Ameriquest to pay $325m settlement
Topic: Mortgage News
LOS ANGELES -- Jan. 23, 2006 -- The parent company of mortgage lender Ameriquest has agreed to pay $325 million to settle investigations into its practices by attorneys general in several states.

Ameriquest lends to people with poor credit and modest incomes. It is the nation's largest sub-prime mortgage lender. Civil lawsuits by consumers in California and other states claim a pattern of fraud, bait-and-switch sales tactics and other violations. Accusations include forging documents to lying about borrowers' income to qualify them for loans they can't afford.

The settlement involves 30 states and is expected in the end to include all 49 states where the company operates, according to a statesperson.
It's parent company has agreed to many changes in company practices, including providing borrowers with clearer disclosures on the terms of their loans.

Under the terms of the settlement, Ameriquest will have to reform its business practices, including...

• A clearer form that explains in simple language the terms of a loan, including rates, points and penalties, if any.

• Giving borrowers notice before closing on their loan if any changes are made to the loan terms.

• Verbal disclosures by loan officers to ensure borrowers are clear on the financial terms of their loans.

• Borrowers applying for stated income loans, or loans in which borrowers don't offer proof of income, will have to sign statements certifying they're telling the truth.

• Ameriquest also agreed to use independent closing agents and to select appraisers randomly, in order to eliminate potential conflicts of interest with lending agents.

Strong Economic Growth for 2006
Topic: Real Estate Market
MILWAUKEE -- Jan. 6, 2006 -- America's 2006 economy will be markedly better than 2005, despite a softer housing market, a panel of trade-group economists said Thursday.



"The U.S. economy is kind of a juggernaut," said Paul Merski, chief economist for Independent Community Bankers of America. "Look at the last few quarters, how it shook off oil price spikes and hurricane shocks."

Merski predicted a 3.8 percent economic growth rate this year, with 2 million new jobs and an unemployment rate dipping to the 4.8 percent to 4.9 percent range.

As for inflation and interest rates, "we'll have to wait to see how hot the economy is" and how heavy a hand Federal Reserve Board officials use in managing it. He predicted the Fed will raise the benchmark federal funds rate, which banks charge each other for overnight loans, from its current 4.25 percent to 4.75 percent by April.

Merski declared the nation's housing boom over - "frankly, that's a healthy thing, since we were running into affordability problems in many areas"- and predicted shrinkage in the mortgage market this year too.

The banking official's comments came at a Webcast conference hosted by the Homeownership Alliance in Washington, D.C., which also featured chief economists of mortgage financiers Fannie Mae and Freddie Mac, the National Association of Home Builders and the National Association of Realtors. His was among the sunnier forecasts.

"We're certainly more pessimistic," said Fannie Mae's David W. Berson. "We predict an 8 percent drop in home sales, with price gains of only 3 percent (but) the job market's going to be pretty good." He expects 2.4 million new jobs this year and a long-term economic boost from immigration.

Realtors' economist David Lereah predicted a 4.1 percent economic growth rate this year, a 4 percent to 5 percent drop in housing resales and bigger drop in new home construction. The housing market may only be taking a one-year breather, he said, "but the risks I see is that slower housing activity will inhibit consumer spending and job creation."

Builders' economist David Seiders said this is the year that "housing turns from being the economy's power growth engine to a slight drag," a gloomy role it may continue in 2007.

Two housing bright spots: Manufactured home sales will surge, courtesy of rebuilding efforts in Gulf Coast areas damaged by 2005 hurricanes, and consumers will continue to spend freely on remodeling, "supported in part by the tremendous equity they've built in their homes," Seiders said.

So when does the housing slowdown hit?

It probably already has, said Freddie Mac economist Frank E. Nothaft.

"The housing sector probably crested in the fall of '05," Nothaft said. Year-end figures aren't in, but are likely to show a fourth-quarter sales slump, he said.

All five economists see mainly good times for most Americans in coming months - barring unforeseen catastrophes.

