The 20% down payment rule threatens middle-income and minority borrowers’ ability to be home owners.

New evidence shows that the 20% minimum down payment rule proposed by federal regulators last year to prevent lenders from making risky loans would discriminate against millions of home buyers and devastate the ailing housing market.

A study released in January found that a mandated 20% down payment would exclude 60% of creditworthy borrowers and hit minority communities even harder, with up to 75% of African-Americans and 70% of Latinos unable to qualify.

To put this in perspective, a 20% down payment on the median U.S. home, which costs about $164,500, is $32,900. Who has $32,900 in easily accessible cash on hand? It would take the typical American family 16 years to save enough money for a 20% down payment and closing costs, according to estimates of 2010 median income and home prices from the NATIONAL ASSOCIATION OF REALTORS® and the 2010 national savings rate.

Gone too far

The rule discriminates against qualified buyers, forcing them into higher-cost loans or out of the market entirely. Under the proposal, home buyers with less than 20% to put down would be burdened with higher fees and rates — up to 3 percentage points more — compared with those who have the 20%. 

How does that help a real estate market inching toward recovery? It doesn’t.

Many agree the mandate is too severe. Roughly 12,000 (mostly negative) comments were filed by banks, civil rights groups, mortgage companies, and members of Congress last year when regulators originally proposed QRM.

There’s a better way

Regulators need to craft rules that encourage home ownership for all. In an interview with HouseLogic last August, Rep. Dennis Kucinich said, “Regulatory agencies have rightly proposed that QRMs include loan terms and practices that have been shown to be less likely to end up in default. But they must craft a set of rules that promote maximum home ownership for all eligible Americans, while simultaneously imposing a return to a ... QRM that doesn’t allow for the predatory gimmicks of the last decade that left entire neighborhoods across America hollowed out.”

Responsible lending standards and the ability of the borrower to repay the loan are better ways of reducing the risk of default than simply eliminating middle-income borrowers from the buying pool. The housing market will not bounce back without access to quality loans.

Home ownership is the cornerstone of generational wealth. Along with peace of mind, home ownership provides equity to start a new business, pay for a child’s education, and build a foundation for financial security for future generations. When you take home ownership away from citizens, they’re less likely to climb the social ladder and become part of the middle class.

Warning: Scammers are on the prowl, claiming to have your share of the foreclosure settlement — for a fee, of course.

The next phone call you get might be from a crook eager to “help” you get your share of the recent $25 billion foreclosure abuse settlement attorneys general in 49 states negotiated with the big banks.

Reality check: This is a national settlement run by state employees. So the chance that a settlement official is calling you the week after the deal was struck because they’re ready to send you your share of $25 billion is about as likely as the possibility you just won the Nigerian lottery.

The attorneys general of several states warn that fraudsters claiming to be bank employees or settlement officials are calling consumers asking for bank account information, credit card numbers, or other personal information. If you give it to them, they’ll use it to steal your identity or run up fraudulent credit card charges as soon as you hang up the phone.

Don’t fall for that trick or for Internet sites promising to get you your share of the settlement — for a fee. Legit organizations never collect a fee for settlements like this or for helping you avoid foreclosure.

The AGs are saying the settlement will take three years to complete. Just hiring the administrator will take three months. That gives you plenty of time to:

1. See who’s eligible for the settlement.

2. Call or go online to your attorney general’s website to see what your state is doing. (I have a hunch most AGs will put information about a multimillion-dollar payment to their constituents on the front page of their websites.)

3. Check with your lender directly:

• Ally/GMAC: 800-766-4622

• Bank of America: 877-488-7814

• Citi: 866-272-4749

• JPMorgan Chase: 866-372-6901

• Wells Fargo: 800-288-3212

If you had a loan from one of those five banks, you may hear from your lender at some point during the next three years. The money from the settlement is earmarked for about 1 million households at risk of foreclosure and about 750,000 others who lost their homes to foreclosures.

