The $300 billion housing bill signed into law on July 30 by President Bush helps stretched homeowners renegotiate their mortgages and provides tax credits to first-time buyers.

But it also addresses three major criticisms of reverse mortgage loans, which are increasingly popular among homeowners 62 and older who use the money for living expenses, health care, prescription drugs or to pay off an existing mortgage.

With a reverse mortgage, you can tap your home equity without having to make monthly payments. Instead the bank pays you. The loan comes due only when you die, sell or move away permanently. The amount you get depends on the home’s value, location, interest rates and the age of the youngest borrower if there are co-owners.

The new bill raises the amount you can get from the mortgage and lowers the cost of getting it.

Most reverse mortgages today are Home Equity Conversion Mortgages (HECMs), which are insured by the Federal Housing Administration. Up to now, HECM has capped a home’s appraisal, which affects the loan amount. The loan limit depends on the county where the home is located and ranges from $200,160 to $362,790.

While the new limit has not been finalized, the bill will increase the amount significantly. “The higher limit will give homeowners access to more cash from their home equity,” says Peter H. Bell, President of the National Reverse Mortgage Lenders Association.

A second criticism has been that the transaction fees for reverse mortgages are too high. An AARP Public Policy Institute study in December 2007 found that high costs were one of the main reasons why eligible homeowners decided against a home mortgage.

The new bill will make HECMs less expensive for many borrowers. Origination fees had been a flat 2 percent of the home’s value, but the new bill reduces that to 2 percent of the first $200,000 of the home’s value, and then 1 percent after that. Also, the fee is capped at $6,000.

And finally, the new bill puts an end to one of the main problems related to reverse mortgages: lenders cross-selling other financial products. The new law forbids requiring the purchase of an annuity, insurance product or investment product as a condition of the loan.

“These prohibitions will protect borrowers from aggressive marketers who try to get them to invest proceeds they receive from their reverse mortgages unwisely,” said David Certner, AARP legislative policy director. “For example, pushy marketing tactics used by some originators encourage borrowers to purchase deferred annuities or long-term care insurance products that are costly and generally not in the borrower’s best interest.”

But despite these changes, says Bell, “the most important safeguards remain talking candidly with your reverse mortgage counselor and dealing only with individuals and companies you know and trust, or have thoroughly checked out.”

Credit repair scam artists will charge you anywhere from $500 to $1,500 or more upfront, and promise you everything from a new Social Security card to perfect credit.

But these companies can’t do anything for you that you can’t do for yourself — for free — and they might ultimately do more harm than good.

What should you do if you have bad credit? Here are 10 tips that are designed to improve your credit history and raise your credit score:

1. Pull a copy of your credit history from AnnualCreditReport.com. Sponsored by the three credit-reporting bureaus, Equifax, Experian and TransUnion, AnnualCreditReport.com is the only place you can go to get a truly free copy of your credit history. Each credit-reporting bureau is required to give you one copy once a year. You should pull copies from each of the bureaus, since they sometimes collect different data.

2. While you’re there, buy a copy of your credit score from Equifax.com. Equifax offers a FICO score, also known as a Beacon score, which is from Fair Isaac, the company that created the concept of credit scoring. Most creditors will pull a FICO score, so you should see what they’re seeing. Your credit score will give you a snapshot of what your credit information means to your creditors. The FICO score runs from 350 to 850. The higher the number, the better. Your target should be to have a credit score of at least 720.

3. Check your credit history thoroughly. You’re looking for errors, misinformation and negative information that might count against you. File a dispute with the three credit-reporting bureaus if you spot any errors. Some credit reports have serious errors in them, so fixing these will boost your score.

4. Understand what kind of debt you’re facing. Make a list of everything you owe, the interest rate each debt carries, and the minimum payment due each month. Then, prioritize your debt: mortgage, real estate taxes, credit cards and medical bills should be paid in that order.

5. Negotiate with your creditors for a lower interest rate. Paying less in interest means more of your payment each month goes toward paying down your balance. If you have a good credit score (over 720 is a starting point), you should be able to find other credit cards featuring zero percent to 5 percent in interest for the first year, or for the life of a balance transfer (check out sites like CardRatings.com and CardTrak.com to compare credit-card offers.) Just be sure you read the fine print: Some credit cards require you to charge on the new account each month or face a stiff fee.

6. Pay down the debt with the highest interest rate first. Pay your mortgage and home equity loan and lines of credit in full each month. Then, make sure you have enough cash to make all of the minimum payments due on your debt each month. Then, throw any spare cash at the debt that carries the highest interest rate first. Once you’ve paid down that debt, transfer all of the extra cash you’re paying each month to the debt with the next-highest interest rate, and so on.

7. Pay everything on time, even if you can make only the minimum payment. The most crucial component of your credit history and credit score is your ability to pay your bills on time each month. Paying on time shows your creditors that you take your debts and obligations seriously. Even one late payment can seriously damage your credit history and credit score, even though it can take a year’s worth of on-time payments to start to heal your credit history and raise your credit score. It doesn’t seem fair, but that’s how the credit industry works.

8. Don’t charge more than 25 percent of your maximum available credit limit. If you carry a credit-card balance that is a higher percentage of your available credit limit, your credit score will go down. Why? Because creditors believe if you charge the maximum on your credit cards, it means you can’t properly manage your credit. You’re better off spreading out your debt between three or four different cards than having it all piled on one card.

