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Pre-purchase Counseling Proving Helpful

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | July 22nd, 2016

As part of National Homeownership Month, Shaun and Nicole Avery journeyed from rural Maine to the White House in late June to tell their story about how homeownership education classes helped pave the way to their first home.

Nicole and Shaun -- an active member of the Coast Guard -- participated in homebuyer education and pre-purchase courses offered by Coastal Enterprises Inc., a counseling agency approved by the Department of Housing and Urban Development (HUD). The Averys went through a 10-hour, web-based curriculum that allowed them to proceed at their own pace, followed by several in-person consultations with a counselor. As a result, they were able to pair a state-sponsored down payment assistance program with a VA loan.

And now they are no longer renters; they own the roof over their heads.

Stories like this are playing out across the land as more and more potential first-time buyers are learning just what it takes to be owners. They find out how mortgages work, how to make and live within a budget, how to maintain a house, the necessity of building up savings for major repairs, and what to do if they are hit with a layoff or major illness and can't make their payments.

Not everyone sees the value of such education. Some lenders view counseling as a speed bump that prevents them from closing loans quickly. And a study by Fannie Mae found that counseling programs may be a waste of time for consumers. The giant mortgage investor said its research shows that 36 percent of lenders believe that such programs have no value, compared to 33 percent who believe they do.

But the preponderance of research suggests otherwise. For example, early results from a rigorous HUD study of the benefits of housing education and counseling are "encouraging," the agency reported last month.

Over the next four years, HUD hopes to provide definitive, long-sought answers about the impact of homebuyer education and counseling on mortgage literacy and preparedness, the success rate of buyers being able to keep their homes, and how well they perform with their mortgages.

So far, the agency says participants show a better understanding of their loans and the mortgage process than a control group that didn't go through counseling. Participants are also more likely to have higher credit scores, and showed a greater appreciation for communicating with lenders.

Other studies have already validated the impact of pre-purchase education. An analysis of 75,000 loans originated between 2007 and 2009, for example, showed that borrowers who took classes offered by NeighborWorks America's nationwide network of affiliates were one-third less likely to become 90-plus days delinquent during the two years after they received their loans.

More broadly, a study by researchers at The Ohio State University found people who took financial counseling courses perform better on a variety of credit outcomes, including revolving debt, better money-management skills and improved financial confidence.

Even a later survey by Fannie Mae, which found "major shortcomings in consumer knowledge," suggested that borrower education is worthwhile. "Advancing from aspiration to sustainable homeownership is more likely to occur if consumers have an accurate understanding of the requirements to qualify for a mortgage," Fannie's researchers said.

Fortunately, it isn't difficult to find decent counseling services. Simply go to hud.gov and search out HUD-approved agencies in your area. The services are often free, but may cost a few hundred dollars.

Here are the types of classes you'll find:

-- Pre-purchase. This will help you learn the habits of good credit, prepare you for all that is involved in owning a home, teach you about mortgages and how to make sure you are creditworthy. While pre-purchase counseling is primarily aimed at rookies, and may be required by some lenders, repeat buyers may also be required to attend classes if they have gone through a foreclosure.

-- Post-purchase. Learn how to navigate the unchartered ownership seas that lie ahead once you move into the house. Learn how to manage your loan if you think you might miss a payment as a result of a layoff or medical emergency, or if you are just short on cash. Learn how to manage your budget and how to pay for major repairs such as a leaky roof or malfunctioning air conditioner.

-- Foreclosure prevention. If you fall behind on your payments, this class can help you work with your lender and get back on track.

-- Rental assistance. Similarly, counseling agencies can help renters who are experiencing problems making their rents or finding affordable housing.

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Tax Credit Certificates On the Rise

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | July 15th, 2016

As the drive to create more affordable housing strengthens, more and more state and local housing authorities are issuing mortgage tax credit certificates (MCCs). These help qualified low- and moderate-income buyers offset a portion of the interest they pay every year for their home loans.