When the lender calls or writes, you’re not going to have to give them any information about yourself or your loan. Anyone who’s really working on the settlement already has information about you, your home, and your loan. If they don’t, ask for a number where you can call them back and then call your AG or your bank to report them. They’re likely just crooks following the money.
 

Warren Buffet gives the thumbs-up to homes as an investment, while regulators and legislators debate whether to reduce principal on troubled loans.

Positive signs abound in this week’s headline roundup as billionaire investor Warren Buffet recommends home ownership as a good long-term investment. Buyers must be on the same wavelength as pending home sale contracts rise to their highest level in two years. Still, lending standards remain tight and the acting director of the Federal Housing Finance Agency is resisting White House calls to allow struggling home owners to reduce their loan balances.

CNBC: Warren Buffet: I'd Buy Up 'A Couple Hundred Thousand' Single-Family Homes If I Could

Warren Buffett says along with equities, single-family homes are a very attractive investment right now. Appearing live on CNBC's Squawk Box, Buffett says if held for a long period of time and purchased at low rates, houses are even better than stocks. He advises buyers to take out a 30-year mortgage and refinance if rates go down.

Los Angeles Times: Principal Reduction Isn't Ideal Fix for Foreclosures, Official Says

Fannie Mae and Freddie Mac’s regulator pushed back against mounting pressure that the mortgage finance giants start reducing the principal owed on troubled loans, insisting the practice could hurt taxpayers and that alternatives were better at avoiding foreclosures. Lawmakers have maintained that the agency needed to direct Fannie and Freddie to write down the mortgage principal on loans that exceeded the value of homes when struggling borrowers were facing foreclosures.

Baltimore Sun: REALTORS® to Rally Against Proposed Change Affecting Md. Mortgage Interest Deduction

In Maryland, REALTORS® have kicked off a campaign to keep legislators from approving a budget proposal that would reduce the amount of itemized deductions higher-income Marylanders could claim on their state taxes, a move they say would effectively cap the mortgage interest deduction. The Maryland Association of REALTORS® says this would effectively limit the mortgage-interest deduction, a big piece of what people typically itemize, as well as deductions for property taxes.

Boston Globe: Contracts for Sales of Homes on Rise

The number of Americans who signed contracts to buy homes rose in January to the highest level in nearly two years, supporting the view that the housing market is gradually coming back.

Washington Post (Wonkblog): Are Creditworthy Americans Having Trouble Getting Mortgages?

Most everyone can agree that mortgage lending standards were too loose during the housing boom and should be tightened to keep people from buying homes they can’t afford. But has the pendulum swung too far in the other direction? In testimony before the House financial services committee this week, Fed Chairman Ben Bernanke pointed out that tight standards have yet to unwind even for prime mortgages that are eligible for government guarantees.

Tax benefits for home owners disappeared at the end of 2011 and no one knows whether Congress will bring them back. How annoying!

Congress was so busy bickering at the end of 2011 that it allowed two important tax breaks for home owners to expire. Beginning with the 2012 tax year:

1. You can no longer deduct the cost of private mortgage insurance premiums.

2. You aren’t getting a tax credit for some of your home energy improvements.

You can take advantage of these provisions when you file your 2011 tax return — but beyond that, who knows.

Now that Congress is back in session, it’s likely going to pick up where it left off — arguing about what programs to cut and what taxes to raise. The programs, deductions, and tax credits supporting home ownership belong at the top their to-do list.

Up until the end of last year, you could deduct your private mortgage insurance premium (PMI) when calculating your income taxes. It was a benefit targeted to lower- and middle-income home owners. Once you made $100,000 or more, it started disappearing and anyone who had more than $110,000 of adjusted gross income couldn’t use it.

The home owners who have to get mortgage insurance are buyers with less than a 20% down payment and refinancers with less than 20% equity. That’s more often first-time home buyers or younger home owners and less often move-up buyers who’ve built up equity in their homes. So in taking away the PMI deduction, Congress is raising taxes paid by first-time home buyers and younger home owners leaving them with less money to spend on housing. That’s especially wrong-headed when the housing market is struggling to recover.