9. Don’t open and close a lot of accounts. Again, a credit score tells current and future creditors how likely it is that you won’t pay back your debts. It assesses how risky a borrower you are today. Every time you apply for a new credit card, that creditor pulls a copy of your credit history from the credit-reporting bureaus. That “inquiry” gets reported on your credit history. Too many inquiries in a short period of time signals that you may be getting low on your available credit and need more cash. Even though you might be interested in getting 10 percent off your first purchase for opening a new account, it looks different to a prospective creditor.

10. Don’t share credit (except with a spouse). It’s easy to tell someone that you’ll “co-sign” a credit card, student loan or a mortgage loan application, especially if it’s someone you’ve known for a long time. But it’s also easy to wind up in a situation where that friend or relative stops paying his or her bills (for whatever reason) and your credit will take a big hit. Once you’re a co-signer for a loan, you’re legally obligated to make those payments — whether or not you can afford them. So think carefully before you agree to co-sign a loan, and nip the problem of bad credit before it begins.

Shortly before Lynn Sugarman of Teaneck, N.J., bought her summer home in Lake George, N.Y., two years ago, a routine inspection revealed it had elevated levels of radon, a radioactive gas that can cause lung cancer. So she called a radon measurement and mitigation technician to find the source.

“He went from room to room,” said Dr. Sugarman, a pediatrician. But he stopped in his tracks in the kitchen, which had richly grained cream, brown and burgundy granite countertops. His Geiger counter indicated that the granite was emitting radiation at levels 10 times higher than those he had measured elsewhere in the house.

“My first thought was, my pregnant daughter was coming for the weekend,” Dr. Sugarman said. When the technician told her to keep her daughter several feet from the countertops just to be safe, she said, “I had them ripped out that very day,” and sent to the state Department of Health for analysis. The granite, it turned out, contained high levels of uranium, which is not only radioactive but releases radon gas as it decays. “The health risk to me and my family was probably small,” Dr. Sugarman said, “but I felt it was an unnecessary risk.”

As the popularity of granite countertops has grown in the last decade — demand for them has increased tenfold, according to the Marble Institute of America, a trade group representing granite fabricators — so have the types of granite available. For example, one source, Graniteland (graniteland.com) offers more than 900 kinds of granite from 63 countries. And with increased sales volume and variety, there have been more reports of “hot” or potentially hazardous countertops, particularly among the more exotic and striated varieties from Brazil and Namibia.

“It’s not that all granite is dangerous,” said Stanley Liebert, the quality assurance director at CMT Laboratories in Clifton Park, N.Y., who took radiation measurements at Dr. Sugarman’s house. “But I’ve seen a few that might heat up your Cheerios a little.”

Allegations that granite countertops may emit dangerous levels of radon and radiation have been raised periodically over the past decade, mostly by makers and distributors of competing countertop materials. The Marble Institute of America has said such claims are “ludicrous” because although granite is known to contain uranium and other radioactive materials like thorium and potassium, the amounts in countertops are not enough to pose a health threat.

Indeed, health physicists and radiation experts agree that most granite countertops emit radiation and radon at extremely low levels. They say these emissions are insignificant compared with so-called background radiation that is constantly raining down from outer space or seeping up from the earth’s crust, not to mention emanating from manmade sources like X-rays, luminous watches and smoke detectors.

But with increasing regularity in recent months, the Environmental Protection Agency has been receiving calls from radon inspectors as well as from concerned homeowners about granite countertops with radiation measurements several times above background levels. “We’ve been hearing from people all over the country concerned about high readings,” said Lou Witt, a program analyst with the agency’s Indoor Environments Division.

Last month, Suzanne Zick, who lives in Magnolia, Tex., a small town northwest of Houston, called the E.P.A. and her state’s health department to find out what she should do about the salmon-colored granite she had installed in her foyer a year and a half ago. A geology instructor at a community college, she realized belatedly that it could contain radioactive material and had it tested. The technician sent her a report indicating that the granite was emitting low to moderately high levels of both radon and radiation, depending on where along the stone the measurement was taken.

“I don’t really know what the numbers are telling me about my risk,” Ms. Zick said. “I don’t want to tear it out, but I don’t want cancer either.”

The E.P.A. recommends taking action if radon gas levels in the home exceeds 4 picocuries per liter of air (a measure of radioactive emission); about the same risk for cancer as smoking a half a pack of cigarettes per day. In Dr. Sugarman’s kitchen, the readings were 100 picocuries per liter. In her basement, where radon readings are expected to be higher because the gas usually seeps into homes from decaying uranium underground, the readings were 6 picocuries per liter.

The average person is subjected to radiation from natural and manmade sources at an annual level of 360 millirem (a measure of energy absorbed by the body), according to government agencies like the E.P.A. and the Nuclear Regulatory Commission. The limit of additional exposure set by the commission for people living near nuclear reactors is 100 millirem per year. To put this in perspective, passengers get 3 millirem of cosmic radiation on a flight from New York to Los Angeles.

A “hot” granite countertop like Dr. Sugarman’s might add a fraction of a millirem per hour and that is if you were a few inches from it or touching it the entire time.

Nevertheless, Mr. Witt said, “There is no known safe level of radon or radiation.” Moreover, he said, scientists agree that “any exposure increases your health risk.” A granite countertop that emits an extremely high level of radiation, as a small number of commercially available samples have in recent tests, could conceivably expose body parts that were in close proximity to it for two hours a day to a localized dose of 100 millirem over just a few months.

David J. Brenner, director of the Center for Radiological Research at Columbia University in New York, said the cancer risk from granite countertops, even those emitting radiation above background levels, is “on the order of one in a million.” Being struck by lightning is more likely. Nonetheless, Dr. Brenner said, “It makes sense. If you can choose another counter that doesn’t elevate your risk, however slightly, why wouldn’t you?”

