WASHINGTON, DC — Fannie Mae (FNM/NYSE) announced yesterday a new, national policy on down payment requirements for conventional, conforming mortgages the company will purchase or guarantee. Starting June 1, 2008, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter® (DU®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations in the United States.

The new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining.

“As another part of our ‘Keys to RecoveryTM’ initiative, we are today announcing that we will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions,” Marianne Sullivan, Senior Vice President, Single-Family Credit Policy and Risk Management, said. “This new down payment policy reinforces our goal to support successful home-owning, not just home-buying, as we seek to bring liquidity to all communities and help the housing market recover.”

The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy.

“We are able to adopt this new, national down payment requirement, even in markets where home prices are declining, because our new automated underwriting risk assessment model DU Version 7.0 will limit risk layering and assess each loan more precisely,” Sullivan added. “At the same time, we believe that equity matters, especially in this market. Down payments are a critical success factor in homeownership — and responsible lending is good business.”

Since the housing correction began, Fannie Mae has expanded its mortgage guaranty business to serve the market’s urgent need for stability, liquidity and affordability. The company also undertook steps to help protect borrowers, manage the increased credit risk in the market, and fortify the company’s capital position.

Among these steps, the company has continued to assess and establish new pricing, eligibility and underwriting criteria for its business that more accurately reflect the current risks in the housing market and guard against the potential for foreclosure. These changes have been incorporated into DU and have included adjustments to credit risk assessment, loan-to-value ratios and down payment requirements, among other factors.

Among the changes in response to market conditions, in December 2007 Fannie Mae adopted a “Maximum Financing in Declining Markets Policy” that restricted the loan-to-value ratios on properties in markets where home prices are declining, essentially requiring higher down payments in these markets. The new single national down payment policy announced today will supersede that policy.

Fannie Mae Senior Vice President Jeff Hayward stressed the company’s commitment to special affordable lending programs to support homeownership for families of modest means. “We are stepping up to provide more liquidity and affordability to some of the most distressed communities while also seeking at least a 3 percent down payment investment through our Desktop Underwriter system from borrowers to help ensure their success.”

Fannie Mae will continue to provide support for homebuyers that need down payment assistance, and will continue to allow loans with Community Seconds® up to a maximum 105 percent combined loan-to-value ratio. Community Seconds allow a borrower to obtain a second-lien mortgage to help cover down payment and closing costs, with funding typically provided by a state or local housing agency; an employer; or a nonprofit organization. Fannie Mae also offers MyCommunityMortgage® and Flex mortgage products, which permit down payment assistance programs in the form of gifts and grants.

“We recognize that down payment assistance programs remain a viable tool for borrowers who can afford a mortgage long term, but might need a little help getting started,” Sullivan said.

As part of its “Keys to Recovery” initiative, Fannie Mae is expanding its partnership with the National Council of State Housing Agencies. The company will provide up to $10 billion in financing to help Housing Finance Authorities (HFA) serve first-time homebuyers of modest means. In some cases, Fannie Mae will purchase HFA mortgages that have greater than 97 percent loan-to-value ratios.

The first “Keys to Recovery” initiative that Fannie Mae announced on May 6, 2008 also includes: streamlined refinancing for Fannie Mae borrowers whose mortgage balances exceed the value of their homes; improved pricing for jumbo-conforming mortgages to help borrowers in high-cost areas; and a neighborhood stabilization initiative with the Center for Community Self-Help for targeted areas with high home foreclosures.

source: Fannie Mae

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When you have an automobile accident, the repair shop is required to restore your vehicle to original condition. That means using Original Equipment Manufacturer (OEM) parts, not after market or junkyard parts. It means straightening the frame to the original dimensions, down to the millimeter. It also means refinishing the vehicle with the same paint and layers of clear-coat finish used by the manufacturer. Your wrecked car is supposed to be “as good as new.” Could the same be said for your house, should it be destroyed? Would your homeowners insurance pay to rebuild it exactly as it stands today?

Probably not, reports Marshall & Swift/Boeckh, a company that provides the insurance industry with data about home values. According to the company’s annual study, nearly 60 percent of single-family homes are not insured for their actual replacement value. On average, these homes are insured for 20 percent less than the replacement cost. That means owners of a home that would cost $300,000 to rebuild might receive as little as $240,000 toward construction costs. With a $60,000 shortfall, the home cannot be restored to original condition. The home will have to be built smaller or the contractors would have to use cheaper materials.

