Today the House of Representatives voted 409 to 5 to give home buyers three more months to close on their purchases and still qualify for the $8,000 or $6,500 federal income tax credit.

The House bill extends the closing deadline to September 30, 2010.

Now the Senate must approve the new, stand-alone House bill. But the Senate has already shown support and approval of the measure by having passed their own version of the bill last week.

The House bill doesn’t help anyone currently shopping for a home. Buyers must have signed a purchase contact by April 30 to qualify for the tax break. The issues currently is that many who now qualify for the credit may not be able to close their transaction in time. That is by July 1, 2010.

Read more on Inman News.

The Home Affordable Foreclosure Alternatives (HAFA) program is a part of the Home Affordable Modification Program (HAMP), and offers a streamlined process for short sales and deeds-in-lieu of foreclosure. HAFA will allow homeowners to discharge their first mortgage debt without the credit-destroying step of foreclosure. The program also offers a $1,000 incentive to banks to permit short sales and a $1,500 bonus to homeowners for the purpose of relocation.

• The property must be the owner’s principal residence

• The first mortgage must have originated before 2009

• The unpaid principal must be less than $729,750 for a single-family dwelling

• The borrower’s monthly payment must exceed 31% of their gross income

• The mortgage must either be delinquent or a default be reasonably foreseeable.

If borrowers meet the program requirements they will receive pre-approved short sale terms from their lender, which will include a minimum acceptable proceeds figure for the sale. The homeowner will be required to list the property for sale with a Realtor® and close within 120 day, extensions may be permitted up to a total of 12 months.

Based on the short sale agreement with the lender, HAFA requires property owners to be fully released from any future liability on their first mortgage debt, and in some cases, subordinate debts, so that when the home is sold, the borrower is free and clear of their mortgage.

The program ends on December 31, 2012. HAFA does not apply to FHA or VA loans. There is an extensive amount of paperwork to be completed to participate in the program, Homeowners wishing to take advantage of the relief offered are encouraged to work with a experienced Realtor®.

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Law Requires 2 Types of Smoke Detector Technology

The two most common methods of fire/smoke detection technology currently used is either ionization or photoelectric based.

Ionization sensors feature a constant current flowing between two electrodes. When smoke strikes the device, it impedes the current between the electrodes and causes the alarm to set off.  Ionization sensors are usually quicker to go off than photoelectric detectors. The problem with ionization detectors is that they are not able to distinguish between smoke and steam.  This makes them prone to false alarms when steam from a shower or other source interrupts the current. This is particularly true when the ionization detector is located near a kitchen or bathroom.

Photoelectric sensors send a beam of light between two sensors. This beam passes in front of the sensors in a direct line. When smoke cuts across the path of the light beam, some light is dispersed by the smoke particles causing it to activate the alarm. Photoelectric detectors are less sensitive to false alarms from steam or cooking exhaust fumes but may take longer than ionization detectors to operate. Another major concern is that ionization detectors do not offer the best protection in fires that smolder. Fires that smolder are some of the deadliest fires nationally. Photoelectric smoke alarms are more sensitive to smoldering, smoke producing fires. Most of the residential dwellings in the country have ionization detectors which are more sensitive to flames.

Tests of both types of alarms show that in smoke producing fires photoelectric detectors sound first and it takes nearly 17 minutes longer before an ionization alarm sounds.

New Fire Detector Regulations

Since there are strengths and weaknesses between photoelectric and ionization smoke detectors, the Board of Fire Prevention Regulation has passed a new regulation (527 CMR 32.00). According to the new regulation, owners of certain residential buildings will be required to install and maintain both the ionization and photoelectric smoke detectors. While the new regulation does not change the locations where smoke detectors are required, it does call for the installation of both technologies in certain locations.

Under the new regulation, an ionization detector can not be placed within 20 feet of a kitchen or a bathroom containing a shower or a tub. In these locations only a photoelectric detector is allowed.  In order to comply with the law you can either install two separate detectors that have both technologies or by installing one that utilizes both.

What Properties Are Affected By The New Regulation?