Among the scenarios the economists believe could trip up the economy: a sudden end to heavy foreign investments here; another major increase in oil prices; a sudden Federal Reserve shutoff of borrowing ability to combat rising inflation; widespread dumping of investment properties.

"This is nothing I see happening," Merski emphasized, and the others agreed. "But it is a risk."

(c) 2006, Milwaukee Journal Sentinel, Michele Derus, Jan. 5, 2006. Distributed by Knight Ridder/Tribune News Service.

Get tax credits for energy improvements
Topic: Energy Efficiency
WASHINGTON -- Dec. 16, 2005 -- If the thought of rising energy bills has you rushing out to buy insulation, hold off until after Jan. 1, 2006, when the recently enacted Energy Tax Incentives Act of 2005 kicks in.

The act includes incentives to make your home more energy efficient and give solar a try. They come in the form of tax credits, reducing federal tax bills dollar for dollar. Unlike many federal programs, they are not phased out for higher incomes.

The most generous credits are available for those who add solar water, heat or power to their homes. It wasn't very long ago that installing virtually any kind of solar device was a labor of love without much economic value. But with the federal incentives -- combined in many places with utility and state incentives -- solar is looking like a much better deal.

The new energy law encourages taxpayers to claim a tax credit each year in both 2006 and 2007 for these expenses: 30 percent of the cost of solar water-heating equipment, up to a $2,000 maximum tax credit for each tax year; 30 percent of the cost of solar equipment that generates photovoltaic electricity, up to a $2,000 maximum tax credit for each tax year; and 30 percent of the cost of a fuel-cell power plant, up to a $500 maximum tax credit for installation in a taxpayer's principal residence. This new technology converts fuel into electricity using electromechanical methods and meets other detailed requirements. But don't get too excited about this one. This technology isn't yet available for practical use to residential consumers. On top of that, it's not likely to be available within the next two years, which is the duration of this tax credit. But if you are interested in being on the cutting edge, check out Plug Power and Ballard Power Systems. These companies, according to their spokespeople, are within a few years of offering systems that are available for residential use.

The best solar deal

Solar equipment -- particularly solar water heaters -- is a lot more reasonably priced, easier to install and generally more practical than it's ever been.

While installing photovoltaic systems can be pricey with payback in the distant future, installing a solar hot-water system can pay for itself quickly and, as energy prices rise, continue to save a homeowner increasing amounts of money.

"I think that even without the tax credit, solar hot-water systems are economical. You'd almost be crazy not to get a solar hot-water heater right now -- especially with natural gas prices going up," says Noah Kaye, policy and communications coordinator for the Solar Energy Industries Association.

Solar hot-water systems rely on relatively simple and cheap technology to circulate water through panels that face the sun, supplementing, and in some cases replacing, conventional water-heating systems.

The most common type of solar thermal system involves copper pipes that wind back and forth through a flat plate collector, typically mounted on a roof. The heated water is collected in an auxiliary water tank, or it can be routed straight into the main water tank, where it is either heated further by conventional means or is ready for use at the spigot or in a radiant, or radiator heating system.

Kaye estimates that a reliable system installed by a professional can cost as little as $3,500, with systems climbing to as much as $6,000 in cold climates where freezing is an issue. Once it's installed, the ongoing costs are near zero with only very occasional maintenance needed.

The federal tax credit will pay as much as one-third of that upfront, but in many states, such as California and New Jersey, there are other incentives available that pay as much as 60 percent. The Interstate Renewable Energy Council, funded by the U.S. Department of Energy and managed by the North Carolina Solar Center, provides an inclusive list of incentives.

But be sure to talk to your accountant. How the credits add up will depend on your location and your personal tax situation.

Solar hot water can be a do-it-yourself project if you are very handy and are willing to commit enough time and energy to learn to do it right. But considering the complexity and the likelihood that a rebate will pay for installation, turning to an expert installer might actually save you money. Several solar organizations provide lists of qualified installers in areas all over the country, including Homepower Magazine, Renewable Energy Access and Solar Energy Industries Association.

