Article 1 (The Homebuyer Protection Plan and Your Business) Article 2 (You Can Save Some Money) Article 3 (Q & A with Michael Merrill) Article 4 (Get to Know Allston and Brighton)

The Homebuyer Protection Plan and Your Business By: Davis Rowley (President of the Residential Association of Realtors) A recent agreement between the Department of Housing and Urban Development (HUD) and the National Association of Realtors (NAR) will help to educate consumers while also preventing home inspections from causing undue delays in closing a sales contract. Called the Homebuyer Protection Plan, the agreement signed in June led to the development of a new Federal Housing Administration (FHA) disclosure form called "For Your Protection: Get a Home Inspection." By providing this form to prospective homebuyers who plan to use the FHA mortgage insurance program, Realtors can help their clients better understand an important part of the homebuying process. By giving your clients this form and reviewing it with them, you can create a better-informed customer. This form explains to the homebuyer what the difference is between an appraisal and a home inspection. This knowledge should better prepare your client to know when an inspection is needed and when is the appropriate time to have an inspection performed. The new FHA disclosure form explains what FHA does for homebuyers (and what FHA does not do), the distinct purposes of an appraisal and of a home inspection, why a home inspection might be necessary, and what an inspection entails. After the prospective homebuyer reviews this form, which is now required for all FHA-insured home purchases, he or she must sign and date the form, indicating that it has been read and understood. NAR, along with the Mortgage Bankers Association of America (MBA), approached HUD last year to begin a process that led to the Homebuyer Protection Plan. Both associations wanted to avoid proposed policy changes that would have been detrimental to homebuyers and the real estate industry. Congress had proposed in 1998 to require home inspections for all FHA-insured home purchases. NAR opposed that legislation because of the cost increase that would have resulted for homebuyers who need to use the FHA program, many of whom are first-time homebuyers. HUD responded to this proposal with a plan to create new responsibilities for FHA-approved appraisers. These added duties would have included some home inspection tasks, as well as the responsibility for recommending a full home inspection when necessary. NAR also opposed this proposal because it could have created liability problems for some real estate professionals, including appraisers. The problem was how to protect homebuyers from purchasing homes with undetected flaws. But a federal mandate for inspections didn't seem like a good solution, and it made little sense to ask appraisers to do the work of home inspectors. The Homebuyer Protection Plan - a voluntary educational agreement among HUD, NAR and MBA - seemed like the right solution. It uses the expertise of Realtors and lenders to create better-informed consumers. And better-informed consumers make for smoother transactions. Under the Plan, NAR is using Realtor Magazine and its members-only website, One Realtor Place, to inform its membership about the Plan. On One Realtor Place, NAR members can find links to various HUD forms and other information on the Plan. NAR also will help HUD develop informational brochures about appraisals and home inspections. Realtors will be encouraged to display these brochures in their offices. The Homebuyer Protection Plan is a relatively easy way for our businesses to inform our clients about some of the issues they face when buying a home. I think an informed homebuyer makes an ideal customer.