Radon is the second leading cause of lung cancer after smoking and is considered especially dangerous to smokers, whose lungs are already compromised. Children and developing fetuses are vulnerable to radiation, which can cause other forms of cancer. Mr. Witt said the E.P.A. is not studying health risks associated with granite countertops because of a “lack of resources.”

The Marble Institute of America plans to develop a testing protocol for granite. “We want to reassure the public that their granite countertops are safe,” Jim Hogan, the group’s president, said earlier this month “We know the vast majority of granites are safe, but there are some new exotic varieties coming in now that we’ve never seen before, and we need to use sound science to evaluate them.”

Research scientists at Rice University in Houston and at the New York State Department of Health are currently conducting studies of granite widely used in kitchen counters. William J. Llope, a professor of physics at Rice, said his preliminary results show that of the 55 samples he has collected from nearby fabricators and wholesalers, all of which emit radiation at higher-than-background levels, a handful have tested at levels 100 times or more above background.

Personal injury lawyers are already advertising on the Web for clients who think they may have been injured by countertops. “I think it will be like the mold litigation a few years back, where some cases were legitimate and a whole lot were not,” said Ernest P. Chiodo, a physician and lawyer in Detroit who specializes in toxic tort law. His kitchen counters are granite, he said, “but I don’t spend much time in the kitchen.”

As for Dr. Sugarman, the contractor of the house she bought in Lake George paid for the removal of her “hot” countertops. She replaced them with another type of granite. “But I had them tested first,” she said.

Where to Find Tests and Testers

TO find a certified technician to determine whether radiation or radon is emanating from a granite countertop, homeowners can contact the American Association of Radon Scientists and Technologists (aarst.org). Testing costs between $100 and $300.

Information on certified technicians and do-it-yourself radon testing kits is available from the Environmental Protection Agency’s Web site at epa.gov/radon, as well as from state or regional indoor air environment offices, which can be found at epa.gov/iaq/whereyoulive.html. Kits test for radon, not radiation, and cost $20 to $30. They are sold at hardware stores and online.

Back when the real estate market was hot, sellers barely had to make their beds and do the dishes for their houses to attract buyers. Any extra effort often elicited multiple offers for over the asking price.

In today’s cool market, however, those same extras can mean the difference between getting one offer or none at all, says Lisa LaPorta, cohost of HGTV’s “Designed to Sell.”

Sellers frustrated with the stagnant market should consider turning their anxiety into action. As inventory grows, a few inexpensive moves can make your house stand apart.

Here are 12 cheap tricks real estate experts recommend sellers consider to speed sales:

1. Get the right mindset. Once you list your home, detach yourself. Treat the house as a commodity, which means making changes that will broaden its appeal but that may erase some of your personal style. “I tell sellers in our first meeting that I may say things that offend them, but if I do it’s because I feel it’s for the benefit of the sale,” says Dan Verbin, general manager of Re/Max Marquee Partners, which oversees 14 offices in the South Bay and throughout Greater Los Angeles.

2. Start at the curb. Look at what people see when they pull up, says Sandy Fish, broker owner of Re/Max Ranch and Beach in San Diego, where she’s been selling real estate for 20 years. Trim hedges, prune trees, mow the lawn and plant oodles of colorful flowers. If the mailbox is tired and the address numbers are falling off, replace them. Walk around the house. Get all debris — old patio furniture, rusty barbecues — off the property. Everything outside should look perfect.

3. Paint — it’s money in a can. Outside, if a good power wash isn’t enough, a coat of paint is one of the best facelifts you can give a house for a relatively low price. If you don’t want to paint the whole house, do the trim. Inside, paint walls a soft neutral such as warm beige, sage or gold. Paint not only says new start, but it also masks odors.

4. Focus on the entry. Put some energy into the front door, because it makes a strong first impression. A few years ago, LaPorta fixed up a Pasadena home for her show. The home had a traditional old-fashioned front door, which looked like all the other doors on the street. She bought a stock door from a lumber supplier, painted it glossy burgundy, put a pediment over it, thick molding around it and flanked it with two large potted topiaries. The whole upgrade cost $2,000. The result? After the listing agent saw the improvements, she raised the original asking price by $40,000 to $739,000. The owners received multiple offers and sold in the high $700,000s, LaPorta said, “because we made an ordinary entry look stately and elegant.”

5. Catch up on maintenance. Get around to the repairs you should have been doing all along. “Fix the little stuff,” Re/Max Marquee Partner’s Verbin says. “Repair the cracked tile in the bathroom and torn screens. Replace broken light-switch covers and burned-out lightbulbs. Tape up or pin wires from audio systems and computers.”

These easy fixes show potential buyers that you pay attention to detail, which signals that you must care about the big stuff too.

6. Look for alternatives to expensive or messy upgrades. “Don’t take on a big remodel when you’re thinking of selling,” says Reva Kussmaul, a remodel coach and owner of Eye for Detail, in Pasadena. “Keep improvements small and manageable. A major project creates more mess and can take up time you could be on the market.”

However, do investigate small ways to get big results. If your tile is 1950s pink or 1970s brown, look into companies that can spray tile to make it a new color, she says. Miracle Method, for example, gives a clean, fresh look without the demo, dust or fat price tag.

