Proposed bills may be boon to homebuyer '93 called good year for buying a house

THE BALTIMORE SUN

This year may be the best year to buy a house. Yes, you've read that before, probably every year for the last 10 years.

But this year may be different. Home prices have come down to earth, mortgage rates continue to stay low, and consumer confidence seems to be on the upturn. And, besides all that, Congress has a new, decidedly more consumer-oriented face -- lobbyists have high hopes for legislation to help middle-income people buy homes.

Here's a roundup of some of the bills before the Maryland General Assembly, the Congress and local governments that may affect homebuyers.

MARYLAND

* Mandatory sellers' disclosure:

Joe McGraw, government affairs director with the Greater Baltimore Board of Realtors, calls a bill to require sellers to disclose problems about their property "the No. 1 issue" for real estate legislation in Maryland this year.

The bill would require a seller to list property defects before the buyer commits to a contract.

"It's one of the rare pieces of legislation that's a triple win," Mr. McGraw said. "The buyer gets clear notice of possible problems of the property. For the seller, . . . it affords significant protection against litigation after property is transferred." And the real estate agent, he said, doesn't have to get caught in the middle of lawsuits between buyers and sellers.

A year ago, only California and Maine required sellers to disclose property defects in writing to buyers. Now, Alaska, Kentucky, New Hampshire, Ohio, Rhode Island, Virginia and Wisconsin have similar laws.

"It's something the National Association of Realtors has been pushing for some time," Mr. McGraw said. The legislation was introduced in the Maryland legislature last year but died in the House of Delegates.

Jamie Gregory, governmental affairs director with the Maryland Association of Realtors, said lobbyists simply ran out of time for the bill.

"It was a new concept, and by time we got the Senate educated, it was too late. In Annapolis, the rule of thumb is it takes two years to pass a bill. You spend the first session in education."

* Semiannual property tax payments:

Mr. Gregory said this bill would cut in half the property taxes that buyers must pay at settlement and make it easier for many people to buy homes.

Maryland law now requires homebuyers to pay, in cash, up to 14 months of property taxes at settlement. For a $125,000 house in Baltimore County, the tax bill may amount to $2,000. Property tax is one of the costliest items on the settlement sheet, Mr. McGraw said.

But the Maryland Association and Baltimore Board of Realtors FTC say buyers should be able to pay half that amount up front, and pay the rest six months later if they want to.

The semiannual tax bill has been introduced to the General Assembly each year since 1990. Each year it has been booed by some local government representatives who say they need tax revenues to be paid all at once. They claim they would have to revamp tax collection procedures and budgets to compensate for the delayed taxes.

But Mr. Gregory says the semiannual property tax bill would be "revenue neutral" with no loss or gain in revenues for local governments. It would require homebuyers who split their tax payments to pay a fee to municipalities to cover administrative costs and any loss of interest on delayed revenue.

In its current version, the semiannual property tax bill doesn't say what the fee would be.

"Local governments could set the fee, but it would have to be a reasonable fee: a percentage or some standard charge," Mr. McGraw said. "Administrative costs should be minimal. We're skeptical of any reports by local governments that it will cost them an outrageous amount of money to track. It's hard to understand why they can't mail out two bills in one envelope at one time," with one bill due six months after the first.

Some prospective homebuyers aren't convinced that a semiannual property tax bill would save them much money in the long run. Dru and Bill Beaudry, preparing to trade up to a new home when they find a buyer for their condominium, said the option could be a big benefit to people who don't have much money left for settlement charges.

But the fee they would have to pay is the key.

"It seems things like this often turn into just another revenue source for local governments," Ms. Beaudry said.

Baltimore

* Baltimore Settlement Expense Loan Program:

This program, which began in January, allows middle-income people living in the city to finance their settlement fees. Buyers of homes in the $60,000 to $100,000 range may borrow as much as $5,000 from a city fund. Baltimore has dedicated $2.5 million to the pilot program.

Mr. Gregory says the settlement expense loan program "is the very best thing the Schmoke administration has done to support housing."

Baltimore County

* Fast-track program for affordable housing developers:

County Executive Roger B. Hayden has proposed this program to the County Council to attract and keep young families in the county.

Mr. Hayden's proposal would reduce the amount of time the county needs to review development proposals from 18 months to as little as three months. Ultimately, he and proponents say, the program would make it easier for developers to build single-family detached homes in the $110,000 to $150,000 range.

NATIONAL

* Escrow account reform:

A bill before Congress may require the mortgage banking industryto change the way it handles borrowers' money in escrow accounts.

One part of the bill would require lenders to use a different procedure to calculate interest on borrowers' escrow accounts. That could force mortgage companies to give refunds to borrowers who overpaid their accounts.

Other parts of the escrow reform bill would allow borrowers who have paid down their loan to less than 80 percent of its value to close their escrow accounts and pay taxes and insurance themselves.

Some lending companies say the reforms could actually work to the detriment of consumers who rely on lenders to advance funds for deficient escrow accounts, then pay them back through higher mortgage payments spread out over a few months.

* Mortgage interest deduction:

Housing lobbyists don't yet know if they will have to defend the mortgage interest tax deduction that millions of Americans rely on each year to reduce their taxes. Some say it isn't likely anyone in Congress will target the mortgage interest deduction to help pay down the national debt: Too many new members were elected on promises to crusade for the interests of middle-class Americans.

But other lobbyists contend that anything is fair game this year as lawmakers grapple with ways to reduce the budget deficit.

* Realtor disclosure laws: The National Association of Realtors and the Consumer Federation of America is lobbying for states to strengthen laws that govern how real estate agents work with homebuyers.

Most real estate agents who help buyers find homes actually work for sellers. Agents are already required to disclose that fact to buyers.

The NAR says agents should be required to emphasize to the buyer at first contact that they work for sellers. That might deter some buyers from giving the agent information about their home or finances which the agent is obligated to pass on to the seller, and which could compromise the buyer's bargaining power.

* Real Estate Settlement Procedure Act: Legislation that went into effect in December, this is a series of regulations drafted by the U.S. Department of Housing and Urban Development.

The act requires mortgage brokers and lenders to give borrowers a "good-faith estimate" of how much their loan will cost, including all the fees they will pay to mortgage brokers. HUD says it's only fair. Mortgage brokers and lenders complain that it's just added paperwork that will ultimately cost the consumer more money.

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