The housing crash brought with it many changes including government programs to aid homeowners facing foreclosures, a closer look at lending practices, and new loan products for consumers.

The last item is what concerns many Americans who are interested in taking advantage of falling housing prices. A study called, A Financial Analysis of Consumer Mortgage Decisions written by Andrew J. Kalotay and Qi Fu and released by the Research Housing Institute for America (RIHA) and the Mortgage Bankers Association (MBA) details information on getting a mortgage loan.

Getting as much information and education about the best options before taking a mortgage loan has never been more vital—it can help ensure that your borrowing strategy is successful.

Fu says their study focuses on three main areas in the mortgage industry. The first chapter is about how to select a mortgage based on the points menu. “The first question to ask is how to make a decision when given the choice between paying points and paying a higher rate,” says Fu.

He says that often borrowers who simply look at the Annual Percentage Rate (APR) don’t consider all the necessary facts to make the best choice. “The APR includes some information but it doesn’t account for the possibility that the mortgagor may refinance down the road,” says Fu. The study gives the mortgagor a deeper look at this consideration. In chapter two, another key concern is addressed. The study helps mortgagors answer the question of when to refinance.

“Oftentimes when mortgagors make a decision they only consider the savings they get from refinancing but what they don’t consider is the opportunity-cost that they’re giving up of possibly refinancing at a lower rate down the road,” says Fu. The study, using graphs, charts and case studies, aims to help mortgagors understand “refinancing efficiency” and a formula that helps them decide the optimal time to refinance.

Fu says homeowners can save lots of money by first making sure that the timing is best for a refinance. He recommends using their refinance calculator which can be found online at kalotay.com/calculators In chapter three, the study covers, “When you have a lump sum [of money] and you have a choice between investing in something else or paying down your mortgage—how to best consider that decision,” says Fu.

The 60-page study available online at the Mortgage Bankers Association offers borrowers a glimpse of how to handle this situation, suggesting possible, but limited, alternative investment options. Visit mbaa.org. For investing in alternative assets, greater research would be helpful; however, overall, this report provides good information for borrowers to consider before taking out a mortgage loan. It provides clear definitions and methods to analyze complex mortgage products for borrowers to review in order to be better equipped to make important financial decisions about future mortgage loans.

P. Chongchua

The housing crash brought with it many changes including government programs to aid homeowners facing foreclosures, a closer look at lending practices, and new loan products for consumers.

The last item is what concerns many Americans who are interested in taking advantage of falling housing prices. A study called, A Financial Analysis of Consumer Mortgage Decisions written by Andrew J. Kalotay and Qi Fu and released by the Research Housing Institute for America (RIHA) and the Mortgage Bankers Association (MBA) details information on getting a mortgage loan.

Getting as much information and education about the best options before taking a mortgage loan has never been more vital—it can help ensure that your borrowing strategy is successful.

Fu says their study focuses on three main areas in the mortgage industry. The first chapter is about how to select a mortgage based on the points menu. “The first question to ask is how to make a decision when given the choice between paying points and paying a higher rate,” says Fu.

He says that often borrowers who simply look at the Annual Percentage Rate (APR) don’t consider all the necessary facts to make the best choice. “The APR includes some information but it doesn’t account for the possibility that the mortgagor may refinance down the road,” says Fu. The study gives the mortgagor a deeper look at this consideration. In chapter two, another key concern is addressed. The study helps mortgagors answer the question of when to refinance.

“Oftentimes when mortgagors make a decision they only consider the savings they get from refinancing but what they don’t consider is the opportunity-cost that they’re giving up of possibly refinancing at a lower rate down the road,” says Fu. The study, using graphs, charts and case studies, aims to help mortgagors understand “refinancing efficiency” and a formula that helps them decide the optimal time to refinance.

Fu says homeowners can save lots of money by first making sure that the timing is best for a refinance. He recommends using their refinance calculator which can be found online at kalotay.com/calculators In chapter three, the study covers, “When you have a lump sum [of money] and you have a choice between investing in something else or paying down your mortgage—how to best consider that decision,” says Fu.