If dated cabinets still work well, consider painting or staining rather than replacing them. Today’s house hunter prefers either dark wood cabinets in shades of espresso or ebony, or painted cabinets. Mid-toned browns and grainy golds are out. A dark stain over light, coarse-grained wood will quiet busy grain and make wood a color more people prefer, as will painting. Put on some new knobs, and for a couple thousand dollars, your kitchen will look as though it had a $20,000 makeover.

7. Consider new appliances. In LaPorta’s experience, sellers typically get every dollar back that they spend on new appliances. “When people see new kitchen appliances, they often see a new kitchen,” LaPorta says. “That rates high on people’s radar, especially men’s.”

8. Add some house bling. Make anything metal in your home look new and shiny. “People see shiny new metal and say ‘Oooh,’ and it’s not that expensive,” LaPorta says. You can pick up a new dining room light fixture for $200 and one for the porch for $40; people will notice. Change the front-door handle, faucets and curtain rods if they’re worn and dull. These should all look fresh.

If you have an ’80s shiny polished brass fixture, try painting it with an updated metallic that looks like oil-rubbed bronze, brushed nickel or iron. If you have metal grills on your stove, spray them their original color, using paint meant to withstand high heat.

9. Start packing. “The average home would show much better if it had 50% less stuff,” real estate broker Fish says. Since you’re already going to move, give yourself a head start by packing away all the clothes, books and dishes you won’t need for the next few months. Thinning out bookcases and closets lets buyers actually see and appreciate the space and gives the illusion that the house offers more-than-adequate storage.

Take out extra furniture, especially if it’s blocking the flow of foot traffic. “It’s better to have just a corner of a room decorated nicely with a little vignette than an overcrowded space, or a room where the furniture is of mixed styles or not to scale,” LaPorta says. If you can get all the stuff off-site in a moving pod or in storage, do so. If not, stack neat, labeled boxes in the garage.

10. Remove the “you” factor. Sorry but home buyers don’t care about your trophies, your hobbies, your taste in art or your photos. Pack all that away. Depersonalizing a home lets buyers imagine themselves in the house. “You want people looking at your house, not your wedding photos,” Fish says. “Those are just a distraction.”

Once personal art is off the walls, patch and paint over holes. While you’re at it, clear countertops. In kitchens, leave out just one appliance and, on your desk, just a phone and a lamp. Think nice hotel.

11. Clean house. “Clean is a relative term,” says LaPorta, “but we often don’t notice our own dirt. Look hard, starting with the switch plate by the front door. Wipe it down along with all light switches, doors and baseboards. If you’re not the best housekeeper, hire a service. . . . Every surface should sparkle.”

12. Banish smells. When people first walk in, they should either smell nothing or a nice scent, like cinnamon or citrus. Set out potpourri, fresh-cut flowers or subtle air fresheners. Have carpets — if not replaced — professionally cleaned and deodorized.

Some carpet-cleaning companies will also clean hardwood, tile or stone floors and grout and buff countertops. “For a 3,000-square-foot house, expect to pay under $1,000,” says Fish, adding that it’s money well spent.

Besides making suggestions as to what buyers can or should do to get a “sold” sign out front, real estate experts also suggested a few things not to do:

* Don’t avoid an upgrade with the idea that you’ll give the new owner a carpet or paint credit.

Most buyers are tapped out and don’t want to spend a lot the minute they move in. Plus, that’s one more hassle for them. They want clean surfaces when they move in. And many people lack the imagination needed to picture how much better the place will look with new carpet. Your job is to make buyers say, “I could move in tomorrow.”

* Don’t ignore the competition. Fish helps clients get realistic about their homes by showing them what else is on the market in the same price range.

“When they see what they’re up against, including new homes, that often motivates them to get real about their price and what they should fix up,” Fish says.

* Finally, don’t get so carried away making improvements that you forget the original goal: Be a bargain.

“The best way to sell your house quickly in a down market,” real estate agent Verbin says, “is to be the best deal out there.”

In the biggest bank failure of the housing downturn to date, federal banking regulators closed IndyMac Bank FSB on July 11, 2008, naming the Federal Deposit Insurance Corp. as conservator.

The FDIC said it will transfer insured deposits and “substantially all the assets” of IndyMac Bank, to a newly created successor, IndyMac Federal Bank, which will be operated by the FDIC.

Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks. Depositors of IndyMac Federal Bank FSB will have no access to online and phone banking services this weekend, but will regain access to them on Monday.

IndyMac was one of the nation’s largest independent mortgage lenders, and had been hard hit by delinquencies and foreclosures. Parent company IndyMac Bancorp Inc. announced Monday that it was no longer considered “well capitalized” by regulators and had stopped making most mortgage loans (see story).

In a statement, OTS Director John Reich said the immediate cause of the closing of IndyMac Bank FSB was a run on deposits that began when a June 26 letter Sen. Charles Schumer, D-N.Y., sent to federal bank regulators voicing concerns about the thrift’s “financial deterioration” was made public. Schumer said IndyMac posed “significant risks to both taxpayers and borrowers” (see story).

In the 11 business days following the public release the letter, Reich said depositors withdrew more than $1.3 billion from their accounts.

“This institution failed today due to a liquidity crisis,” Reich said. “Although this institution was already in distress, I am troubled by any interference in the regulatory process.”

OTS said IndyMac is the largest thrift it regulates to fail and according to FDIC data is the second largest financial institution to close in U.S. history.

IndyMac Bank, FSB had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, including about $1 billion of potentially uninsured deposits held by approximately 10,000 depositors. The FDIC will begin contacting customers with uninsured deposits to arrange an appointment with an FDIC claims agent by Monday.

