My New Blog

y Scott Jarvis, Washington State Director of the Department of Financial Institutions

“The oldest and strongest emotion in mankind is fear.” - H.P. Lovecraft

If you watch only national news of financial turmoil and declining housing prices you may fear now is not the time to buy a home.   While that may be the case in other states, it’s not an accurate picture of the market in Washington. Washington State has a unique set of positive economic variables that sets us apart from much of the country.   

As the financial regulator responsible for overseeing the financial safety and soundness of our state-chartered banks and credit unions, the Department of Financial Institutions stays in close touch with local real estate market conditions.   This message is prompted by that “local knowledge” and a concern that the true nature of the Washington State real estate market has been lost among the national headlines.

Is it a great time for everyone in Washington to buy a home?   No .   However, we can truthfully say this may be a great time for you to buy.

There may be at this time an historic opportunity to buy in Washington State.   There are many reasons for optimism.

Long-term mortgage rates are in historically low ranges and, contrary to what you may think, our state’s banks, credit unions, consumer loan companies and mortgage brokers have money available for buyers with reasonably good credit.

Also, Congress acted to expand a number of home loan programs.   Washington’s financial institutions have a strong presence in your communities and have excellent financing options for home buyers, including great programs for first time homebuyers. With the addition of expanded FHA guidelines, they can meet a variety of different borrower needs.

Additionally, there is a good selection of new and existing homes available on the market right now.   Reports of plummeting home values are almost always coming from markets far from Washington State. Here, home values are generally stable, experiencing only modest fluctuations up or down over the past year.

Perhaps the most important factor to consider is the reality that the Washington State economy continues to outperform the national economy.   

If you want to buy a home, expect to live in the home for at least three years. If the only reason you are hesitating to buy the home you want in Washington State is an expectation that you are likely to get the same home for considerably less money if you wait a few months, you may want to reconsider.   Very few of us are lucky enough to pick the bottom of a stock market downturn — and that also holds true for the housing market.

For many buyers looking for that perfect home NOW may be the time to buy and be comfortable in your new home.   Depending on your personal financial situation, this could be an opportune time to contact a Washington State REALTOR®, or home builder to help you find that perfect home and a Washington State financial institution or mortgage broker to assist with your financing.

There are many resources available to assist you with your decision.   The Washington State Department of Financial institutions, the Washington State Housing Finance Commission, our state’s financial institutions, mortgage brokers, REALTORS®, and your local home builders association are among the organizations providing valuable information to assist you with your home purchase decision.

Free State of Washington-sponsored pre-purchase counseling is available to Washington residents thinking of buying a home or considering refinancing.   To speak with a counselor, call the Washington Homeownership Information Hotline at 1.877.894.HOME (1.877.894.4663) or find a participating counselor near you at www.homeownership.wa.gov.   You can also visit http://www.dfi.wa.gov/consumers/homeownership/ and http://www.wshfc.org/   to educate yourself about mortgages and homeownership and find links to other homebuyer resources.

It’s a great time to buy a home in Washington State!

2008 has been a volatile year in terms of mortgages and tax law changes. Following are four mid-year tax changes that you need to know to save your clients thousands of dollars.*

1. You can elect to write off double the previous maximum allowable -- up to $250,000 of equipment - in this year rather than depreciating over time.

2. Increase business mileage reimbursement to 58 cents starting July 1 2008.

3. You can write off up to 25,000 of the business use of a Sport Utility Vehicle plus bonus depreciation on new SUVs.

4. You can now put up to $56,000 in a profit sharing account, and an extra $5,000 if you are age 50 or older.

Individual situations can vary so consult your CPA to determine the impact on your tax return.

· FHA is implementing risk-based pricing today

· Omnibus housing bill could move more quickly because of turmoil surrounding Fannie Mae and Freddie Mac

· Fed is expected to implement HOEPA changes today

· One likely change will change disclosure of broker compensation

· This change affects all loans originated by mortgage brokers

I. FHA Is Implementing Risk-based Pricing

Despite likely Congressional action to enact a moratorium, FHA is moving forward with the implementation of risk-based pricing today. Below is the message that FHA has posted on its fha.gov website for the handling of administrative problems with the implementation of risk-based pricing.

How to Handle Any Implementation Problems:

While FHA anticipates a smooth transition to risk-based premiums and has extensively tested the systems that will provide the upfront premium fact
ors, as well as the annual premiums, FHA also recognizes that some errors may occur. Therefore, FHA has established an e-mail inbox for industry representatives to submit questions and / or problems, be they associated with particular cases or more globally to a large number of loans lenders
are trying to insure. To notify FHA of any problems or request additional assistance, please contact FHA at: riskbased@hud.gov

III. Impact of Recent Events on the Housing Bill

As a result of actions taken by the Treasury and Fed this week-end in response to the unprecedented turmoil involving Fannie Mae and Freddie Mac last week, it is more likely the enactment of the housing bill will be expedited (possibly as soon as this week). Senator Chris Dodd, Chairman of the Senate Banking Committee, appeared on CNBC this morning saying that he hoped the House would move in the next 24-48 hours to pass the Senate bill or make modest changes to it.

IV. HOEPA Rule

The Fed is expected to announce new rules today that will tighten standards on subprime and alt-A mortgages (e.g. an ability to repay standard and a limitation on the use of stated income). One provision is expected to include changes to the disclosure requirements with respect to mortgage broker compensation.

In the proposed rule published earlier this year, brokers would be required to advise borrowers of their total compensation upfront and it could not increase prior to closing. The change to broker compensation requirements would affect all loans originated by mortgage brokers not just alt-A and subprime.

These new rules will not be effective immediately. We expect at least several months of lead time before they become effective.

V. IRS Bulletin 2008-28

IRS published IRB 2008-28. No actions were taken against seller funded down payment assistance organizations.