In order to determine if a property is affected by this change you may consider checking with the local fire department. According to the new amendment the following types of properties are impacted by the new regulation:

• Residential buildings under 70 feet tall and containing less than six dwelling units.
• Residential buildings not substantially altered since January 1, 1975, and containing less than 6 residential units.
• All residential buildings sold or transferred after April 5, 2010, which are less then 70 feet tall, have less than six units, or have not been substantially altered since January 1, 1975.

For all properties in these categories, compliance is mandated by April 5, 2010. It should be noted that the law does not apply to these larger buildings or those which were substantially altered since January, 1975, as these properties already were required to upgrade their fire safety systems under other existing laws.

One other important note regarding smoke detectors: Many towns require hard wired smoke detectors and NOT battery operated. You should make certain you know what the requirement is for the town where the property is located in.  As a general rule according to the State fire Marshall’s office, the law is as follows:

• Homes built after 1975 are required upon sale or transfer to comply with the State Building Code in effect at the time of construction.
• Homes built before 1975 are required upon sale or transfer to comply with the requirements of MGL c. 148, §26E(A); and
• Homes built between 1975 and 1998 are required to have hard wired interconnected smoke detectors outside the bedrooms and one detector on each floor at the top of the stairs. The smoke detector at the top of the stairs can be the same detector that is required outside the bedroom.
• Homes built after 1998, smoke detectors are required to be interconnected and have a battery backup. Smoke detectors are required in each bedroom, outside the bedroom and at the top of each flight of stairs. A single detector can satisfy multiple location requirements, if sited properly. There must also be one smoke detector on each level and one smoke detector for each 1,200 square feet of living space.
• The requirements for newer construction also apply to additions and/or renovations where a bedroom is either added or substantially altered. If an addition or renovation involves adding or substantially changing a bedroom, the entire house, including existing bedrooms must be brought up to the present standard according to the Massachusetts State Building Code (780 CMR), regardless of when the original home was built.Carbon Monoxide detectors are required in any residence that has fossil-fuel burning equipment including, but not limited to, a furnace, boiler, water heater, fireplace or any other apparatus, appliance or device; or has enclosed parking within its structure.

According to the carbon monoxide regulations, you need to have a detector on each finished level of the home. Further there must be a detector placed within ten feet of all the bedroom doors. The detectors do not need to be hard wired. A plug-in or battery operated detector meets the requirements and usually the most viable choice. Here are all the types are carbon monoxide detectors that are allowed:

• Battery powered with battery monitoring;
• Plug-in (AC powered) units with battery backup;
• Hardwired AC primary power with battery backup;
• Low-voltage or wireless alarms with secondary power; and
• Certain combination smoke detectors and CO alarms

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On July 1 2010 a new Massachusetts law goes into effect that will concern certain homeowners.  The new law requires that all 1 to 4 family residential dwellings serviced by a home heating oil system meet new safety standards. 
 
Homeowners using home heating oil must have either an oil supply safety valve or an oil supply line with a special protective sleeve.
 
Homes build after January 1990 should already be in compliance with the new law and would likely have one or both of these safety features installed.
 
However, homes constructed prior to then may not have such safety features and are required to be in compliance and upgraded by July 1, 2010.
 
There are limited exemptions and an upgrade is estimated to cost between $150.00 and $350.00.
 
If you represent a home seller with a property constructed before 1990 confirm with them that they are aware of the new law and that they understand that they will need to be in compliance in order not to complicate a potential sale.
 
If you represent home buyers buying a home subject to the law inform them of the new law and ensure that the seller is incompliance before closing.
 
Read more about the new law here.
 
Here is a helpful .PDF fact sheet for buyers and sellers.

Last night FEMA made Disaster Declarations for much of Mass, RI and NH (see counties affected below). Lenders are going to require the appraiser go back out and do a re-inspection prior to funding to show that the property is undamaged / unaffected by the disaster. Be prepared for the phone calls. Be prepared to let the appraiser in quickly. Be prepared for potential delays to your closings. Be aware that this is not just Prospect Mortgage, this is going to be the case with any lender.

Here are the counties:

Massachusetts:

Bristol, Essex, Middlesex, Norfolk, Plymouth, Suffolk, and Worcester Counties.

New Hampshire:

Grafton, Hillsborough, Merrimack, Rockingham, Strafford, and Sullivan Counties

Rhode Island:

Kent, Newport, Providence, and Washington Counties.

 If you have questions please do not hesitate to call or email me.