Adding solar power

A much more extensive and expensive proposition would be to add a grid-tied solar-electric system to your home. This photovoltaic, or PV, system is made of a complete set of components for converting sunlight to electricity, storing that electricity and delivering it to its end use. The system could produce some or all of the electricity that your home requires. In addition, it can allow you to sell the excess back to your utility company.

Figuring out whether it makes economic sense for you can be accomplished by gathering up a few electric bills and showing them to a qualified solar installer who can do the calculations for you. Or you can try to estimate the return on investment yourself using a guide published in Homepower Magazine or by using a calculator offered by BPSolar.

The price will depend on how much electricity your home and lifestyle require, the amount of sunlight your region gets each day during peak sun hours, how sunny the location of your property is and how much money is available to you from state and utility rebates.

Just to give you a ballpark figure: George Douglas, a spokesman for the National Renewable Energy Laboratory, says experts at this federal research facility estimate that in New Jersey, purchasing and installing a photovoltaic system costs $9 per watt, and the average home requires 4,000 watts per year for a total cost of $36,000. This is offset by state incentives that can be as large as 70 percent, with the federal rebate on top of that. Plus the homeowner can sell back excess power to the utility company at rates that are about 50 percent of retail.

New Jersey and California are the two most progressive states when it comes to encouraging alternative energy, with Maryland, Pennsylvania and New York close behind. Other states have less generous alternative-energy rebates and the utility power buyback price is much lower.

Douglas suggests that you do the math, keeping in mind that energy prices are much more likely to go up than down; photovoltaic systems are usually under warranty for 30 years and biting off the entire job at once isn't necessary. You can add solar in affordable chunks.

BPSolar is selling photovoltaic kits at Home Depot in California, New Jersey and some areas of New York. Home Depot will do the installation. The price varies enormously, based on what you buy and your locale.

Do the basics first

Before you leap into the brave new world of alternative energy, consider taking advantage of the other half of this energy bill -- a 10 percent tax credit with a lifetime cap of $500 for improving the energy efficiency of conventional technology in your home. A homeowner would have to do $5,000 worth of work to get the full amount. This is in addition to the solar credits.

Eligible purchases include:

Insulation materials. This includes exterior doors and certain metal roofs with special coatings designed to reduce heat loss and gain. If your home is more than 20 years old, its insulation probably no longer meets minimum code. Spending money to improve it can pay off in heating and air conditioning costs.

Replacement windows. No more than $200 can be credited against the cost of replacement windows, including skylights. This isn't much, but something's better than nothing when you undertake this effective but expensive upgrade.

Energy-efficient heating and cooling systems. Up to $300 for high-efficiency electric heat pumps and central air conditioners -- those meeting the 2006 Consortium for Energy Efficiency specifications, expected to be 15 SEER and 13 SEER. (SEER is an acronym for seasonal energy efficiency rating, and is a gauge of efficiency and performance for residential air conditioners and heat pumps.)

High efficiency conventional furnaces. Up to $150 can be claimed by homeowners who install a highly efficient furnace or boiler with annual fuel efficiency of 95 or better, or a gas, oil or propane hot water heater with an energy factor of .80. A storage water heater's energy factor is a measure of its overall efficiency based on the use of 64 gallons of hot water per day. To achieve an energy factor of .80, you must buy a condensing water heater.

A credit of $50 is available for installing a whole house circulating fan. This is a much more powerful version of a ceiling fan, which draws hot air out through the attic or the roof.

The costs of installation as well as equipment are included in calculating the price of these energy improvements. The solar systems can be installed in either a principal residence or a second home as long as it is located in the United States. The systems can't be used to heat a swimming pool or hot tub.