You Can Save Some Money... By Jay McHugh of RE/Max Affiliates Effective July 29,1999, the Homeowner's Protection Act took effect. If you buy a home with less than 20% down your lender will insist that you buy a Private Mortgage Insurance Policy, (PMI). This "policy" is supposed to protect the lender if you don't make your payments, and the home is foreclosed on. What this means is that the PMI substitutes for the higher down payment. This form of home-buying insurance is good because it allows people to buy homes without having to wait until they accumulate the higher down payment. The down side of PMI use in the past is that some lenders would continue to collect the PMI well after the equity in the home passed 20%. Some even held the PMI until the mortgage was paid off in full. Your Voice Was Heard... The public complained. Your REALTOR and the REALTOR organizations heard your cry and went to Congress. A Senate version of this new law was sponsored by Sen. Alfonse M. D'Amato (R-NY). After some time, Congress agreed with the public and the REALTOR organization that the way lenders were using PMI was one of the worst forms of overcharging homeowners for unneeded insurance. Congress enacted Legislation that would force lenders to release you from your PMI when the equity value reaches 20%. The law states that after 21% the lender will be penalized for such. The Act allows consumers to ask lenders to end the PMI coverage when they can prove 20% equity in the home. The owner must have a good credit history and may need an appraisal to confirm that the debt is only 80% of home value. Under the new federal rule when equity payment reaches 22%, PMI policies must be automatically dropped by the lender. Weigh Your Choices... The automatic cancellation date under the federal guideline is defined as the date when the loan is scheduled to reach 78% of the original home value of the secured property. An optional cancellation date occurs when the amortization schedule requires the loan balance to be 80% of the original value of the home used to secure the loan. This may happen sooner if the buyer makes additional loan payments. Your REALTOR can assist you in determining if the property value rises faster than actual payments. This can happen through appreciation or home improvements. For your part as a consumer, you will have to weigh the costs and benefits of seeking an end to your PMI once you have paid the loan down by 20%. For example, is it better to pay for an appraisal and seek an end to the PMI once you have paid 20% down? Or would it be better to wait for the automatic cancellation at 22% paid off the equity? New Guidelines Require Lenders to Disclose...      · Fixed rate borrowers are to receive an amortization schedule when PMI can be cancelled.      · The requirements for a "good repayment" history are defined. No payments 30 days late within one year of cancellation request, or one payment 60 days late within two years of seeking a cancellation request.      · Highlights the "original value" of the property as either the purchase price or the appraised value at the time of the purchase, whichever is lower.      · Requires borrowers to show that the property value has not declined when seeking an end to their PMI at the optional 20% level. A Caution... Under this new legislation a lender can continue PMI up to 15 years for "high-risk" mortgagees regardless of equity. This bill applies to loans made as of July 29, 1999. It DOES NOT apply to loans already in place or FHA Loans. Ask Your Lender... Now would be a good time to ask your lender about current PMI cancellation policies. If you make your payments on time, The Homeowners Protection Act will curb some of the most abusive lender practices. Cool Tip of the Month... Be sure to wash off your air conditioner's outside unit to keep it from getting clogged with debris. Proper ventilation is a must to keep air conditioners running in top shape.

Q & A with Michael W. Merrill of Merrill & McGeary, a real estate attorney. Q:   I want to purchase a new Condominium unit. In order to do so, I will have to sell the one I currently own. I own my own existing unit with a friend and he is willing to purchase my share of the unit from me. My mortgage broker indicated I could qualify for a loan to purchase the new Condominium if my existing Condominium is under agreement and the Buyer has a commitment. I think I can make this work, but the Seller's attorney on the new Condominium will not agree to make the purchase contingent upon the sale of my existing unit. What do you think? Should I take a chance that all of the pieces will come together as planned? What is my risk? R.P. Boston, MA A:   Apparently, you have thought this out in great detail because it sounds as if you are quite knowledgeable about the issues. You know what you have to accomplish in order to make the deal happen. Therefore, initially you want to focus on whether or not your friend can obtain financing. If he cannot qualify, then he will not get a commitment, nor will you. My suggestion is to ask your friend to obtain a prequalification letter now and to immediately apply for financing thereafter. If he can prequalify now, it is likely he will obtain a commitment. You should also remember that not only does your friend have to qualify, but the Condominium unit will have to meet the lender's guidelines for owner occupancy. Investigate these issues with his broker now. Your risk if the transaction does not close is the potential loss of your deposit plus any other out-of-pocket costs and expenses you may incur such as mortgage application, inspection and legal fees. My advice is to put your unit under agreement and have the buyer's commitment in hand before you pay the deposit on the new Condominium. Don't risk your hard earned money, because there are too many variables. Q:   I own a two family house without parking. I would like to create a parking area on the property. Some of the houses on my street have parking in the rear and others in the front or side yard. What steps should I take to investigate and then initiate this project? L.S. Brookline, MA A:   Initially, you should obtain a plot plan or survey depicting the lot and the house, as well as a copy of the Town's street atlas showing your house and the other houses on the street. Then discuss potential parking locations on the lot with the Town's building inspector or with an engineer of your choice. The location of the parking you can create will depend upon the size of your lot and the proximity of the proposed parking area to your house and the neighboring properties. Adding a parking area onto your lot may require zoning relief from the Town depending upon the zoning district, front, side and rear yard set back requirements, as well as the size and grade of the lot. If zoning relief is required, you should contact your neighbors and inform them of your plans, because they will be notified by the Town when your application comes before the Planning Board or Board of Appeals for a hearing. This can be a complicated situation and I suggest you contact a real estate attorney familiar with zoning issues in your town.