The 60-page study available online at the Mortgage Bankers Association offers borrowers a glimpse of how to handle this situation, suggesting possible, but limited, alternative investment options. Visit mbaa.org. For investing in alternative assets, greater research would be helpful; however, overall, this report provides good information for borrowers to consider before taking out a mortgage loan. It provides clear definitions and methods to analyze complex mortgage products for borrowers to review in order to be better equipped to make important financial decisions about future mortgage loans.

P. Chongchua

As energy costs rise and resources become scarcer, more homeowner associations are finding ways to reduce energy consumption and “go green.” With state legislation placing limits on the authority of HOAs to prohibit or regulate certain energy generation devices and energy efficient measures,the issue has come to the forefront of the attention of both HOAs and owners. Given all of this, what are some ways homeowner associations can be proactive in creating or encouraging green practices?

Recycling. If your HOA has centralized trash collection, contract with your trash removal contractor to also provide for recycling. If your community has curbside pickup, recycling may be included in the cost of that pickup. Encourage all residents to recycle.

Reduce Water Consumption. Many HOAs have overly ample open space, much of which may be landscaped with lush grass. While grass is attractive, there are many turf and xeriscaping alternatives that require less, if any, water. Consider replacing high-water consuming plants with plants that require less water. Allow owners to install xeriscaping, subject to any approval requirements for any landscaping project.

Practice Landscape Water Management. Apply the appropriate amount of water needed to maintain a healthy landscape. This requires an understanding of plant water use, soils and the irrigation system installed. Spray sprinkler heads distribute water at a different rate than rotor heads, so having both types of heads on the same zone can lead to over saturation in some areas and dry spots in others. Install smart controllers to detect when plants actually need water. Install rain sensors so turf areas are not being watered when it is raining. Your landscape contractor should have expert knowledge of irrigation equipment alternatives. If he doesn’t, hire one that does. Equipment needs to be continually monitored and adjusted for greatest water use efficiency.

Energy Conservation or Generation. If your HOA has a clubhouse, have an energy audit done to determine where energy use could be reduced. There may be some simple and inexpensive ways to reduce energy consumption, such as installing weather stripping and programmable thermostats. Replace furnace filters on a regular basis. Replace incandescent light bulbs in the common area light fixtures and lamps with compact fluorescent bulbs. Install photocells or timers on outdoor lighting.

Consider installing solar panels to heat the pool or provide power to the clubhouse. If your HOA makes an energy efficient purchase such as solar panels there many be a tax credit available. While HOAs typically are not be eligible for the tax credits because they don’t pay taxes, the tax credit may be bought by those that do or possibly passed through to HOA members. There are strict guidelines on the types of expenditures that are covered, so check with your CPA for more details.

Review the Governing Documents. Review the governing documents and amend them to eliminate provisions that discourage or prevent energy efficiency and add provisions to include proactive provisions to encourage green activities.

This is just a small sample of things HOAs can do to reduce costs and help the environment. There are countless resources and websites that can provide in-depth information for associations. Check out:

* epa.gov

* nrdc.org/greenliving

* usgbc.org

* regreenprogram.org

* treehugger.com

* plantnative.org

* caigreen.org

R. Thompson

A recent headline in the business section of the Orange County (Calif.) Register noted that the median price of home sales had risen, but that the statistic was misleading. Most of my Realtor® colleagues would complain that the paper was going negative again. Okay, point conceded; but the paper was correct.

The Register had noted that the rise in the median price was explained by the fact that more sales of higher priced properties had occurred in the present period than had in the preceding period. This didn’t mean that the prices or values of any particular properties had risen; only that the middle point of the sales had risen. This phenomenon deserves elaboration. I suspect that it is not a uniquely Orange County phenomenon. Moreover, not understanding it can cause serious misperceptions.

All real estate is local, to be sure. Nonetheless, different markets still bear similarities. One is that most markets contain a number of price ranges. Think of them as layers, something like geological strata.