The MCC program was established by the Deficit Reduction Act of 1984 and modified by the Tax Reform Act of 1986. After peaking in 1997, the number of tax returns claiming the credit dipped by more than 50 percent, then started to take off again in 2007.

The maximum tax credit allowable each year is $2,000 -- maybe not much, in the grand scheme of things. But it is a dollar-for-dollar reduction against your federal tax liability, as opposed to a typical deduction, so it comes directly off your bottom line.

Better yet, it can be layered onto other government programs that also seek to make housing more affordable. And lenders sometimes add the credit to your income, so you might qualify to purchase a bit more home.

However, MCCs "are not a silver bullet," says Rob Chrane of DownPaymentResource.com, a website that lists some 2,400 different programs nationwide. "They won't cure all ills, but they can help move the needle significantly."

According to the latest figures from the National Council of State Housing Agencies (NCSHA), state authorities more than tripled their issuances of MCCs between 2012 and 2014. And that doesn't include the numerous local housing finance authorities, which also issue MCCs. In Texas, DownPaymentResource counts 19 local issuers, besides the state agency. In California, 12 local issuers offer MCCs.

"We've seen a large increase in issuances," says Greg Zagorski of the NCSHA. "We're seeing a lot more interest in the program as states seek to rebuild their single-family lending programs."

Currently, 34 states issue the credit certificates, and the District of Columbia introduced MCCs in the nation's capital just last month. (The states that do not yet offer MCCs are Alaska, Connecticut, Georgia, Kansas, Louisiana, Maine, Massachusetts, Nebraska, New Jersey, New Mexico, New York, North Dakota, Oregon, Tennessee, Utah and West Virginia.)

Here are the program's basics:

Each year, your mortgage tax credit will be calculated based on a percentage of the total interest paid on the loan that year. The percentage varies depending on the program, but it ranges from 20 percent to 50 percent. According to DownPaymentResource, 40 percent is typical.

The certificate remains in effect for the term of the mortgage, as long as the underlying property remains your principal residence. You can adjust your withholding on your W-4 to take the credit into account, so you will have a bit more take-home pay listed. And your lender can use the added income to approve a somewhat larger loan.

Homebuyer education is required, though. You must take a course from a counseling agency approved by the Department of Housing and Urban Development prior to closing.

The program is open to individuals and families who meet certain income and purchase requirements. These rules are different for each issuing authority. In Maryland, for example, the maximum sales price ranges from $255,000 in rural areas to $525,000 in Baltimore proper. Income limits also vary in the Old Line State, based on household size, from $89,000 in rural areas to $152,000 in urban areas.

Across the Potomac River in Virginia, meanwhile, the max sales prices range from $251,900 in rural spots to $500,000 in urban core areas. The max income ranges from $121,900 for one- and two-person households to $142,300 for households with three to eight people. In Virginia, moreover, there is a significant federal recapture tax if you sell the house within nine years and realize a significant increase in income.

Also, you must use the house as your primary residence and cannot have owned your main home for the previous three years. Veterans are exempt from the three-year rule.

Again, the maximum amount of the credit cannot exceed $2,000 in a single year. And the credit cannot be any larger than your federal tax liability after all other credits and deductions have been taken into account.

But credits in excess of your current-year tax liability can be carried over for use in subsequent years.

According to NCSHA data for 2013, the national average loan amount of a borrower who used a mortgage credit certificate was $156,632. The average borrower income was $52,862. About 1 in 4 MCCs were claimed by minorities, and nearly 2 out of every 5 were claimed by female heads-of-household.

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Lay It Again, SAM: Could Robots Build Your Next House?

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | July 8th, 2016

SAM is a bricklayer who never takes a day off, doesn't call in sick, never checks his cellphone and doesn't even take a coffee break.