David Bremer
Senior Loan Officer
978-302-0475 Direct
877-721-7051 Fax
david.bremer@prospectmtg.com
www.DavidProspect.com

New lead paint regulations go into effect in Massachusetts on April 22, 2010.  Although the new regulations do not immediately or directly impact Realtors® and real estate agents, contractors will now be required to be certified by the Environmental Protection Agency in order to perform even the simplest repairs or renovations to properties built before 1978.

According to the state Childhood Lead Poisoning Prevention Program as much as 30 percent of childhood lead poisoning cases in Massachusetts involve exposure to lead dust caused by renovation work.  That is a serious figure considering the devastating, life long effects of lead poisoning.  Homeowners who have work performed on their property by contractors, including painters, plumber, electricians and carpenters, must ensure that the contractor is “EPA Lead Safe Certified.”

The rule can be summarized in four parts:

1. Training and Certification
   Beginning in April 2010, firms working in pre-1978 homes will need to be certified. In addition to firm certification, an employee will also need to be a Certified Renovator. This employee is responsible for training other employees and overseeing work practices and cleaning. The training curriculum for certification, in development with the EPA, will be an eight-hour class with two hours of hands-on training. Both the firm and renovator certifications are valid for five years.
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2. Work Practices
   Once work starts on a pre-1978 renovation, the Certified Renovator has a number of responsibilities. Beginning with distributing EPA’s Renovate Right brochure to the homeowner and having them sign the pre-renovation form in the booklet. Before the work starts the Certified Renovator will post warning signs outside the work area and supervise setting up containment to prevent spreading dust.

   The rule lists specific containment procedures for both interior and exterior projects. It forbids certain work practices including open flame or torch burning, use of a heat gun that exceeds 1100°F, and high-speed sanding and grinding unless the tool is equipped with a HEPA exhaust control. Once the work is completed, the regulation specifies cleaning and waste disposal procedures. Clean up procedures must be supervised by a Certified Renovator.

3. Verification and Record Keeping
   After clean up is complete the Certified Renovator must verify by matching a cleaning cloth with an EPA verification card. If the cloth appears dirtier or darker than the card, the cleaning must be repeated. A complete file of records on the project must be kept by the certified renovator for three years. These records include, but aren’t limited to verification of owner-occupant receipt of the Renovate Right pamphlet or attempt to inform, documentation of work practices, Certified Renovator certification, and proof of worker training.
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4. Exemptions

• The home or child occupied facility was built after 1978.
• The repairs are minor, with interior work disturbing less than six sq. ft. or exteriors disturbing less than 20 sq. ft.
• The homeowner may also opt out by signing a waiver if there are no children under age six frequently visiting the property, no one in the home is pregnant, or the property is not a child-occupied facility.
• If the house or components test lead free by a Certified Risk Assessor, Lead Inspector, or Certified Renovator.
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In pending real estate transactions real estate professionals should be certain that homeowners are aware of the new regulations, particularly if a seller is doing renovations or repairs to the property in preparation for the sale.  Without doubt there will be a new form or two to be executed at the time of listing and or at closing.

Buyers purchasing properties constructed prior to 1978 (and there mortgage lenders) will certainly be looking for representation from sellers that the property is in compliance with the new regulation.  Expect to see new language included in purchase and sale agreements accordingly.

Of course the EPA has published a list of frequently asked questions about the RRP Rule:

Renovation, Repair and Painting (RRP) FAQ

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These most recent FAQs offer additional guidance on the following issues:

• A loan originator can require the use of a particular provider of flood certification and tax service as long as that provider is not affiliated with the lender;
• Pages cannot be added to the GFE but it may be printed on legal size paper and the shading and margins can be changed;
• How to deal with the situation when an FHA approved loan correspondent closes a loan in its name that is not table funded by its sponsor;
• What items can change when a new GFE has been issued and the interest rate has not been locked;
• Clarification of some of the requirements when mortgage brokers and lenders interact;
• What items can change when a revised GFE is issued and the borrower has previously locked the interest rate;
• Lenders may not require a borrower to sign consents to verify employment, income or deposits prior to issuing a GFE;
• Verification documents can be requested after a GFE has been issued;
• Lender can indicate that although it has identified certain providers of settlement services these identifications do not constitute an endorsement;
• When a new GFE has been issued borrowers are not required to re-indicate an intent to proceed;
• An escrow waiver fee is a type of loan level price adjustment and may be part of the calculation of Block 2 on the GFE;
• The Y.S.P. payment cannot be shown on the HUD-1 as POC;
• If a lender requires a condominium certificate and questionnaire for loans on condos, that charge should be listed on Block 3;
• Charges that are part of the sales contract, but are not required by the lender, are not disclosed on the GFE;
• The fee paid by the seller for the preparation of deeds or closing charges should be disclosed in a blank line of the 1100 series in the seller’s column; and
• If an appraisal is subcontracted by Company A to Company B, then Company A’s name should be identified on Line 804.