The tax credit for energy efficiency upgrades wasn’t enormous — it was capped at $500 or 10% of the cost for some projects; less for others. But it was a nice incentive to add insulation, new windows, or to upgrade your HVAC system with a more efficient unit — exactly the kind of actions that help decrease our dependence on fossil fuels, leading to a cleaner environment and less outflow of U.S. income to foreign countries. Not to mention, hopefully, smaller utility bills.

In 2012, home ownership and energy independence advocates will fight to get those expired tax rules back on the books and to have them apply retroactively. It’s a familiar fight — they had to do the same thing at the end of 2010.

But this year, the battle is more complicated because there’s a presidential election, discord between the major parties, and a general lack of consensus on any issues.

We home owners certainly don’t all agree on who to vote for, but most of us consider the renewal of those policies is a no-brainer. And we really don’t appreciate it when Congress lets those rules expire at the end of one year and then leaves us to wonder the rest of the next year whether they’ll be renewed.

Will you be claiming either of these tax breaks on your 2011 returns?

Congress is looking to home owners once again — this time to pay for the payroll-tax extension.

Washington’s inability to put aside partisan politics and solve long-term problems is placing home owners in harm’s way again. Searching for a means to extend the payroll tax cut that expires at the end of the month, Congress is considering charging home buyers and owners higher Fannie Mae and Freddie Mac loan fees, known as guarantee fees.

Fannie and Freddie charge g-fees to cover their losses when home owners default on their loan. In turn, lenders pass these costs to home owners when they refinance. 

To pay for just a two-month extension through February, the last increase raised the fee for the next 10 years. That increase added 10 basis points (that’s 1/10th of 1%) to the g-fee, which doesn’t sound like much until you add it up over the life of a typical loan. For a home owner with a $200,000 mortgage, a 10-basis point increase that’s passed along in their interest rate adds $4,000 to $5,400 over 30 years.

Raising g-fees won’t help the economic engine of the recovery: the housing market.

Leading economists say Americans shouldn’t expect a robust economy until the housing market returns to health. This shouldn’t come as a surprise. Housing sales generate demand for furniture, remodeling, and other goods and services, adding more fuel to the economic revival. In past recessions, a rebound in housing has been one of the first signs that economic conditions are improving.

Politicians from both sides are looking for ways to help the housing market. In his State of the Union speech, President Obama called for eliminating red tape for home owners with his proposed refinance program; Sen. Johnny Isakson’s (R-Ga.) proposed Home Act would allow financially troubled home buyers to withdraw funds from their retirement accounts to make mortgage payments.

Instead of joining such efforts, Congress is making home ownership more expensive by looking to home owners to raise revenue. Members of Congress need to remember that home owners aren’t their ATM.

Rather, Congress should do no harm when it comes to housing. As much as the market has improved in recent months, it remains in precarious balance. If Congress levies additional fees on home owners, that revenue should be used to help the housing market. Tapping home owners to pay for non-housing-related spending isn’t right.

Americans are fighting to ensure their kids have the chance to attend college, support their families, and buy a home. Allowing Congress to saddle middle-class home owners with additional fees is a step backward.

What do you think of an increase in loan guarantee fees to support a payroll tax extension?

Existing-home sales, low mortgage rates, and a spike in home builder confidence point to a housing turnaround.

Rebounding from another slow year, the housing market is picking up steam. Prospective home buyers are taking advantage of low mortgage rates, and home builder sentiment reached its highest level in more than 4 years this week. Housing is also gaining a bit of attention on the campaign trail. Dems and Republicans took part at a South Carolina rally promoting home ownership. Read these headlines and more in this week’s Friday Five.

HouseLogic: Home Sales Rise in December

Existing-home sales continued on an uptrend in December, rising for a third consecutive month and remaining above a year ago, according to the NATIONAL ASSOCIATION OF REALTORS®.

CNN Money: Mortgage Applications Surge Amid Record-Low Rates

Mortgage loan applications surged 23% last week, according to the Mortgage Bankers Association, as record-low interest rates convinced many home owners it was time to refinance into lower-cost loans.

