President Clinton's newly announced homeownership program outlines scores of individual actions that can be taken toward the goal of a record ownership rate by the year 2000.
The plan includes 22 actions in the area of financing. Some are simply old ideas rehashed. What follows are excerpts from the program report that describe some less-familiar strategies.
Action 32: Standardize homebuying settlement procedures. The partnership should support standardization of settlement closing instructions. This standardization can eliminate much confusion, delay, and expense in communication between settlement agents and lenders, which should benefit homeowners.
Under the current system, every lender communicates unique requirements, forms ... and other documentation needs through closing instruction letters. If such letters were standardized in format and language, settlement agents could more efficiently and effectively find and understand the information most pertinent to each aspect of the home purchase transaction.
Action 33: Bulk purchase of homebuying settlement services. While remaining mindful of the Federal Government's Real Estate Settlement Procedures Act (Respa) regulations, the partnership should investigate the feasibility of bulk purchase of settlement services such as title insurance, appraisals, and legal work to reduce acquisition costs for homebuyers.
Purchasing any good or service on a volume basis typically results in a lower per-unit cost. Bulk purchase of settlement services might be coordinated by employers ... neighborhood associations, or other groups with an interest in promoting homeownership for particular households and properties.
Action 34: Local government development fees and homeownership trust funds. The partnership should encourage state and local governments to develop affordable housing trust funds using dedicated revenue sources. These trust funds would be specifically for affordable homeownership purposes. The partnership should also encourage state and local governments to waive or reduce development fee on homes purchased in certain neighborhoods or by underserved populations.
Action 38: Savings plans for homeownership. The partnership should identify and promote effective methods of saving for homeownership. Such methods may include use of household homeownership accounts and savings clubs, whereby savings are dedicated specifically for down payments and closing costs. Members of the partnership also should support homeownership education and counseling efforts that assist households to save for home purchase.
Saving for a down payment represents a significant challenge for a large number of households.
Examples of homeownership accounts might include:
*Lease-purchase programs where a portion of the household's rent payment accrues toward the down payment.
*Employer-assisted homebuyer savings plans, sometimes including incentive-based employer contributions of loan features using pretax savings.
*Lender-initiated savings plans, whereby the lender provides enhanced savings rates or preferred customer mortgage terms to encourage homeownership.
*Formal and informal "homebuyers clubs," which generate savings through the reinforcement or group participation.
Action 40: Home mortgage foreclosure requirements. The partnership should analyze existing state foreclosure laws and support future efforts to implement streamlined foreclosure procedures that are more consistent from state to state.
The cost of mortgage money reflects, in part, the investor's estimate of credit costs. These credit costs are, in turn, affected by state laws concerning foreclosure. State laws vary considerably in the rights and obligations of the lender and the homeowner in the foreclosure process. Notwithstanding the benefits of establishing a more systematic foreclosure process, no such changes should be supported by the partnership if the rights and interests of the homeowner are unduly jeopardized.