Some would say that's inhuman, and they'd be right. SAM -- Semi-Automated Mason, that is -- is a robot. Once he's programmed by his handlers, he takes off, laying brick after brick after brick without saying a word. He can lay 1,000 bricks an hour and finish the typical two-story house in two days.

Created by engineers in Perth, Australia, SAM auto-corrects 1,000 times per second to prevent interference from sway and vibrations. Slapping mortar on the bricks and then putting them in place -- the exact opposite of the way humans do brickwork -- the machine is 20 times faster than a journeyman mason.

People still do the grunt work, like mixing the mortar and loading the bricks into the robot. It takes about an hour to set up the tracks, according to SAM's inventors, and then he -- oops, it -- is off. Enter the critical measurements for wall heights, window sizes and locations, and the machine lays brick all day long.

Some people don't think the robotic bricklayer will ever catch on in the real world of residential construction.

"Builders have been engaged for a thousand years trying to create a system better than masonry," posted one naysayer on ProTradeCraft.com, suggesting that it will take "our mechanical friend's inventors" just as long to get it right.

"I have to say, this will never work to be cost-effective," posted another doubter.

They may be right. But there's no doubt that robotics will one day be commonplace, if not to help erect the house, than inside the house to help simplify its inhabitants' lives.

Take robotic vacuums, for example. They made their debut in 2009 and have become hugely popular. The latest models can self-start on a programmed schedule, vacuum, sweep and mop an entire floor in a single cycle and return to their charging stations when their batteries run low.

Meanwhile, Asus, a maker of laptops and phones, has unveiled a plan to break into the "aging in place" market with Zenbo. At $599, Zenbo is marketed as a "fairly affordable" home robot that helps manage its owner's health and smart devices, according to trade pub TechHomeBuilder. Zenbo will remind people of doctor's appointments, medication and exercise schedules, while ultimately keeping a virtual eye out for emergencies.

Construction, on the other hand, has yet to be transformed by automation. But with builders finding it ever more difficult to find skilled labor in almost every trade, it's inevitable that "steel-collar workers," as robots are sometimes called, will replace some blue-collar workers on job sites.

"Anywhere you have unsafe, boring or drudgery work, or heavy lifting or something else physically demanding, you can have a machine do it," said Scott Peters of Construction Robotics in an article on HowStuffWorks.com. "What you have to do is find ways to define the problem and then add sensors and smart technology to do the task."

How about big, strong robotic helicopters, hoisting roof joists or wall sections into place? Daniel McQuade, chief executive officer of Tishman Construction, is thinking about them for commercial construction, so why not for houses, too? "In the next 10 years, there will be drones, with a guy running them from a safe place," he said at an Urban Land Institute meeting last fall.

And there are already driverless cars, so why not driverless construction vehicles? The Japanese firm Komatsu, which makes wheel loaders, excavators, dozers, crushers and dump trucks, is reportedly building robotic bulldozers guided by cameras, lasers and 3-D data transmitted by aerial drones hovering above them.

Then there's the giant 3-D robot printer created by a University of Southern California (USC) professor that can build a complete house in a single day. The robot can read an architect's computer-aided design drawings and spit out exactly what the plans call for. Building the house from the ground up, the machine, which looks like scaffolding with nozzles, loads up on semi-liquid concrete and extrudes it, layer by layer, into wall structures and domed roofs.

Sure, the robot could pop out cookie-cutter houses, one after another, as well a one-of-a-kind custom homes. But USC's Behrokh Khoshnevis, a professor of industrial and systems engineering, says his "Contour Crafting" robot can also build fast post-disaster housing for the displaced, military housing for our folks in uniform, inner-city and in-fill houses for people in need, and houses in developing countries.

Because the robot is quicker than humans -- and, once programmed, needs no rest -- Khoshnevis claims a 45 percent to 55 percent savings in labor. There's also an estimated 25 percent to 30 percent savings in materials -- with no waste.

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