ABCDE REAL ESTATE saturday, august 28, 2010 WHERE WE LIVE


No sleep till Brookland The Northeast Washington neighborhood is a quiet area in a bustling city. F1


Shaping the City Family-size apartments in urban areas could help communities. E3 Green Scene To attract birds, let nature take its course. F1 Do It Yourself Depending on attic access, cellulose and fiberglass insulate well. E4


E AX DC MG PG VN VS


MORTGAGE RATES How low can they go?


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4.36% mEconomic weak home sales drive down rates. F2


concerns and 6washingtonpost.com/realestate Searchable listings of home sales and tax assessments, plus a mortgage rate calculator, community profiles and updated real estate news


rent it, If you


Yes, but they’re not going to pay off your vacation home


HOUSING COUNSEL


Demand accountability from board members


by Benny L. Kass


Q: Is there a time by which a condo- minium board of directors must reply and set a date for a special meeting? A number of us unit owners are con- cerned about the lack of disclosure of serious financial conditions and possible bylaw infractions by the board. Our bylaws require that the board call a special meeting if 25 per- cent or more of the owners file a peti- tion requesting that meeting. More than three weeks have passed since we formally presented the petition. What can we do? A: I do not have all the facts regard- ing your matter, but there are some general principles that apply. There are good boards and not-so-good boards. A good board would probably never get into this situation because communica- tion generally resolves most associa- tion disputes. When a board holds closed meetings, however, and does not


disseminate information to the mem- bership that elected its members to of- fice, suspicion and distrust rise to such a level that often the community be- comes seriously polarized. My general advice to owners who complain about their board and their community: You have three alterna- tives. Fight the system, and get yourself and your friends elected to the board; accept the situation; or sell and move out. You have chosen the first approach,


to fight the system. Assuming that your petition is valid — that is, the requisite percentage of unit owners have signed — the board is legally obligated to call that special meeting. But that meeting is to discuss only what is contained in the petition. It is not a free-for-all where everyone can discuss everything that concerns them. In your situation, you have asked the board to discuss the financial condition of the community


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espite earlier reports to the con- trary, it turns out that your mort- gage lender will not have to pull a second full credit report on you hours before closing on your home purchase or refinancing. In a clarification of a policy an- nounced earlier this year, mortgage gi- ant Fannie Mae now says that appli- cants will need to come clean about any debts they have incurred since they sub- mitted their mortgage application — or debts they never disclosed on the appli- cation. But a formal pre-closing credit report will not be mandatory to confirm creditworthiness. Instead, loan officers can use other techniques to verify that you haven’t fi- nanced a new car, taken out a personal loan or even applied for new credit in any amount that might make it more


D will they come


?


by Sonja Ryst


Tina Lambert and her husband want- ed an investment that would help them pay for their kids’ college tuition some- day. When he insisted on paying $49,000 for a condominium in Ocean City in 1997, she worried. But by the mid- dle of this decade, when housing mar- kets were in full boom, the condo’s value had increased nearly fivefold. It worked out so well, they decided to buy another condo, this time for $160,000. They rarely used either condo, but


they were able to pay most of their ex- penses with weekly rentals of $1,500 or more on each during the summer. Then the economic crisis hit. Renters became scarcer, so Lambert had to lower


the rent. In 2007, the couple almost fully booked the condos for the summer. But last year, rental income — which they had hoped would cover all of their ex- penses, or even bring in a profit — cov- ered only half of the annual mortgage costs.


On top of principal and interest, the


properties carry other expenses: condo fees, insurance, utilities, repairs. Finding renters has hardly been a day


at the beach, either. Lambert said she has been slaving to book rentals, posting ads on Web sites such as Craigslist and Rentalo.com almost every day. A few years ago, she would have to field about 10 phone calls to get one booking, but now it takes even more effort. Some-


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Fannie Mae clarifies policy about credit reports


difficult for you to afford your monthly mortgage payments. Among the techniques Fannie ex-


THE NATION’S HOUSING Kenneth R. Harney


pects lenders to use on all applicants: commercial or in-house fraud-detection systems are capable of tracking appli- cants’ credit files from the day their loan request is approved to closing. Although Fannie made no reference to specific services in its recent clarifi- cation letter to lenders, some commer- cially available programs claim to be able to monitor mortgage borrowers’ credit activities on a 24/7 basis, flagging such things as inquiries, new credit ac- counts and previous accounts that did not show up on the credit report that was pulled at the time of initial applica- tion.


One of those services is marketed by


national credit bureau Equifax and dubbed “Undisclosed Debt Monitoring.” Aimed at what Equifax calls “the quiet period” between application and clos- ing — often one month to three months —the system is “always on,” the com- pany says in marketing pitches to mort- gage lenders. Home loan applicants failed to men- tion — or loan officers failed to detect — “up to $142 million in auto loan pay- ments” during mortgage underwriting in first mortgage files reviewed by Equi-


fax last year alone, according to the credit bureau. Those loan accounts had average balances of $361 per month — more than enough to disqualify many borrowers on maximum debt-to-income ratio standards required by Fannie Mae, Freddie Mac and major lenders. Why the sudden concern about new debts incurred after mortgage applica- tions? It’s mainly because Fannie and others have picked up on a key type of consumer behavior that has helped trig- ger big losses for the mortgage industry in recent years: Some buyers and refi- nancers hold off on creating new credit accounts until they have cleared strict underwriting tests on the debt-to-in- come ratios and have been approved for a loan. Then they splurge.


Additional debt loads can run into the tens of thousands of dollars, execu- tives in the credit industry say. Had those new accounts been in their credit files during the application process, borrowers might have been turned down for the mortgage, required to make a larger down payment or charged a higher interest rate. Fannie’s new policy puts the burden


of detecting these debts squarely on lenders or loan officers. Whether they


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ILLUSTRATION BY THOMAS FUCHS FOR THE WASHINGTON POST


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