In most cases, you can claim the credit both years if you have two properties - use it one year for a main residence and the second year on a vacation home -- even a recreational vehicle or boat could count if you can live aboard. But you can't take the credits twice on the same property. You can, however, spread the credit over two years by doing some of the work one year and some of the work the next. If you owe too little in taxes to take the entire credit in one year -- even though you've done the work -- then you can carry forward the portion of the credit you were unable to claim and deduct it in the following year.

A caveat: the IRS still hasn't released the final set of regulations on this new energy bill. While big changes are not expected, there's always the possibility of minor differences that might impact your tax return. Check with your accountant.



? 2005 Bankrate.com

Survey: Delinquent borrowers don't ask for help
Topic: Mortgage News
McLEAN, Va. -- Dec. 16, 2005 -- The first step in helping homeowners avoid foreclosure is to understand the problem. To do that, Freddie Mac conducted a survey and found that nearly two-thirds of delinquent borrowers don't know they will be offered help simply by contacting their lender and asking for it. In over half of al foreclosure cases, the borrowers never contact their lender, and the survey was undertaken to help find out why.

The survey found that 75 percent of the delinquent borrowers surveyed recall being contacted by their mortgage servicers. But, a substantial percentage gave a variety of reasons for neglecting to follow-up with their servicers to discuss workout options. Mortgage servicers collect monthly housing payments on behalf of Freddie Mac or other investors.

Specifically, 28 percent said there was no reason to talk to their servicers or that their servicers could not help them, 17 percent said they could take care of their payment problems without any help, and 7 percent said they didn't call because they didn't have enough money to make the payment. Other reasons for not calling included embarrassment (6 percent), fear (5 percent) or not knowing whom to call (5 percent).

The lack of borrower follow-up may help explain why more than six in 10 (61 percent) of late-paying borrowers said they were unaware of a variety of workout options that could help them overcome short-term financial difficulties. At the same time, 92 percent said they would have talked to their servicers had they known these options were available to them.

The survey found no significant statistical difference in the responses given by white, black, Latino, male or female borrowers indicating an almost universal need for more borrower education about workout options and foreclosure avoidance.

Freddie Mac requires mortgage servicers to explore several workout options with late-paying borrowers. These options include forbearance, which temporarily delays or reduces payments, and loan modifications, which can restructure the payment terms for a fixed period. Many servicers typically describe these options in their collection letters. However, it is up to borrowers to follow-up with their servicers to learn more about these options.

"Part of the problem is that the data shows that there's a knowledge gap: People's interest in the options available to them is quite high, but their awareness of these options is quite low," says Elizabeth Armet, Vice President, Senior Account Executive at Roper Public Affairs.

While the likelihood of a successful foreclosure avoidance depends upon each individual borrower's financial situation, a 2004 Freddie Mac study concluded that repayment plans could lower the probability of home loss by 80 percent among all borrowers, and by 68 percent among low-to-moderate income borrowers.

Other notable findings from the Freddie Mac/Roper survey:

• Eighty percent of delinquent borrower households included at least one employed individual and only five percent said someone in their household was unemployed. Seven percent of the respondents said they were retired.

• Among homeowners in good standing, 62 percent were employed, 32 percent were retired, and only two percent were unemployed.

• Delinquent borrowers earned slightly less than borrowers in good standing. The median annual income among delinquent borrowers was $52,400 compared to $56,700 a year for homeowners in good standing.

• Forty seven percent of the defaulters were first-time homeowners but 62 percent of the homeowners in good standing had owned a home in the past.

? 2005 FLORIDA ASSOCIATION OF REALTORS?

HISTORIC SALES PREDICTED IN 2006
Topic: Real Estate Market
WASHINGTON -- Dec. 13, 2005 -- The housing market for 2005 is headed for a fifth consecutive annual record and sales activity in 2006 is expected to be the second best year in history, according to the National Association of Realtors? (NAR).