Wall Street Journal: Home-Builder Sentiment Hits Highest Level Since Mid-2007

U.S. home builders’ sentiment rose in January to the highest level in 4 1/2 years, the latest in a series of signs that the housing market is finally beginning to recover after a prolonged bust.

The State: Rally for Home Ownership Bridges Political Divide

Hundreds turned out in a diverse crowd for a rally designed to head off prospective federal legislation that could hurt home buyers and owners. The well-publicized rally attracted Republican presidential candidate and former House Speaker Newt Gingrich, along with U.S. Rep. Jim Clyburn (D-S.C.), and former U.S. Rep. J.C. Watts of Oklahoma, a Republican.

HouseLogic: Time for GOP Candidates, and Obama, to Step Up on Housing Policy

If you’ve been paying attention to the Republican presidential candidates lately, you wouldn’t guess that housing is one the most important issues on voters’ minds. Mitt Romney, Rick Santorum, and Newt Gingrich — the top three finishers in most national polls — have been fairly quiet on the issue. Instead, the leading Republican contenders have been narrowly focused on attacking President Barack Obama’s jobs record.

Punxsutawney Phil predicts six more weeks of what we laughingly call winter.

Punxsutawney Phil, the world’s most famous weather-rodent, weighed in this morning and forecasted six more weeks of winter.

What’s that groundhog smoking? Many parts of the country haven’t had six weeks of real winter yet. My daffodils already are sprouting — a month ahead of Virginia’s usual spring.

On the off-chance that old Phil is correct — he’s right about 39% of the time — here are some ways you can still button up your home for six more weeks of this freaky winter with these home repair tips:

• Caulk air-leaking cracks around windows and doors.

• Clean or replace furnace filters.

• Clear gutters of debris to prevent ice buildup.

• Gas up snow blowers in case of a big storm. (Like that’s going to happen.)

If you’re still enjoying April weather in February, don’t forget to water your garden. This heat is confusing it, too.

Do you believe Phil and think we’ve got six more weeks of winter?

Are you getting a little more winter color in your garden than you expected? What’s growing in your yard that shouldn’t be?

It’s not even February, and the birds are singing and the tulips are rising. What’s up with that?

Spring temperatures in winter mean your landscaping thinks it’s April instead of what should be the dead of winter. This means we need to dig out some of our garden gear a little earlier than we expected. We need to take care of plants according to the temperature outside, not our iCalendars.

That means watering gardens and foundation plants that are drying out in this spooky warmth. Also, mulch to avoid dehydration (of plants, not you) and pull weeds to protect your home’s curb appeal, and save yourself some grief when the real spring arrives.

Does your landscaping have spring fever? What’s growing that shouldn’t be growing in your yard?

Before you put your home up for sale, use the right comparable sales to find the perfect price.

Knowing how much homes similar to yours, called comparable sales (or in real estate lingo, comps), sold for gives you the best idea of the current estimated value of your home. The trick is finding sales that closely match yours.

What makes a good comparable sale?

Your best comparable sale is the same model as your house in the same subdivision—and it closed escrow last week. If you can’t find that, here are other factors that count:

Location: The closer to your house the better, but don’t just use any comparable sale within a mile radius. A good comparable sale is a house in your neighborhood, your subdivision, on the same type of street as your house, and in your school district.

Home type: Try to find comparable sales that are like your home in style, construction material, square footage, number of bedrooms and baths, basement (having one and whether it’s finished), finishes, and yard size.

Amenities and upgrades: Is the kitchen new? Does the comparable sale house have full A/C? Is there crown molding, a deck, or a pool? Does your community have the same amenities (pool, workout room, walking trails, etc.) and homeowners association fees?

Date of sale: You may want to use a comparable sale from two years ago when the market was high, but that won’t fly. Most buyers use government-guaranteed mortgages, and those lending programs say comparable sales can be no older than 90 days.