There are several reasons for the insurance shortfall. To avoid higher premiums, many homeowners do not increase their insurance amounts to adjust for inflation. The longer a person owns a home, the further away from actual replacement costs their insurance becomes. Sometimes the building codes for an area change, requiring costly upgrades in design and materials when a home is rebuilt. The home improvement craze has also widened the insurance gap. Many homeowners add a room, upgrade a kitchen or bath, retrofit doors and windows, install new heating and cooling, or even purchase solar energy systems without factoring in the replacement costs for insurance purposes.

Some upgrades are covered by the “extended replacement cost” that some insurance companies offer their customers. The extended replacement cost provides as much as 20 percent more money for rebuilding than the amount stated in the homeowners insurance policy. The Marshall & Swift/Boeckh study includes this coverage in its under insurance estimates.

Homeowners who have been in their homes for three years or more should revisit their home owner’s insurance policies. They should check to see if they have extended replacement cost coverage. If they have made upgrades, they should inform their insurance agents. They also should ask for an analysis of their homes’ actual replacement costs. Many insurance companies offer this service for free. Replacement cost calculators are available on the Internet for a small fee. Adjusting insurance upward will cost more in the short run, but it would be well worth it should your home be “totaled” by a natural disaster, fire, or other catastrophe.

Bradley Steffens is the author of twenty-one books, coauthor of seven, and editor of the 2004 anthology, The Free Speech Movement. His Censorship was included in the 1997 edition of Best Books for Young Adult Readers and his Giants won the 2005 San Diego Book Award for Best Young Adult & Children’s Nonfiction. His latest book is Ibn al-Haytham: First Scientist, the world’s first biography of the eleventh-century Arab scholar known in the West as Alhazen
http://www.homeownerswiz.com/.

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Before Congress went on recess for the holidays, it passed a new tax break for middle-income taxpayers who plan to purchase a home in 2007. The tax break, neatly sandwiched in an omnibus tax bill, allow new homeowners to claim a deduction on their mortgage insurance premiums.

Many home buyers cannot afford to make an initial down-payment of 20% of their home value and are thus subject to paying home owners mortgage insurance, an insurance designed to protect banks from home owners that may default on their payments. Mortgage insurance is estimated to be about $75.00 a month on a $180,000 home, or just about 1% of the mortgage.

The Mortgage Insurance Companies of America, a trade group for private mortgage insurers, estimates that the tax deduction will save homeowners approximately $300 to $500 a year on taxes. There are some caveats, however:

For one, the deductions will expire at the end of 2007 unless congress is pressured to extend it, which is very likely. In addition, only homeowners with adjusted gross income of $100,000 (middle-income taxpayers) or less qualifies for the deduction. Moreover, if you are paying homeowners insurance on an existing home you probably will not qualify for the tax deduction. It remains available explicitly for new home mortgages issues after December 31.

Home owners who refinanced their mortgages after December 31 are also qualified for this tax deduction in so far as the amount being refinanced exceeds not the amount of the original loan, states Jeff Lubar, of Mortgage Insurance Companies of America.

Tax deduction on mortgage increase was not the only tax break that Congress enacted before taking a holiday recess.

Teacher’s classroom expenses tax deduction was extended allowing teachers and others in the education arena to deduction up to $250 in classroom expenses that they purchase with their personal cash. The CCH reports that over 3 million taxpayers claimed the deduction in 2005.

Deduction for state and local taxes, which expired in 2005, was resuscitated until 2007. This gives taxpayers the option to deduct sales taxes instead of state income taxes on their federal returns. This, however, is more frequently used by taxpayers in states with no income tax.

With tuition cost rising higher than inflation, it was indeed good news for many students for Congress to extend a deduction of up to $4000 for college tuition, books and related cost. To qualify for the full tax deduction single taxpayers must have an adjusted gross income of up to $65,000 and married couples with an adjusted gross income of $130,000 or less. Single taxpayers with an adjusted gross income of $80,000 or less and married taxpayers with an adjusted gross income up to $160,000 can deduct up to $2000.