David Lereah, NAR’s chief economist, says that market conditions are still favorable for housing. "The slowdown amounts to a tapping of the brakes on a hot market," says Lereah. "Home sales are coming down from the mountain peak, but they will level-out at a high plateau -- a plateau that is higher than previous peaks in the housing cycle. This transition to a more normal and balanced market is a good thing."

The 30-year fixed-rate mortgage should trend up modestly and reach 6.6 percent during the second half of 2006.

Existing-home sales, expected to rise 4.7 percent to 7.10 million this year, are likely to decline 3.7 percent in 2006 to 6.84 million. New-home sales, projected to increase 7.0 percent to 1.29 million this year, are forecast to drop 4.8 percent to 1.23 million in 2006 -- also the second best on record. Total housing starts for 2005 should grow 5.8 percent to 2.06 million units, the highest since 1972, and then decline 4.8 percent to 1.92 million next year.

NAR President Thomas M. Stevens says that housing has always been the soundest investment for most families. "As the old saying goes, homeownership beats the heck out of a drawer full of rent receipts," says Stevens. According to the Federal Reserve Survey of Consumer Finances, the median net wealth of a homeowner household is 36 times higher than a renter household.

Stevens notes that the national median home price has never declined since good recordkeeping began in 1968. "Although there can always be a temporary decline in a given area if jobs are weak and there is an oversupply of homes on the market, people who stay in their homes for a normal period of homeownership generally see healthy returns over time. There are no guarantees, but there are very good odds."

The national median existing-home price for all housing types, which is experiencing a surge estimated at 12.7 percent to $208,800 for 2005, is expected to rise another 6.1 percent in 2006 to $221,400. The median new-home price is likely to rise 5.5 percent to $233,100 in 2005, and then grow by 7.3 percent next year to $250,100 as higher construction costs impact the market.

The U.S. gross domestic product should grow 3.7 percent for 2005 and 4.1 percent next year. The unemployment rate is expected to decline to 4.9 percent by second quarter of 2006, and then stabilize.

The Consumer Price Index is projected to rise 3.4 percent for 2005, and 2.9 percent next year. Inflation-adjusted disposable personal income is forecast to increase 1.4 percent in 2005 and 4.5 percent in 2006.

? 2005 FLORIDA ASSOCIATION OF REALTORS?

NAR: Pending Home Sales Index shows market easing
Topic: Real Estate Market
WASHINGTON -- Dec. 7, 2005 -- The Pending Home Sales Index, a leading indicator for the housing market, is moving toward a more balanced market, according to the National Association of Realtors? (NAR).

The index, based on contracts signed in October, dropped 3.2 percent to a level of 123.8 from a reading of 127.9 in September, and is 3.3 percent below October 2004; the current reading is the lowest since March of this year.

The index is based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed. A sale is usually finalized within one or two months of signing.

David Lereah, NAR’s chief economist, says a decline was expected. “The drop in pending home sales is an affirmation that we are experiencing a modest slowing in the housing sector,” he says. “The index is pointing to a soft landing for home sales, which will help to correct the inventory shortages that have dominated housing over the last five years. This should restore balance to the market.”

A Pending Home Sales Index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed, and was the first of four consecutive record years for existing-home sales. Sales in 2001 were fairly close to the higher volume of home sales expected in the coming decade, well above the levels that were seen in the mid-1990s, so an index of 100 is considered to be historically strong.

NAR President Thomas M. Stevens says it’s important to look at the index from a broader view. “The level of home sales activity remains quite strong from a historical perspective,” says Stevens. “It’s unrealistic to expect continuous records or to sustain double-digit home-price gains. People shouldn’t interpret a market that is returning to equilibrium as something that’s undesirable -- this will be good for the long-term health of the housing sector by taking excessive pressure off of home prices.”

Regionally, the PHSI in the West rose 0.8 percent in October to 134.8, but was 2.0 percent below October 2004. In the South, the index was down 2.5 percent to 135.4 in October but was 1.2 percent higher than a year ago. The Midwest index dropped 6.3 percent to 112.2, and was 10.2 percent below October 2004. The index in the Northeast fell 6.9 percent to 101.8 in October, and was 6.4 percent lower than a year ago.