The FDIC will pay uninsured depositors an advance dividend equal to 50 percent of the uninsured amount. Based on preliminary analysis, the estimated cost of the resolution to the Deposit Insurance Fund is between $4 billion and $8 billion.

In a statement, American Bankers Association president Edward Yingling called it “a sad day for IndyMac” but said insured depositors “should know that their money is safe. The FDIC insurance fund is huge, with more than $52 billion in assets to protect bank depositors. In this year alone, the fund will add an additional $5 billion from assessments on banks and interest earnings.”

The FDIC said IndyMac Bank is the fifth FDIC-insured failure of the year. The last FDIC-insured failure in California was the Southern Pacific Bank, Torrance, on Feb. 7, 2003.

The FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3 p.m. to 9 p.m. (PDT), and then daily from 8 a.m. to 8 p.m. thereafter, except Sunday, July 13, when the hours will be 8 a.m. to 6 p.m. Customers also may visit the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/IndyMac.html for further information.

The National Association of Realtors trade group forecasts that resale home prices and sales will both fall about 6 percent this year compared to 2007. After peaking at a record 6.48 million resale home sales in 2006, this pace dropped 12.8 percent to 5.65 million in 2007 and is projected to drop to 5.31 million this year and then rise 5 percent to 5.58 million in 2009, according to the forecast report. The median price of resale homes is expected to fall from $218,900 last year to $205,300 this year, and to rise 4.3 percent to $214,100 next year.

The previous NAR forecast report, released in June, anticipated a 6.4 percent drop in the median resale home price and a 4.5 percent annual drop in resale home sales this year compared to last year. Single-family home sales are expected to plunge 32.3 percent this year and 3.4 percent next year, following a 26.3 percent slide in 2007 and an 18.1 percent drop in 2006, with new-home prices dropping 3.2 percent this year and rising 5.3 percent in 2009.

Pending sales index falls in May:
An index that gauges pending sales of resale homes, based on contracts signed in May, dropped 14 percent compared to the same month last year and was down 4.7 percent compared to April 2008. The Pending Home Sales Index rating in May was below Wall Street expectations. Regionally, the index dropped 22.1 percent in the South, 16.4 percent in the Northeast and 13.8 percent in the Midwest while rising 2 percent in the West in May 2008 compared to May 2007. The index was down 7.1 percent in the South, 6 percent in the Midwest, 2.9 percent in the Northeast and 1.3 percent in the West in May 2008 compared to April 2008. Lawrence Yun, NAR’s chief economist, said in a statement, “The overall decline in contract signings suggests we are not out of the woods by any means.”

FHA expansion plan back on track in Senate:
A proposal to expand Federal Housing Administration loan guarantee programs by $300 billion to help troubled borrowers refinance into more affordable loans is moving toward a Senate vote this week after a 76-10 vote Monday to limit debate on the bill.

The FHA expansion plan — which the Congressional Budget Office has estimated could help 400,000 borrowers at a cost of $680 million over 10 years — is part of the sweeping “Housing and Economic Recovery Act of 2008.” The bill would also create a new regulator for mortgage financers Fannie Mae and Freddie Mac and assess them more than $700 million a year to provide affordable housing and cover the cost of expanding FHA loan guarantees.

Ten Republicans voted against moving forward on the bill Monday, with presidential candidates John McCain, R-Ariz., and Barack Obama, D-Ill., among the 14 senators who did not cast votes. The bill passed a similar procedural vote on June 24, only to be delayed by a failed attempt by Sen. John Ensign, R-Nev., to attach an amendment providing tax breaks for renewable energy. If approved by the Senate this week, the bill faces a veto threat by President Bush.

Before the bill reaches the president’s desk, it would also have to be reconciled with competing legislation in the House. While the Senate bill would not allow Fannie and Freddie to purchase or guarantee single-family mortgages larger than $625,000, the House proposes to make permanent a temporary increase in the conforming loan limit to $729,750 set to expire at the end of the year.

OFHEO: Fannie and Freddie finances are sound:
The federal regulator that oversees the safety and soundness of mortgage financers Fannie Mae and Freddie Mac said Tuesday that a proposed change in accounting methods will not force the companies to raise $75 billion in additional capital.

A report by Lehman Brothers speculated that a proposed revision of rule FAS 140 by the Financial Accounting Standards Board might force Fannie and Freddie to raise billions in additional capital. The report helped send shares of the government-chartered companies into a tailspin on Monday, as investors worried that the companies would raise capital by issuing common stock and dilute the value of existing shares, Reuters reported.

James Lockhart, director of the Office of Federal Housing Enterprise Oversight, said Fannie and Freddie are “prudently” growing their purchases and guarantees of mortgage loans, and that it was “hard to imagine” what prompted investors’ panicked sell-off Monday, Reuters reported.

Both Fannie and Freddie “are classified as adequately capitalized,” Lockhart said in an interview on CNBC. “They have raised significant capital — Fannie has raised close to $15 billion — and going forward that should allow them to ride out the problems of the past years and underwrite this year what should be a very profitable book of business. Freddie has already agreed to raise $5.5 billion more, and we expect them to raise that before the summer is out.”

Kids get burned in mortgage meltdown:
First Focus, a children’s advocacy organization, reports that about 2 million children will be directly affected by foreclosure during this mortgage crisis, according to a report that appeared in the Los Angeles Times. The article notes that kids’ education can suffer when foreclosure pulls them away from their familiar schools, and children can also lose access to services, and their physical and mental health can be compromised.