Earnest Young is an accounting and tax writer for http://www.accentaccounting.net/. Earnest Young is an accounting and tax writer for http://www.accentaccounting.net

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Coverage for damage caused by trees and for the trees themselves is one of many confusing areas of a Homeowners insurance policy.

Your neighbors’ tree falls and damages your garage, shed and fence.
Will insurance pay for the damage?
Whose insurance should pay?
What will they pay for?

A tree falls in your yard.
Will your insurance policy pay for it to be removed?
Will it pay for a new tree?

A tree limb breaks from wind or a lightning storm and is dangling over your house.
Will your insurance policy pay for it to be removed?
What if it’s hanging over a neighbor’s house?

A tree falls on your car.
What policy will cover the damage to my car?
Is there coverage for the tree removal?

First, the basics; it does not matter whose tree it was. If there is damage to your property (from anyone’s tree) your insurance policy is the one to respond. If there is damage from your tree to a neighbor’s property, their insurance policy is involved. If there is damage to both properties (from anyone’s tree) both policies will be involved and each will deal with its own property only.

The only time a Homeowners insurance policy should be involved with damage to someone else’s property is if there is liability involved. That is if the tree was rotten or leaning and should have been removed or trimmed prior to the damage occurring. Even then the damaged properties insurance policy will generally pay for their customer’s damage and then try to recover their money from the tree owners’ insurance company.

Second, the important consideration for coverage is; what is physically damaged. If a tree, or portion of a tree, falls and does not damage any real property there is no coverage. Real property is any building, structure or contents item it does not include land, landscaping or plants of any kind. A fence, shed, patio, driveway, swing set or bicycle would count as real property.

If a tree falls into your yard and does not cause any damage to the home or any other real property then there is no coverage to remove the tree or for any cleanup. Sorry!

If there is damage to anything such as a fence then the policy should cover repairs or replacement of the damaged item(s) and also limited coverage for removal of the tree. To make this even more confusing; the tree removal coverage is divided in 2 phases.

Phase 1: Getting the tree removed off of the real property is covered with no sub-limit. That is if a tree is on a storage shed then the first stage of tree removal is to remove it off the shed so repairs can be made. The only limit for this part of the removal is the coverage limit on this section of your policy; in this case the Other Structures coverage.

If the repairs to the shed and the tree removal combined are greater than the coverage available then there is an additional coverage available for debris removal. This is 5% in most cases, so if you have $10,000 coverage on Other Structures you can have up to $10,500 for the repairs and tree removal cost.

Phase 2: The second stage of tree removal is removing the tree debris off the premises. This portion is limited to $500 or $1,000, this limit can vary by insurance company, policy type and state involved.

Third, the tree itself is covered in certain limited circumstances and for a limited amount only. The tree is not covered for wind or hail damage but is covered for damage from fire, lightning, explosion, vandalism and vehicle damage (as long as it was not a vehicle driven by members of your family). The limit is typically $500 per tree but can be more on some policies and in some states.

Fourth, If a damaged tree is leaning toward your home or dangling precipitously over your home what is covered? Assuming that portion of the tree has not damaged real property then there is NO coverage. Even if another tree or portion of the same tree has caused damage.

It is your responsibility to protect your property. The insurance policy only covers damage, NOT potential damage. The same is true if one of your trees is dangling over someone else’s property, no coverage for potential damage.

If you ignore the situation and the tree later falls and causes damage to the neighbor’s home their insurance will cover their damage. They will then want to recover their money from your insurance company, or you. This is called subrogation.

If the later damage occurs to your home your insurance company could try to deny coverage because you did not protect the property.

The Homeowners insurance policy covers sudden and accidental damage it is not a maintenance policy.

Finally, damage to any automobile will only be covered on the auto policy (then only if you have Comprehensive coverage). The tree removal will not be covered by your Homeowners policy unless other real property was damaged.

About the AuthorGeary Morris is the National Sales Manager for Storm Survivor, LLC.

See our websites mentioned below for more information. You can send direct questions or read what other homeowners have asked. We offer web sites and products as a consumer resource for information and news about property insurance claims and insurance related topics. Informational original articles, excerpts from industry publications, links to insurance resources, consumer questions and answers.

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