? 2005 FLORIDA ASSOCIATION OF REALTORS

Americans Want to Keep Tax Mortgage Deduction
Related story:
Senator says he can block Bush tax issue
WASHINGTON -- Nov. 11, 2005 -- Americans overwhelmingly support retaining federal tax incentives to promote homeownership and oppose altering the current system to encourage investment in the stock market, according to results from a nationwide survey of 800 likely voters.

"Voters are sending a loud and clear message to policymakers in Washington: don't mess with the mortgage interest deduction and other important housing tax incentives that promote homeownership," says Jerry Howard, executive vice president and CEO of the National Association of Home Builders (NAHB).

Commissioned by NAHB to gauge the public reaction to the recommendations by the President's Advisory Panel on Federal Tax Reform to overhaul the current system, the survey was conducted Nov. 6-8 by Public Opinion Strategies.

The polling found that 81 percent of voters believe it is reasonable for the federal government to provide tax incentives to promote homeownership, and 76 percent oppose replacing tax incentives promoting homeownership with incentives to invest in the stock market.

Furthermore, when asked to rate the importance of preserving tax deductions in the current tax system, 73 percent of those surveyed indicated top support for the deduction of mortgage interest and medical expenses. These top two items were followed closely by the deduction for state and local taxes, including property taxes, at 69 percent.

Those respondents renting their current homes were also high on preserving the mortgage interest deduction. In ranking the importance of current tax deductions, renters said this provision came in second at 62 percent, behind the deduction for medical expenses.

The President's panel on tax reform has called for replacing the popular mortgage interest deduction with a considerably more limited 15 percent tax credit. Also gone would be deductions for state and local taxes (including property taxes) and interest deductions for home equity loans and second homes.

In rating national issues they believe it is important for the President and Congress to address, survey respondents put tax reform low on their list of priorities, behind the war in Iraq, national security and terrorism, ending corruption in Congress, protecting Social Security and Medicare, slowing the rising cost of prescription drugs, improving education, creating jobs and improving the economy, holding down gas and energy prices, reforming the nation's immigration laws and protecting the environment.

According to the survey results, one reason voters appear skeptical of the current push for tax reform is that few believe they will end up paying less in taxes. Only 14 percent believe their tax bill will fall if tax reform is enacted. Conversely, 30 percent expect to pay more taxes under a new tax code.

? 2005 FLORIDA ASSOCIATION OF REALTORS?

Florida grows at near-record pace
Topic: Real Estate Market
GAINESVILLE, Fla. -- Nov. 1, 2005 -- Despite threats from people in storm-ravaged areas to move away, new University of Florida (UF) research shows that the devastating 2004 hurricane season had little or no effect on Florida's 2004-2005 population growth.

"Florida's population grew by more than 400,000 last year," says Stanley Smith, director of UF's Bureau of Economic and Business Research. "This is one of the largest increases in Florida's history."

The Bureau bases its population estimates on building permit and electric customer data, combined with data from the 2000 Census. This year it supplemented its data by conducting 11,560 telephone interviews with residents in the 13 counties most heavily affected by the hurricanes.

"If the 2004 hurricanes had any significant effects on Florida's population growth, it would be in the area covered by these 13 counties," says Chris McCarty, director of the Bureau's survey program.

The hurricanes damaged 32 percent of the housing units for the state as a whole but 74 percent of the units in the 13-county area. Many residents were forced from their homes by structural damage and the loss of utilities.

"About 21 percent of the residents of these counties were forced to move out of their homes, at least temporarily," Smith says. "Most were away for only a few days or weeks, but others were away for several months and some still have not returned."

By the time the surveys were conducted in March through June 2005, 82 percent of those having to leave had returned.

