Deana "Dee" Langley

A settlement on foreclosure fraud and a positive outlook for housing in 2012 are in the news this week.

State and federal officials finally reached a landmark $26 billion settlement on Thursday with five of the nation’s largest banks for fraudulent lending practices. The lengthy negotiations came to a close after the attorneys general of California and New York joined more than 40 other states on the proposed settlement.

With news of continued low mortgage rates and a positive housing outlook for 2012, the settlement came on top of an already-good news week for home owners.

The New York Times: States Negotiate $26 Billion Agreement for Homeowners

After months of painstaking talks, government authorities and five of the nation’s biggest banks have agreed to a $26 billion settlement that could provide relief to nearly 2 million current and former American home owners. It’s part of a broad national settlement aimed at halting the housing market’s downward slide and holding the banks accountable for foreclosure abuses.

Bloomberg: Banks Paying Homeowners to Avoid Foreclosures

Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent home owners to sell their properties for less than they owe.

Wall Street Journal (Developments): Fannie Mae: Outlook for Home Prices Rises Again

The consumer outlook for U.S. home prices improved again in January, extending a recent upward trend in housing market sentiment, according to mortgage market firm Fannie Mae. Views on the direction of the U.S. economy also continued to improve.

Property Casualty 360: Multiple Industries Join Together to Urge Long-Term NFIP Extension

The insurance and other industries affected by floods are making a big push to get the Senate to act on legislation reauthorizing the National Flood Insurance Program.

HouseLogic: Home Owners Shouldn’t be Washington’s Personal ATM

Washington’s inability to put aside partisan politics and solve long-term problems is placing home owners in harm’s way again. Searching for a means to extend the payroll tax cut that expires at the end of the month, Congress is considering charging home buyers and owners higher Fannie Mae and Freddie Mac loan fees, known as guarantee fees.

Tax benefits for home owners disappeared at the end of 2011 and no one knows whether Congress will bring them back. How annoying!

Congress was so busy bickering at the end of 2011 that it allowed two important tax breaks for home owners to expire. Beginning with the 2012 tax year:

1. You can no longer deduct the cost of private mortgage insurance premiums.

2. You aren’t getting a tax credit for some of your home energy improvements.

You can take advantage of these provisions when you file your 2011 tax return — but beyond that, who knows.

Now that Congress is back in session, it’s likely going to pick up where it left off — arguing about what programs to cut and what taxes to raise. The programs, deductions, and tax credits supporting home ownership belong at the top their to-do list.

Up until the end of last year, you could deduct your private mortgage insurance premium (PMI) when calculating your income taxes. It was a benefit targeted to lower- and middle-income home owners. Once you made $100,000 or more, it started disappearing and anyone who had more than $110,000 of adjusted gross income couldn’t use it.

The home owners who have to get mortgage insurance are buyers with less than a 20% down payment and refinancers with less than 20% equity. That’s more often first-time home buyers or younger home owners and less often move-up buyers who’ve built up equity in their homes. So in taking away the PMI deduction, Congress is raising taxes paid by first-time home buyers and younger home owners leaving them with less money to spend on housing. That’s especially wrong-headed when the housing market is struggling to recover.

The tax credit for energy efficiency upgrades wasn’t enormous — it was capped at $500 or 10% of the cost for some projects; less for others. But it was a nice incentive to add insulation, new windows, or to upgrade your HVAC system with a more efficient unit — exactly the kind of actions that help decrease our dependence on fossil fuels, leading to a cleaner environment and less outflow of U.S. income to foreign countries. Not to mention, hopefully, smaller utility bills.

In 2012, home ownership and energy independence advocates will fight to get those expired tax rules back on the books and to have them apply retroactively. It’s a familiar fight — they had to do the same thing at the end of 2010.

But this year, the battle is more complicated because there’s a presidential election, discord between the major parties, and a general lack of consensus on any issues.

We home owners certainly don’t all agree on who to vote for, but most of us consider the renewal of those policies is a no-brainer. And we really don’t appreciate it when Congress lets those rules expire at the end of one year and then leaves us to wonder the rest of the next year whether they’ll be renewed.

Will you be claiming either of these tax breaks on your 2011 returns?

President Barack Obama’s proposal for enhanced refinancing efforts sparked a new dialogue among members of Congress and the media after the State of the Union Tuesday. Issues like the size of down payments, principal write downs, and how to take advantage of low interest rates are suddenly gaining traction among lawmakers. Even the GOP candidates for president are having to face the housing crisis as they campaign in Florida, a state hard hit by foreclosures.

Associated Press: After Obama Speech, Three Arguments for Housing

President Barack Obama said in his State of the Union speech that he wanted to help struggling home owners refinance their mortgages. The Republicans who want his job say the government should get out of the way of the housing market. But some experts advocate something much bolder to provide relief to the 11 million home owners in the United States who owe more on their mortgages than their houses are worth.

MSNBC Bottom Line: Home Buying Could Soon Beat Renting

Falling home prices have sent many would-be buyers to the sidelines. If all goes well, record low interest rates and rising rents may soon prompt some of them to take a second look at buying.

New York Times (Bucks): Big Down Payments Could Bar Creditworthy Borrowers From Market, Study Finds

Requiring a minimum down payment of 20%, or even 10%, on home loans would push many creditworthy borrowers into higher-cost loans or out of the mortgage market entirely, a new study says.

HouseLogic: Finally Some Talk on Home Ownership; Will Action Follow?

It was nice to finally hear a politician talking about solving our housing market woes — the bull's-eye in terms of economic recovery. Aiming to strike a populist chord with voters, President Barack Obama asked Congress Tuesday night during the State of the Union to pass a mass refinancing effort that would help home owners take advantage of today’s lower mortgage rates. 


USA Today: Florida Primary Turns Spotlight on Housing Bust's Fallout

As the GOP presidential contest heads to Florida, the Jan. 31 primary looms as the first in the nation where declarations by Romney and former senator Rick Santorum that housing should be allowed to bottom out will be judged by voters in markets where the housing bust has been concentrated.