Incentive Programs Key to Housing Backlog

Many prospective home buyers are unaware of some pivotal programs designed to help make the purchase of a home more affordable. These include assistance with down payments, special financing and even tax breaks on your purchase.

One key demographic that is helped with such incentives are police officers, emergency workers, and especially teachers. These programs are especially important to helping encourage homeownership within one of the most underserved areas of the population.  Furthermore, they help alleviate the glut of vacant homes crippling many communities throughout the country. 

One of these programs is the Teacher Next Door Program allowing qualified teachers the opportunity to purchase a HUD-owned property at 50% of the asking price. Its goal is to have teachers buy homes and commit to living in them for at least 3 full years. Another similar program opens up the same possibilities for police officers.  Teachers, firefighters and emergency medical technicians can help revitalize their communities through HUD's Good Neighbor Next Door Sales Program.

Several real estate companies offer fee rebates for using their agencies. On a local level, counties officers offer applicable employees access to various incentives.  The Howard County Maryland Public School system has the Employee Incentive Program allowing mortgage and real estate incentives, which include closing cost credits and lower rates.

In a time when many Americans are suffering from poor economic conditions and unemployment levels still stubbornly high at over 8%, people often rush to place blame. The target of the blame (often justified) is political figures ranging from the President on the national level all the way down toward local City Council members. When people suffer it is a natural inclination to look at those who are believed responsible for their troubles. Since the start of the downturn in 2008 the root cause of the problems has included members of Wall Street, Banks, Mortgage brokers, the Federal Reserve Board, among many others.

When economic conditions have deteriorated to the level where public services need to be cut, taxes raised or a combination of both – public sentiment turns against the biggest expenditure of all, public sector employees. A common belief is that is immune to the cancelled pensions, layoffs, furloughs, and pay cuts that a large group of private sector employees face. As a result, sentiment turns against public sector employees and the unions that represent them. In actuality, many jurisdictions – many public employees, such as NYC public school teachers face the same fate as those in the private sector.

There is no doubting the system in place for the public sector needs some kind of overhaul. However, teachers, police officers, emergency workers and fire department personnel are all some of the most underappreciated groups in our current economy, and remain the back bone of most communities. Special housing programs allow an opportunity for this key demographic to live closer to where they work and become a more entrenched fixture in the communities they represent.

These programs are also vital to the redevelopment of many areas, directly resulting in more jobs, safer communities, and the chance for a better education for the children of local residents. With the sale of vacant or foreclosed homes property values become more stable, in turn increasing property tax revenues to the state budget. An unoccupied home cannot be taxed, and plummeting house values reduces the revenue collected by the state for currently occupied homes.  

These improvements to the neighborhood also decrease crime and recreate the sense of community which has been lost in so many areas.  

These benefits are not just about entitlement spending. They are about societal issues whose benefits are far outweighed by minimal expense associates with the administering of such programs. 

HVCC Changes Residential Mortgages

HVCC Changes Residential Mortgages

The Home Valuation Code of Conduct (HVCC) adds an extra element of risk for the consumer when buying a new home or refinancing their existing mortgage. The code requires the random selection of appraisers by appraisal management companies set up individually by the chosen lender. Homeowners, who were often accustomed to using a “preferred” appraiser during much of the last decade, no longer have this option. First implemented for most loans as of May 1^st, 2009, HVCC has since expanded to include all FHA & conventional loans bought by Fannie Mae or Freddie Mac. The goal of the Code was to prohibit borrowers or mortgage originators from selecting appraisers which was believed to create a conflict of interest and thus reduce the quality of the appraisal. While the idea was noble in theory, it has substantial ramifications for the homeowner and the greater mortgage industry as a whole.

Homeowners have faced longer wait times, reduced quality of appraisals, as well as increased costs. Appraisal management companies (AMCs) have added an extra middle man to the process of loan origination. When banks sign up with relatively few management firms, it allows such companies to increase prices for the appraisal to pay for office staff and management while facing less competition. Such appraisal costs increases have been passed onto the homeowner and have been up to 33% higher than prior to HVCC. In addition local appraisers were forced to sign up to staff such companies, resulting in substantially reduced income due to reduced payouts by management companies to the appraiser. As a result of all of these changes, management companies will select appraisers far from the local market of the homeowner requiring the appraisal. Appraisers, trying to increase profits are taking on more jobs. Appraisal quality, speed of completion, and accuracy of appraised value have lagged. Homeowner’s have a difficult time disputing the inaccuracies in the reports, even after several rounds of quality control that are supposed to be part of the appraisal process. In addition, many have reported poor service with the AMC’s, delays with return calls, and a lot of added confusion from informal third party communication with the client. Most importantly, homeowners who spent up to $500 on an appraisal in an effort to obtain financing are often out luck when the completed appraisal makes them ineligible for a loan.  

HVCC was intended to provide a more accurate picture of the value of a home for the benefit of the homeowner and the investor who buys the loan. While it is true there were cases of aggressive mortgage lending creating undue pressure on the appraisal process, HVCC by itself has done little to curb such practices. The unethical and often illegal behavior of the few originators, homeowners, and realtors engaging in such activity created undue problems for those involved in the mortgage process. Those engaging in wrongdoing will only find new and innovative ways to stay ahead of any new regulations, including ways to get around HVCC itself. Reform in the mortgage industry is a necessary and vital need for its future. However HVCC has turned out to be another poorly planned and executed regulation by politicians who are often more focused on their political futures than the actual issue at hand.