Although the hurricanes had little effect on overall population growth for the state, they had a significant impact in several counties. The 2005 population estimates show one-year declines of 3,603 for Escambia; 2,955 for Charlotte; 1,499 for DeSoto; 454 for Hardee; and 239 for Okeechobee.

"The surveys found these counties to have experienced heavy hurricane damage," Smith says. "Since they had been growing in previous years and the state as a whole grew rapidly last year, these declines were clearly caused by the hurricanes."

Smith and McCarty do not believe the 2004 hurricanes will have a long-term impact on population growth in Florida. "Despite anecdotes of people tiring of hurricanes and wanting to leave, our prediction is that last year's hurricanes won’t have any effect on long-term growth," Smith says. "Most people just accept hurricanes as part of the price of living in Florida, along with heat, humidity, mosquitoes and alligators. Some people will certainly move away, but they will be replaced by others moving in."

Hurricanes have had little effect on the rapid pace of U.S. coastal development during the past 50 years, Smith says. A previous Bureau survey showed that while population growth in Miami-Dade County slowed the first year after Hurricane Andrew, it later rebounded to even higher levels. "It may take several years for the most heavily damaged areas to recover, but we believe they will continue to grow," Smith says.

However, hurricane hits for multiple years could take a toll on population growth, Smith says. "An occasional bad hurricane year won't override all Florida's advantages," he said. "If we had a number of bad years in a row, however, it could start to have an impact."

Smith and McCarty believe the effects of Hurricane Katrina will be quite different than the effects of hurricanes in Florida.

"Katrina was much more destructive, destroying more homes and forcing more people to move away than last year’s hurricanes in Florida," Smith says. "Many people lost their jobs as well as their homes and moved hundreds or even thousands of miles away."

New Orleans is a special case, given its unique physical characteristics and the nature of its damages, McCarty says. "We expect most of the Gulf Coast to follow the Florida model, with substantial short-term population declines but long-term population growth," he adds. "But New Orleans will recover much more slowly and may never again reach its pre-hurricane population size."

A copy of this report can be found on the Bureau's Web site.

? 2005 FLORIDA ASSOCIATION OF REALTORS?

Changes to FHA Programs
Topic: Mortgage News
SAN FRANCISCO -- Oct. 31, 2005 -- Brian Montgomery, head of the mortgage loan insurance programs at the Federal Housing Administration, announced significant changes Friday that will make it easier for consumers to use -- and Realtors? to promote -- FHA products.

Speaking at a forum during the 2005 Realtors? Conference & Expo last week, Montgomery said FHA will no longer have specialized FHA appraisals and will let homebuyers fold into their mortgage up to $35,000 in home repairs or minor remodeling.

Specialized FHA appraisals often require a list of repairs that have to be made before settlement, which often delay settlement, kill a transaction, or prompt Realtors and lenders to direct homebuyers elsewhere for a mortgage. Required repairs can be time-consuming and often unclear, but underwriters are afraid to waive the requirements.

FHA will continue to work with Realtors, lenders and appraisers to be consistent with the rest of the market, Montgomery said, and will no longer impose unnecessary repairs or require inspections and evaluations that aren't customary for an area. "Instead, we will accept the new Fannie Mae appraisal forms," he said.

"Similar to Fannie Mae and Freddie Mac, we will defer to state and local requirements regarding the condition of the home," Montgomery added.

The new version of the loan will permit homebuyers to finance up to $35,000 in their mortgage to pay for straightforward home repairs, like replacing a roof, windows or furnace.

"The program is a financing tool for the average homebuyer who wants to make simple changes, such as updating the appliances or replacing flooring or installing new windows to make the home more energy efficient," he said. Buyer's agents can assure their clients "that they can close on the house, and then make the repairs," he added.

Montgomery said that the two major changes are the first of many, and that the recommendations came from the real estate industry. He assured Realtors that FHA is continuing to study its operations and programs, and to consider changes recommended by users, Realtors? and lenders.