Rents climb in Q2:
Real estate research firm Reis Inc. reports that apartment-complex vacancies were unchanged in the second quarter while rents rose 1.1 percent, the Wall Street Journal reports, which was down from 1.3 percent rent growth in the same quarter last year. Rents dropped in four of 79 markets tracked by Reis, according to the article, and these markets all had home-price declines: Detroit; Miami; Palm Beach, Fla.; and Ventura County, Calif.

The current housing slump is far from over and is shaping up to be the worst in 50 years, according to an annual report on the state of the nation’s housing markets from the Joint Center for Housing Studies of Harvard University.

Drastic production cuts and deep price discounts in 2005-2007 helped shrink the inventory of unsold new homes from a mid-2006 peak of more than 570,000 to less than 500,000 in early 2008. But the number of homes entering foreclosure nearly doubled to 1.3 million last year, and vacant homes for sale rose 46 percent over two years, to 2.12 million.

“Until the number of vacant for-sale units on the market … falls enough to bring vacancy rates back down, house prices will remain under pressure,” the report said. “Working off the oversupply will require some combination of the following: housing starts fall even further, prices decline enough to bring out new bargain-seeking buyers, interest rates drop enough to improve affordability, job growth improves, consumer confidence returns, and mortgage credit again becomes more widely available.”

Single-family home prices in the first quarter of 2008 were down 12 percent from their October 2005 peak — 18 percent in real terms, after adjusting for inflation. A “dispiriting picture” of housing affordability issues nevertheless remains.

The report, “The State of the Nation’s Housing 2008,” is more optimistic about medium- to long-term prospects, estimating that unless there’s a serious, prolonged economic decline or a marked cutback in immigration, the nation will gain 14.4 million new households between 2010 and 2020, compared with 12.6 million between 1995 and 2005.

For now, center director Nicolas Retsinas said mortgage rates have “barely responded” to aggressive easing by the Federal Reserve. While the supply of for-sale vacant units continues to grow, tighter underwriting standards have locked many would-be home buyers out of the market. And with home prices falling in most metropolitan areas, homeowners are remaining on the sidelines, he said.

“At some point demand will bounce back,” Retsinas said in a press release announcing the release of the report. “Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability. It is difficult to judge how far away from these conditions we may be. It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets.”

If the economy slips into a severe recession, the prolonged contraction could drive down the sustainable level of housing demand by slowing the loss of older units, forcing more households to double up, and reducing sales of second homes, the report said. But in the case of a mild downturn, which most economists expect, the fundamentals of demand are likely to drive a strong rebound in housing once prices bottom out and the economy begins to recover.

How bad is the downturn? The report noted that sales of existing homes fell 13 percent in 2007 to 4.9 million, and sales of new homes were down 26 percent to 776,000, the lowest level since 1996.

The 500,000 unsold new single-family homes available in early 2008 was down from a mid-2006 peak of more than 570,000, but the slower rate of sales translates into an 11 month supply — an overhang not seen since the 1970s. A supply of more than six months is considered a buyer’s market, and the inventory of existing single-family homes rose to 10.7 months in April.

Housing permits fell 24 percent nationwide in 2007, with single-family permits down 29 percent and multifamily permits down 9 percent for the year. The total decline from the 2005 peak was 35 percent, including a 42 percent reduction in single-family permits.

The report said that it’s hard to gauge with certainty how far home prices have fallen, as each of the three most commonly used measures paints a different picture.

The National Association of Realtors (NAR) national median single-family home price declined 6.1 percent from the fourth quarter of 2006 to the fourth quarter of 2007, while the S&P/Case-Shiller U.S. National Home Price Index fell 8.9 percent during the same period.

The narrower purchase-only repeat sales index from the Office of Federal Housing Enterprise Oversight — which excludes mortgages too large or too risky for purchase by Fannie Mae and Freddie Mac — fell 0.3 percent during that time.

The national statistics don’t reveal the larger price drops in many metro areas, the report said, and mask the speed declines spread across the country. At the beginning of 2007, quarterly data collected by NAR showed prices rising in 85 of 144 metro areas. By the end of the year, only 26 metro areas were still seeing price appreciation. In the fourth quarter, prices in 33 metro areas had fallen by 10 percent or more from their peak.

NAR’s figures showed fourth-quarter nominal house prices falling back to 2006 levels in 12 metros, to 2005 levels in 35 metros, to 2004 levels in 19 metros, and to 2003 or earlier levels in 16 metros.

How does the current downturn stack up against others in recent memory? The 12 percent drop in national home prices since the October 2005 peak (18 percent in real terms) exceeds the downturns of the early ’80s and early ’90s. Two and a half years after real prices peaked in November 1989, the real median price was down just 4 percent and the nominal price was up 6 percent. Two and a half years after the May 1979 peak, the real median price had fallen 8 percent and the nominal price had increased by 20 percent.

Those price drops may not have produced meaningful improvements in affordability, the report said.

Between 2001 and 2006, the number of “severely burdened” households spending more than half of their income on housing grew by nearly 4 million, to 17.7 million — or 16 percent of households. Another 39 million households were “moderately burdened” paying more than 30 percent of income on housing.

At current interest rates, the national median price would have to fall an additional 12 percent from the end of 2007 to bring the monthly payments on a newly purchased median-priced home back to 2003 levels, the report said. In 40 metros, prices would have to fall more than 25 percent.

If interest rates were to come down by a full percentage point, the report estimated that the national median home price would still have to decline by 2 percent, or by more than 25 percent, to return to 2003 affordability levels.

Repeat home buyers would not see affordability gains from such price drops because they would have to sell their homes at discounts similar to those on the home they would buy, the report said.