For purposes of explanation, imagine the following hypothetical example (one which is grossly oversimplified when compared to real markets): This market has 4 layers. The bottom range — say, $75,000 – $150,000 — consists of one and two-bedroom condominiums. Next — between $150,000 – $250,000 — are three-bedroom condominiums and two-bedroom detached homes. Above that layer — with a wider range of $250,000 – $500,000 — we find three and four-bedroom homes situated on lots of increasing sizes within neighborhoods of varying amenities. Finally, in the top layer there are homes ranging in price from $500,000 – $1 million.

Of course any real market would likely be much more complex and could be sliced into a greater number of layers. But, for purposes of illustration, this will work.

Different segments of the market may be affected by different events. The bottom might be hit by layoffs at the local factory, whereas the top might feel the results from a crashing stock market. Sometimes these events will have a ripple effect, but not necessarily always.

During the past couple of years, disparate but often-related events have affected local real estate markets at different levels. Think of these market-affecting events as waves. The first wave to hit was the resetting of crazy loans that borrowers couldn’t afford. This did the most damage at the bottom levels. More recently, the effects of rising unemployment rates are showing up in the middle price ranges. Finally, the diminishment of substantial wealth experienced both by owners of now-suffering businesses and by casualties of collapses in the financial markets is a likely third wave should this recession stretch out much longer. All of these waves may have ripple effects.

What does all this have to do with “the bottom”? Simply this: In many parts of the country, as well as nationally, a number of pundits and experts have pronounced that we appear to have reached “the bottom of the market.” But, we should ask, the bottom of which level? Maybe the bottom level of various markets isn’t going to go any lower; but what about the levels above them, and above them, etc.?

As more sales occur at the 2nd, 3rd, 4th, and etc. levels of local markets, the median price will rise. But does this mean that prices have headed back up? Not necessarily; not even likely. When the house that was formerly worth $600,000 sells for $500,000, that may raise the median; but it isn’t indicative of price increases at any level.

Indeed, in many areas we may have reached the bottom of the bottom (level). But have all the levels reached their bottom? That remains to be seen.

B. Hunt

The House and Senate may still be on summer break, but the battle lines are growing sharper every day in Washington on one key real estate and mortgage issue that will be front and center in September: Should Congress create a new federal agency that does nothing but protect consumers from high-risk mortgages, bad lenders and real estate settlement rip-offs?

Last week, in an unusual move tied to possible congressional action next month, half of the country’s state attorneys general weighed into the debate and said, “yes,” we need more muscle from the feds.

Before heading back to their districts, congressmen and senators got an earful from opponents of the idea. Most banking and mortgage industry lobbyists argued that creating a new agency would just gum up the works, add a new layer of bureaucracy, and raise costs.

Consumer groups disagreed, pointing to the regulatory failures of federal agencies on abusive mortgages earlier this decade, which have led to record foreclosure rates.

In a joint letter to the chairmen of the House and Senate financial services and banking committees, the attorneys general last week sided with the consumers.

“Congress should support additional enforcement resources to fight fraud at all levels of the financial marketplace,” said the attorneys general. “The current financial crisis has demonstrated the need for comprehensive and effective consumer outreach at the federal level.”

The Obama administration has strongly supported the idea of a specialized new agency, and House Financial Services committee chairman Barney Frank is poised to move legislation out of his committee and to the House floor in September.

Frank’s bill, which is based on the White House’s plan, would have huge impacts on virtually everyone involved in home real estate or mortgages. The agency would be given broad oversight and enforcement powers on all home loan products offered nationwide – whether from small local brokers or giant banks.

It would have the power to impose tougher underwriting requirements for mortgage financings the agency considers high-risk, for example, piggyback combinations of first and second mortgages, loans with negative amortization terms and even loans with adjustable rates.

The agency would also have full federal responsibility for overseeing the Real Estate Settlement Procedures Act, including complex “affiliated business” relationships among realty brokers, title companies, home builders, escrow and settlement agencies and mortgage brokers.

The White House and congressional supporters say they intend to pass the controversial legislation this Fall. The banking industry says no way.

Realty Times will keep you on top of this important legislation as it moves or stalls on Capitol Hill in the weeks ahead.

K. Harney