"FHA needs to be compatible with the rest of the industry. I feel very strongly that FHA is here to serve the American public in a way that protects the consumer. But consumer protection that drives away the consumer is no protection at all," he said.

? 2005 FLORIDA ASSOCIATION OF REALTORS?

Hurricanes, housing boom blow construction materials prices through the roof
Topic: Real Estate Market
JACKSONVILLE, Fla. -- Oct. 28, 2005 -- Hurricane-force winds may not have hit the First Coast this season, but hurricanes Katrina, Rita -- and now, Wilma -- have blasted the costs of construction materials skyhigh.

Local contractors and material suppliers say Wilma might deal the latest blow to construction materials prices, causing a spike in costs of the basic building blocks of homes, including cement, lumber and shingles.

Expected rebuilding efforts for Katrina and Rita have already driven prices up, spurring home prices up with them. According to the National Association of Home Builders, new home prices have grown 15 percent through August since August 2003.

Cement prices were already rising at a rate of about 20 percent every six months, said Frank Taylor, a sales and marketing agent with Heidelberg Cement Group.

"Demand has been very high in the Southeast region," he said.

"Katrina, Wilma, the housing boom -- all of that is driving prices up and putting us in a shortage."

Taylor said that Florida consumes about 10 million tons of cement per year, half of which must come from outside the state due to insufficient in-state production capacity. Thus, rocketing fuel prices have also driven cement prices skyward.

Bryan Lendry, president of the Northeast Florida Builders Association, said that higher cement prices might be coming from another unlikely source -- China. Construction projects there have sucked building materials away from the United States, leaving local contractors scraping for cement. The hurricanes worsened that costly trend.

Lendry said that his own company, custom home builder Brylen Homes, has seen a 50 percent increase in the cost of plywood since the end of September. The waiting period for asphalt shingles has also grown to between two and three weeks.

"Whenever a hurricane hits, we see lumber flying off the shelves," Lendry said. "We're getting hit with repair demands in an already tight market. Now, we might wait four or five days just for concrete. That used to be unheard of."

Since Sept. 1, the price of plywood has rocketed 30 percent and the price of OSB roof sheeting, which is used in the roofs of most local homes, has soared 40 percent, said Robert Mangum, who heads purchasing for the Carolina Lumber Company in Jacksonville.

"Since Katrina, these prices went way up, and with Wilma coming, manufacturers are probably going to keep prices up," he said.

Because South Florida mainly uses plywood in roofs instead of OSB roof sheeting, Mangum expects that plywood prices will see the largest increase once rebuilding begins.

Roofing materials, which are largely petroleum-based products, have also come in high-demand.

Asphalt shingles, which are used in the construction of most roofs, cost about 5 percent more every month than they did the month before, and shingles manufacturers are having to ration some suppliers as they struggle to keep up with demand, said Kevin Snyder, sales and projects manager for BBG Contracting Group Inc. in Jacksonville.

Glen McRae, assistant manager of the Jacksonville branch of the Bradco Supply Corporation, said that he has seen the price of asphalt shingles go up about 25 percent in the last six months and that his branch is on an allocation from his manufacturers.

People are trying to come up with alternatives but almost everything used in roofing is petroleum based," McRae said. "As you see gas prices go up, you can be sure that shingles are going up too."

McRae said that his supply line and prices had already been heavily affected by Katrina and Rita and that Wilma could cause another spike in demand and prices.

All of that might bring another headache for Katrina Hosea, owner of BeeTree Homes, a Jacksonville-based custom home builder. In the past four months, she has seen the prices that it pays for sheetrock rise 20 percent. Hosea said that she also has trouble getting dry wall and concrete for her houses.

"In my opinion, I find materials costs are extremely inflated, but a lot of the manufacturers know they can get these prices," she said.

? 2005, The Florida Times-Union, Jacksonville, Joe Light. Distributed by Knight Ridder/Tribune Business News.