The boom-bust housing cycle has been reflected in the home-ownership rate. From 1994 to 2004, the home-ownership rate surged by five percentage points, peaking at 69 percent. Since then, home-ownership rates have fallen back for most groups, including a nearly two-point drop among black households and a 1.4-point drop among young households. The number of renter households increased by more than 2 million from 2004 to 2007, lowering the national home-ownership rate to 68.1 percent.

Once the oversupply of housing is worked off and home prices start to recover, the use of automated underwriting tools, a return to more traditional mortgage products, and the strength of underlying demand should put the number of homeowners back on the rise, the report said.

Although the short-term prospects for a recovery remain uncertain, in the long run the downturn is unlikely to slow down the creation of new households — unless the economy enters a sharp, prolonged recession that dampens immigration or slows household formation, the report said.

A weak economy could slow the rate of immigration, which is largely driven by the availability of U.S. jobs. The report identifies the main risk to the long-run outlook as a dip in the level of immigration from its recent 1.2 million-a-year pace due to weaker labor markets.

Minorities contributed more than 60 percent of household growth in 2000-2006, and they now account for 29 percent of all households, up from 17 percent in 1980 and 25 percent in 2000. The minority share is likely to reach about 35 percent by 2020, the report said.

The report projected that minority household growth among 35- to 64-year-olds should remain strong in 2010-2020, while the number of white middle-aged households will begin to decline after 2010 as baby boomers reach retirement age.

People living alone are expected to account for 36 percent of household growth between 2010 and 2020, and 75 percent of the 5.3 million projected increase in single-person households will be among those 65 and older.

Most buyers and sellers feel relieved when the negotiations are done and the purchase agreement has been signed by all parties. It’s a milestone. But, you might want to hold off celebrating until the transaction closes.

Current market conditions have complicated the home sale industry. Lender requirements for mortgage qualification and the types of home loans available are changing daily. Before getting into contract to buy a home, make sure you double check with your lender or mortgage broker to confirm that the loan you were qualified for several weeks ago is still available.

For example, a week before closing, buyers who were purchasing their first home — and who had been assured that their financing was in order — were informed that their lender was no longer providing the type of loan they needed to complete the transaction.

These were well-qualified buyers who had enough cash for a 10 percent down payment and closing costs. They needed to borrow a first mortgage for 80 percent of the purchase price and a second mortgage for the remaining 10 percent. The lender who was providing the 10 percent second mortgage decided they would no longer provide 10 percent second loans to first-time buyers.

In a similar situation, buyers who had been approved for 80-10-10 financing were told by their lender at the last minute that their underwriting guidelines had changed. The lender would no longer provide a second mortgage for 10 percent of the purchase unless they were also providing the first mortgage.

A year ago, financing was readily available to just about anyone who wanted to buy a house. And, most of what sold appraised for the purchase price. It was rare to see a listing back on the market because the buyer couldn’t get financing. If a deal fell apart, the most likely culprit was an irreconcilable difference over an inspection issue.

HOUSE HUNTING TIP: Due to the change in the credit markets, buyers are wise to include financing and appraisal contingencies in the purchase contract in addition to an inspection contingency. A contingency should give the buyers a period of time to satisfy the condition in question. If they act in good faith and attempt to satisfy the condition, but are unable to, they may have the right to withdraw from the contract without penalty, depending on how the contact is written.

When buyers find themselves in competition, it’s tempting to waive contingencies. A year ago, many buyers felt comfortable waiving contingencies for financing and property appraisal. There was a loan product for everyone and appraisals weren’t an issue.

This is no longer the case. Most lenders have stopped doing easy-qualifier, no-cash loans and pay-option mortgages, to name a few. Lenders have also tightened up on appraisals, credit score and verifiable income requirements.

Buyer’s remorse is a more serious issue in a slow market where home prices are soft than it is in a market where prices are escalating. Sellers can help prevent buyer’s remorse from sinking a deal by properly preparing their homes for sale. This includes pricing accurately for the current market so that the buyers don’t feel they overpaid when they see the inspection reports.

Obtaining pre-sale home inspections will also help keep buyers from having second thoughts. The more buyers know about the condition of the property before they make an offer, the less chance they will back out due to inspections.

THE CLOSING: A soft market makes an offer that is made contingent on selling another property more risky. Even if your buyer has lined up a buyer for his house, if that deal falls apart so does yours.

Some home sellers view open houses as a right. If their agents balk at sitting in the living room for four or five hours on a nice spring Sunday afternoon waiting for prospects to come bouncing through the door, they feel cheated.

Others see them as a necessary evil. Even though they’ll have to make the beds, clean the kitchen and get put out of their homes, lock, stock and family pet, many sellers believe it is absolutely imperative that agents hold their houses open so anyone and everyone can come traipsing through.

But according to the National Assn. of Realtors’ latest profile of buyers and sellers, only 7% of all buyers visited open houses as a first step in their safari for a new house. Most people start their hunt on the Internet.

That’s not to say that open houses don’t work. They do, but not necessarily for the house in question. Rather, they help turn up new clients for your agent in the form of possible sellers of other houses. They also produce potential buyers of other houses that also are listed for sale.

But as a true selling tool? According to the association, few buyers found the place they bought at an open house.

Of course, that’s not always the case. Over the last two years, Carrie Georgitsis of Re/Max Signature has sold maybe eight houses to buyers who first saw the homes at open houses.

The third house that Kris Coutant of Balfour Realty ever sold was at an open. “I had never met the buyer,” she recalls. “She walked in, decided it was exactly what she wanted, and we wrote the contract right there.”