An index of over 300 home builders, which shows the demand for new homes. The index runs from 0-100, so a rating of 50 would mean that demand for new homes was average.  Data used in the index is provided by the National Association of Home Builders (NAHB).

The index is not as comprehensive as formal housing reports like new home sales or MBA mortgage applications, the index is more like a supplemental indicator for predicting housing trends.

The NAHB Housing Market Index is used to provide general insight to where the housing market is heading. Because new home sales reflect ‘big ticket’ items that require construction and investment, the housing market is often considered an indicator of the direction of the economy as a whole. Growth in the housing market usually means subsequent spending, generating demand for goods and services and the employees who provide them.

The Washing Post, LA Times and other sources are reporting an increased account of the use of borrower loan “worksheets.” In an effort to avoid being bound by newly implemented RESPA (Real Estate Procedures Act) regulations governing real estate mortgage consumer Good Faith Estimates and Settlement Statements, some mortgage lenders have been providing potential borrowers with worksheets that estimate what their loan might cost. These “worksheets” are completely unregulated and were not at all anticipated under the recent RESPA reform.

The loan scenario-forms/worksheets have no requirement for accuracy and loan officers are not bound by any sort of disclosure. Ultimately, the lender still must provide a regulatory Good Faith Estimate and the Settlement Statement (HUD Form 1) must conform to it, but right now the average consumer is not aware of that fact. Once the loan shopper is “satisfied” with what was “disclosed” on the worksheet, and only days before closing, the consumer is presented with the obligatory GFE.

Loan officers and lenders claim the worksheets are necessary to remain competitive and that the new regulation is too strict to be a practical benefit to the consumer. The regulatory demand for 90% accuracy is overbearing say some mortgage professionals.

A HUD official said that they will continue to monitor the practice and update the reform accordingly.

In the mean time mortgage shoppers should be certain that they are working with experienced, trustworthy lenders and loan officers.  If you need the name of a local trustworthy loan officer – call me anytime and I will introduce you to one of my finest lender clients.

Reporting on all forms of payment, including cash, retail sales rose 3.6% from November 1 through December 24, according to a top credit reporter. Internet sales popped up 18%, consumer electronics rose 5.9% and jewelry sales climbed 5.6%. Major economists had anticipated overall retail sales to remain unchanged. They were mistaken.

Initial claims for unemployment benefits fell by 22,000 to 432,000 in the week ending December 26. It was the lowest pace since July 2008. Continuing claims for the week ending December 19 fell by 57,000 to 4.98 million, the lowest level since February 2009.

Freddie Mac reported Thursday that after four straight weeks of increases, 30-year fixed-mortgage rates dropped to an average of 5.09% this week, reducing real estate mortgage costs for home buyers.

Last week the rate averaged 5.1%; last year at this time the rate was 5.01%. The average 15-year fixed mortgage rate dipped 0.4% to 4.5%, and the average five-year adjustable-rate mortgage remained flat. The average one-year ARM edged down 0.03% to 4.31%.

The Federal Government now holds $909 billion of mortgage-backed securities. Since the beginning of 2009 it has purchased 73% of the mortgages that government-backed Fannie Mae, Freddie Mac and Ginnie Mae have turned into securities.

If mortgage rates spike up or the economy weakens, economist speculate, that the central bank might need to keep buying mortgage-backed-securities. However, with the economy improving and the mortgage market already heavily dependent on government, officials are eager to leave the business of purchasing MBS’s.

After expiration of the current, extended, home buyer tax credit the U.S. real estate market may be left to stand on its own. That will be the true test of the recovery.