concurrently with the implementation of the new HECM loan limits. The loan limits still need to be clarified. Peter Bell, president of the National Reverse Mortgage Lenders Association, said the group still does not have a definitive answer as to whether the bill establishes a single national loan limit at $417,000, or $625,500, or a sliding scale somewhere in between.

“Because one section of the bill points to another, and then the other section references prior legislation, etc., there is some confusion and variation of opinion on exactly what the language in the bill means,” Bell said. “We have had great legal minds interpreting it on our behalf and have been in constant discussion with Hill staffers and FHA. In the end, the conclusion drawn by HUD’s counsel, in consultation with congressional staff, will determine where we have come out.”

HUD expressed serious concern about companies that market reverse-mortgage products with new loan limits before HUD actually figures out what those limits might be. Companies that do so might find themselves subject to disciplinary action for false or misleading advertising, and were advised to wait until the issue is resolved before sending out any marketing information based on new loan limits.

“More seniors are recognizing that traditional retirement tools, such as IRAs, pensions and 401(k)s are not providing sufficient income to help fund everyday living expenses and healthcare,” Bell said. “Through proper education, more retirees are recognizing that the home they have lived in for so many years can now take care of them by using a reverse mortgage to access the equity accumulated over 20, 30, 40 years to help them living more comfortably.”

Reverse-mortgage proceeds can be used for any purpose, and can be taken out as a lump sum, fixed monthly payments, line of credit, or a combination. The loan amount depends on the borrower’s age, current interest rates, and the value and location of the home. A reverse mortgage does not have to be repaid until the borrower moves out of the home permanently, and the repayment amount cannot exceed the value of the home. After the loan is repaid, any remaining equity is distributed to the borrower or the borrower’s estate. A senior’s home does not have to be owned free and clear to qualify for a reverse mortgage. Reverse mortgages are often used to retire existing debt on a home.

The early reverse-mortgage programs got a poor reputation because some were flawed and contained huge appreciation shares for the lender coupled with big-time upfront fees. Now, with the federal government insuring a majority of the reverse mortgages with no lender equity shares, the concept has become more acceptable and recognized by consumers.

Thanks to the new housing bill, reverse mortgages will be less expensive to get.

If you’re selling your home, you obviously want to get it sold quickly and for the highest amount possible. One very important strategy to keep in mind is staging, which is simply the process of arranging the inside of your home so that it shows off to its full potential.

Staging plays up your home’s good features, such as enhancing a great view or drawing the buyer’s eye to some spectacular wood floors. It also helps to minimize some of the home’s drawbacks, such as making a small bedroom look larger. But also understand that staging does not in any way mean concealing structural defects, such as hanging a picture over a water stain or putting curtains over a broken window!

Staging allows a potential buyer to visualize what can be done with the home, which is especially important with a house that’s currently vacant. For example, some carefully arranged furniture in a room that would otherwise be empty can really help the buyer see the room’s potential. And if you’re in a neighborhood of tract houses that all look pretty much the same inside, good staging will set your home apart from the others for sale in the neighborhood.

Finally, good staging makes buyers feel at home. It lets them really imagine themselves in the kitchen with friends, or relaxing in front of the living room fire, or even working on their car in the garage.

Remove Clutter

There are several things that go into staging a home for sale, and probably the single most important one is getting rid of all the clutter. No one wants to see several days’ worth of mail and newspapers on the kitchen counter, or a kid’s bedroom crammed with toys and games. The same applies to the garage, basement and even the backyard storage shed.

Clutter is not just an overflowing magazine rack. It can be too many pictures on the wall, too many chairs wedged around the dining room table, or an oversized sofa that blocks the living room traffic patterns. It can be too many items of clothing crammed into a closet, or too many of grandma’s dishes filling up every inch of a kitchen cabinet.

When decluttering the house, stuffing everything into the closet or in boxes in the garage is not the answer. Remember that a potential buyer is looking in every nook and cranny of the house, and an overflowing closet doesn’t make much of an impression. Instead, get the clutter completely out of the house. This could be a garage sale, some donations to a local charity, or simply a trip to the landfill. If you still have items that are cluttering up the house but they are things you’ll want for your next home, then rent a temporary storage space and move them there.

Let Buyers Envision Themselves There

In addition to removing the clutter to make the rooms feel more open and the closets and cabinets feel more spacious, you want to always have an eye on what things you can do to help the buyers visualize living there. For example, lots of family photos on the wall will make it hard for the buyers not to feel like they’re trespassing in someone elses home.

Likewise, while you may be very proud of your religious affiliations, your choice of political ideologies, or your gun collection and the elk head on the wall, remember that not everyone shares your interests. If you can depersonalize the home to some degree, it will make it easier for potential buyers to see themselves making a life there.

Your home should also be absolutely immaculate when you have it on the market for sale. Clean the counters and the cabinets and the fixtures and the flooring and every other part of the house until it shines. Wash the windows, let in the light, and make sure that beautiful view or that inviting backyard is clearly visible when a buyer walks through. A clean house also gives potential buyers more confidence that the structure of the house has been properly maintained and cared for as well.

Hire A Professional Stager

It often makes good financial sense to hire a professional to do the staging for you. A professional home staging company will thoroughly understand the concepts of space and light and color, and they know how to make rooms show off to their full potential. They also don’t have the same personal attachment to the home and its furnishings that you do, so they can make practical, impartial suggestions that you might otherwise overlook or simply not want to face.

The cost of professional staging varies with the size of the house and amount of work involved, but a well-staged home should sell quicker and for more money, which makes that upfront expense a wise financial investment.