Focus on Real Estate

New law makes mortgage insurance tax deductible

Congress approved a measure that would for the first time allow lower- and moderate-income homebuyers to deduct the full cost of mortgage insurance from their federal taxes in 2007.

Mortgage insurance helps buyers get around the problem of limited cash. Instead of putting up dollars buyers get insurance coverage. Lenders accept mortgage insurance because it performs the same function as 20 percent down: If a property is foreclosed lender risk is reduced because mortgage insurance pays for much or all of the lender's possible loss.

The legislation passed makes all mortgage insurance premium payments deductible for homeowners with adjusted gross household incomes of $100,000 or less. It applies to all new mortgage originations beginning January 1, 2007.

The deduction applies to interest on mortgage insurance associated with a "qualified residence", a term that remains foggy. Plainly Congress wanted to have a write off for a prime residence but what about a second home or vacation property? Speak with a tax professional for details.

FYI --The provision was approved for one year only, which means it will expired Dec. 31, 2007 unless renewed by Congress.

Negligence suit over gas shutdown reinstated

A real estate broker had a fiduciary duty to notify an absent owner that the gas company was attempting to contact him about a gas shutdown on the property during winter, the Court of Appeals of Ohio, Eighth District, ruled, reversing the trial court. The broker argued that the brokerage had a duty to sell the property, not to manage it, but the court said that notifying the owner of the gas shutdown was a reasonable duty. The court sent the case back to trial to determine if the salesperson breached a duty by failing to meet a gas company representative at the property after allegedly promising to do so.

Women pay more for home loans, study finds

A new study by the Consumer Federation of America found that in 2005, about a third of women took out mortgages with interest rates over 7.66 percent (well above the average prime mortgage rate of 5.87 percent) compared with about a quarter of men. The study, which examined 4.4 million mortgage originations throughout the country where borrowers were identified by their gender, also found that women with high incomes were 46.4 percent more likely than men with comparable incomes to have the more expensive mortgages.

Although women earning below the area median income were eight percent more likely to receive subprime loans than similarly earning men, women earning more than double the area median income were 50 percent more likely to receive subprime loans than men with similar earnings.

NAR Housing Forecast

According to the National Association of REALTORS® (NAR), existing-home sales are expected to rise gradually in 2007 from currentlevels, with annual totals comparable to 2006. Based on 2006 projections, they're expected to rise steadily from the current cyclical low and reach an annual total of 6.40 million, which would be 1.0 percent lower than this year's total. By the fourth quarter of 2007, existing-home sales should be 4.6 percent higher than the current quarter.

New-home sales are projected to drop an additional 9.4 percent in 2007 to 957,000.

The 30-year fixed-rate mortgage is forecast to gradually increase to 6.7 percent by the fourth quarter of 2007.

The national median existing-home price is projected to rise 1.0 percent next year to $224,700. The median new-home price should also rise by 0.8 percent in 2007 to $241,700.

Buyers, especially first-time buyers, with the combined benefits of seller flexibility and an unexpected drop in mortgage interest rates, have a window of opportunity. These conditions will persist in many areas until early spring when inventory supplies are likely to become more balanced.