Sales sweeteners: Did the comparable-sale sellers give the buyers downpayment assistance, closing costs, or a free television? You have to reduce the value of any comparable sale to account for any deal sweeteners.

Agents can help adjust price based on insider insights

Even if you live in a subdivision, your home will always be different from your neighbors'. Evaluating those differences—like the fact that your home has one more bedroom than the comparables or a basement office—is one of the ways real estate agents add value.

An active agent has been inside a lot of homes in your neighborhood and knows all sorts of details about comparable sales. She has read the comments the selling agent put into the MLS, seen the ugly wallpaper, and heard what other REALTORS®, lenders, closing agents, and appraisers said about the comparable sale.

More ways to pick a home listing price

If you’re still having trouble picking out a listing price for your home, look at the current competition. Ask your real estate agent to be honest about your home and the other homes on the market (and then listen to her without taking the criticism personally).

Next, put your comparable sales into two piles: more expensive and less expensive. What makes your home more valuable than the cheaper comparable sales and less valuable than the pricier comparable sales?

Are foreclosures and short sales comparables?

If one or more of your comparable sales was a foreclosed home or a short sale (a home that sold for less money than the owners owed on the mortgage), ask your real estate agent how to treat those comps.

A foreclosed home is usually in poor condition because owners who can’t pay their mortgage can’t afford to pay for upkeep. Your home is in great shape, so the foreclosure should be priced lower than your home.

Short sales are typically in good condition, although they are still distressed sales. The owners usually have to sell because they’re divorcing, or their employer is moving them to Kansas.

How much short sales are discounted from their market value varies among local markets. The average short-sale home in Omaha in recent years was discounted by 8.5%, according to a University of Nebraska at Omaha study. In suburban Washington, D.C., sellers typically discount short-sale homes by 3% to 5% to get them quickly sold, real estate agents report. In other markets, sellers price short sales the same as other homes in the neighborhood.

So you have to rely on your REALTOR’s® knowledge of the local market to use a short sale as a comparable sale.

Ask detailed questions about their experience and skills to help you find the right agent for your home sale.

1. How long have you been selling homes?

Mastering real estate requires on-the-job experience. The more experience agents have, the more likely they’ll be able to handle any curveballs thrown during your home sale.

2. What designations do you hold?

Designations like GRI (Graduate REALTOR® Institute) and CRS® (Certified Residential Specialist), which require that agents complete additional real estate training, show they’re constantly learning. Ask if agents have designations and, if not, why not?

3. How many homes did you sell last year?

Agents may tout their company’s success. An equally important question is how many homes they’ve personally sold in the past year; it’s an indicator of how active and aggressive they are.

4. How many days on average did it take you to sell homes?

Ask agents to show you this data along with stats from their local Multiple Listing Service (MLS) so you can see how many days, on average, their listings were on the market compared to the average for all properties in the MLS.

5. How close were the asking and sales prices of the homes you sold?

Sometimes sellers choose their agent because the agent’s suggested listing price is higher than those suggested by other agents. A better factor is the difference between listing prices and the amount homes actually sold for. That can help you judge agents’ skill at accurately pricing homes and marketing to the right buyers. It can also help you weed out agents trying to dazzle you with a lofty sales price just to get your listing.

6. How will you market my home?

The days of agents putting a For Sale sign in the yard and hoping for the best are long gone. Look for an agent who does aggressive and innovative marketing, especially on the Internet.

7. Will you represent me exclusively?

In most states, agents can represent the seller, the buyer, or both in a home sale. If your agent will also represent buyers, understand and consent to that dual representation.

8. How will you keep me informed?

If you want weekly updates by email, don’t choose an agent who plans to contact you only if there’s an offer.

9. Can you provide references?

Ask to talk to the last three customers the agent assisted. Call and ask if they’d work with the agent again and if the agent did anything that didn’t sit well with them.

10. Are you a REALTOR®?

Ask whether agents are REALTORS®, which means they’re members of the NATIONAL ASSOCIATION OF REALTORS® (NAR). NAR has been an advocate of agent professionalism and a champion of homeownership rights for more than a century.