Get to Know Allston and Brighton By Sara Rosenfeld Sr. Vice President, Co-Manager of Hunneman & Coldwell Banker If you are looking for a new home in Metro Boston, I suggest that you take the time to get to know all the different Boston neighborhoods. One of the areas I suggest you take time to look at a little closer is Allston and Brighton. Allston and Brighton are diverse with an international population and many different neighborhoods. They offer a variety of housing options and lifestyles. We suggest you visit the neighborhoods and experience them for yourself. If you would like a free copy of our office's "in and around allston-brighton community guide," which includes valuable information about these neighborhoods, please call us at (617) 731-2447 and we will arrange to get you a copy! Starting from the Charles River on the Cambridge line, the first landmark you will see is the Harvard University Business School and Harvard's Athletic Facilities. This area is adjacent to Storrow Drive West that intersects with Soldier's Field Road, a beautiful winding multilane road that runs adjacent to the Charles River and MDC Recreational Facilities adjoining the Charles River. Please take the time to explore the bicycle paths, picnic grounds, kyak and canoe rental facility, and even an outdoor theater that is part of the MDC Recreational Facilities. The neighborhood closest to this area is a very residential community consisting of single, two-family, and three-family houses, plus a minimal number of small apartment buildings, newer construction townhouses, and local businesses. Many homebuyers chose this section of Allston for its commuter conveniences along with its appeal for a less urban setting. Heading south from this section of Allston on the other side of the Mass Pike is the more bustling side of town. Harvard Avenue is the main commercial thoroughfare and offers an array of international restaurants, local bars, and entertainment spots, and other local businesses. We suggest you visit the web site of allston village to find out more about this area at www.allstonvillage.com. The streets surrounding Harvard Avenue consist of turn-of-the-century housing stock, primarily multi-family houses and apartment buildings with some of the apartment buildings converted to condominiums during the past 20 years. A few blocks east of Harvard Avenue is the beginning of the Boston University campus. Many of us who are familiar with Allston and Brighton think of this neighborhood first since we have visited the commercial district, but there are a few lesser-known neighborhoods we want to introduce you to. Heading west on Commonwealth Avenue after Washington Street, there are two abutting neighborhoods that run along Commonwealth Avenue, the Nottinghill Area to the north and the Aberdeen Area to the south. The Nottinghill Area offers residential surroundings of primarily single and multi-family houses set on a lovely sloping hill with tree-lined streets. The Aberdeen Area is primarily turn-of-the-century brick apartment and condominium buildings with a small scattering of single and multi-family houses and abuts the Brookline line, Beacon Street, and the area known as Cleveland Circle. The Nottinghill and Aberdeen Areas, along with Cleveland Circle and the Reservoir Area, are considered by many to be desirable because of the accessibility to many conveniences: 3 T-Lines of the MBTA, the Chestnut Hill Reservoir and Parks, and all of the great shops, restaurants, and movie theaters. These areas are also close to the main campus of Boston College, which lies west of the Chestnut Hill Reservoir. In next month's issue, I will continue to introduce you to some other neighborhoods of Allston and Brighton, including the Mansion District, Brighton Center, Oak Square, Breck Hill, Presentation Hill, Faneuil Area, and Chandler Pond. In the meantime, call us for a copy of our guide at (617) 731-2447 and visit the neighborhoods yourself!