Positive Real Estate Changes in the Air

Legislation Aims to Shore Up Housing Industry

There’s no question that news in the real estate industry has taken on a negative tone in recent years, with the collapse of the sub-prime market and the resulting foreclosures, not to mention the continuing decline in home values — especially in Michigan, where the foreclosure crisis is coupled with job loss and the economy continues to flail.

The good news is federal, state and local officials have been working toward implementing a number of reforms to help stimulate both the housing market and the economy.

“There’s a rule of thumb that approximately 30 percent of the value of the purchase of a home, let’s say the home was purchased for $100,000, 30 percent over and above the purchase price is going to go into the economy, and that starts with the transaction itself,” said Nanci J. Rands, a Realtor with SKBK Sotheby’s and director of the Michigan Association of Realtors (MAR). “Money goes to pay the commissions, title insurance … movers, painters … the purchase of furniture — the list goes on and on and on. The purchase of the house is just the beginning — it begins the whole process … and has a good effect on the economy.”

The FHA has already implemented a number of improvements, including increasing loan amounts and offering more programs for first-time and low-income buyers; and banks and mortgage brokers have reverted back to traditional mortgages, tightening the reins on the types of loans offered and the amount needed for a down payment, and increasing credit score and income verification requirements.

“A lot of fly-by-night appraisers and brokers have already closed up shop,” said Kim Miller of Landmark Appraising, regarding the effect of more stringent lending standards.
“The sooner we eliminate risky lending due to fraud, the foreclosures will slow down. Although I don’t know what percentage of foreclosures are fraud related, one less foreclosure is good for this market. With the spring market under way, I see positive things in the future for our market,” said Mason Miller, assistant vice president of sales at Flagstar Bank, of the need to better regulate the housing industry.

While that’s a start, more needs to be done; however, there may be a light at the end of the tunnel, as new legislation to help shore up Michigan’s housing market and stave off fraud continues to be implemented, and industry professionals remain positive that the changes will be for the good — eventually.

“I think some of it will help,” said Rands of the legislative measures being taken. “I think we’re starting to see glimmers of light. My overall opinion is Michigan is coming out, has begun to see improvement. It’s not over, though — but it’s looking more encouraging.”

In response to the whole sub-prime fiasco, local and state officials, as well as MAR and other real estate professionals, have already taken measures to improve matters, including the April 8 passage of the Principal Residence Exemption, Public Act 96, which will give homeowners who had to move and can’t sell their old house a tax break in that they can claim two principal residences as long as they meet certain requirements: The home must be on the market; it can’t be leased or used for commercial purposes; it must be for sale; and the homeowner must reside in Michigan.

“It’s meant to support the Michigan market — if they have a house here and moved out of state, then they’re not contributing to Michigan’s economy. It’s definitely made to be an incentive for people who choose to remain in the state,” said Rands.

New legislation to help clean up Michigan’s mortgage loan industry was also recently passed. The legislation, which was signed into effect April 3 as part of a 13-bill package — Senate bills 826-833 and House bills 5287-5291 — by Gov. Jennifer Granholm, is meant to protect consumers from real estate fraud and unfair lending practices by giving the Office of Financial and Insurance Service (OFIS) more authority to track mortgage loan officers.

“I believe this act is intended to clean our industry of unethical loan officers. This alone should help consumers regain their confidence in the mortgage market. … This is good and will also help our industry — an educated consumer forces loan officers to step up to the plate and do the right thing or get out of business,” said Miller.

The 13-bill package also stipulates mandatory background checks, strengthens licensing and education requirements for mortgage loan officers, and implements changes as to how appraisals are done to help stave off fraud.

“Many homeowners were appraised too high, and now they’re upside-down and can’t refinance, and they can’t pay their mortgage. … Certain appraisers would cave into lenders and increase a home’s value. This will make it so that appraisers have no direct contact with loan officers, which is good — a little late, but good,” said Miller, adding that homeowners should definitely look into having their homes re-appraised so that the state equalized value, or taxable value, of their home reflects the current market.

“Typically with property tax reviews, 50 percent are approved for reductions and 50 percent are told no; however, they can appeal to the tax tribunal. A tax tribunal may sound ominous, but it’s just a judge, an appraiser and you, and the judge only looks at the facts, unlike a city, which is looking to keep its tax base. … There’s been very good success with the tax tribunal,” said Miller, adding that recent amendments to the Tax Tribunal Act of 1973 should also help.

For more specific information on these acts, and more, visit www.legislature.mi.gov and click on the Public Acts (Signed Bills) link, or call the State Law Library at (517) 373-0630 with questions regarding legal matters.


By Christa BuchananC & G Staff Writer