For the most part, though, agents prefer not to hold open houses unless their clients insist. And even then they’re more likely to persuade their offices’ rookies to baby-sit the house rather than sit there themselves. Actually, novice agents sometimes beg to hold an open house on behalf of their more experienced colleagues in hopes they can snare a client or two of their own. But in those instances, the seller sometimes doesn’t get the representation he’s paying for.

Robert King of Charles Rutenberg Realtors is one of the few realty pros who believe open houses are a good way to stand out in the crowd, but he says most agents he meets at opens he attends when not conducting his own “have the personality and conversation of a table waiter explaining the menu.”

Even in this slow market, when agents are pulling every trick they can think of out of their hats, open houses just don’t seem to work very well.

When houses were selling fast, the modus operandi was to list a home Thursday, hold it open Sunday and collect multiple offers by Tuesday. Buyers knew they had to spend their weekends visiting open houses so they didn’t miss new listings. And they knew if they didn’t act fast, the house wouldn’t be around the next weekend.

Now there is no longer that sense of urgency, says Don Fabrizio-Garcia of Keller Williams: “There is no need for buyers to see a home on our timetable. They can view homes with their agent on their own schedule.”

When open houses do draw people, says Debra Cochran of 1st Choice Better Homes & Land, they are more likely to be looking for decorating tips. And Sandra Newman of Keller Williams considers an open house a success if someone shows up. “Even if they don’t care for it, they will tell someone else,” she says. “It is free advertising, and word of mouth is the best advertising.”

Another reason to hold an open: instant feedback. Lookers will tell your agent what they don’t like about the place. If you get some similar reactions, you’ll know something needs to be addressed.

Still, if you insist on an open house, you might persuade your agent to schedule it during the week so other agents can preview it. Then, if your house happens to fit what one of their clients is looking for, the agent can bring the client back for a private showing.

“The difference between death and taxes is death doesn’t get worse every time Congress meets.” –Will Rogers

In my series of tax articles, I have discussed the tax benefits for residential properties, such as the exclusion of gain of up to $500,000, or the various tax deductions available to homeowners.

Now I turn to the tax benefits available to real estate investors.

If you own investment property, and sell it, you will have to pay capital gains tax; for 2008, the tax rate is 15 percent.

But investors are required to depreciate a portion of their property. While this may provide a small tax benefit each and every year, when the property is ultimately sold, in many cases this depreciation must be recaptured at the rate of 25 percent.

Enter the like-kind exchange, which is a way of deferring that tax. At the outset of this column, it must be pointed out that contrary to popular opinion, this is not a “tax-free” transaction. The exchange, authorized by section 1031 of the Internal Revenue Code, will only defer — not avoid — the capital gains tax. It will not relieve you from the ultimate obligation to pay the capital gains tax.

Many years ago, a man by the name of T.J. Starker sold property in Oregon, pursuant to a “land exchange agreement,” but did not receive any money for the sale. Instead, the seller — a couple of years later — transferred replacement property to Starker. The Internal Revenue Service considered this a taxable sale, but the 9th Circuit Court of Appeals held that this was a deferred exchange permitted under Section 1031 of the Tax Code. In other words, the exchange did not have to take place simultaneously.

The ideal exchange is a direct exchange. I own investment property A and you own property B (also investment). Both are of equal value. On Jan. 1, 2008, you convey B to me and on that same day I convey property A to you. If there is a written agreement between us that this is to be a 1031 exchange, neither of us will have to immediately pay any capital gains tax on any profit we have made.

But it is almost impossible to arrange such a transaction. The logistics of finding the replacement property to be exchanged simultaneously with the relinquished property is very difficult to coordinate.

Accordingly, most 1031 exchanges today are deferred.

There are two kinds of deferred (Starker) exchanges:

* Forward exchange: You sell the relinquished property, and within the time limitations spelled out in Section 1031, obtain the replacement property;

* Reverse exchange: You obtain title to the replacement first, and then sell the relinquished property.

The rules are complex, but here is a general overview of the process. With some important exceptions (discussed below) the rules apply equally whether the exchange is forward or reverse.

Section 1031 permits a delay (non-recognition) of gain only if the following conditions are met:

Must be investment property: The property transferred (called the “relinquished property”) and the exchange property (”replacement property”) must be “property held for productive use in trade, in business or for investment.” Neither property in this exchange can be your principal residence, unless you have abandoned it as your personal house. Your vacation home would also not qualify as investment property, unless you actually start to rent it out more or less full time.

The area of vacation homes is complex and often misunderstood by taxpayers and lawyers alike. The IRS recently promised to provide more information to taxpayers regarding the treatment of these vacation homes.

There must be an exchange: The IRS wants to ensure that a transaction that is called an exchange is not really a sale and a subsequent purchase. Practically, an exchange looks like a sale, but the paperwork involved with the transaction makes it an exchange. It is important that anyone considering a 1031 exchange retain counsel who is familiar with the various rules.

The replacement property must be of “like kind”: As a general rule, all real estate is considered “like kind” with all other real estate. Thus, a condominium unit can be swapped for an office building, a single-family home for raw land, or a farm for commercial or industrial property.

Once you meet these tests, it is important that you determine the tax consequences. If you do a like-kind exchange, your profit will be deferred until you sell the replacement property. However, it must be noted that the cost basis of the new property in most cases will be the basis of the old property. Discuss this with your accountant to determine whether the savings by using a like-kind exchange will make up for the lower cost basis on your new property. Many taxpayers are excited about the concept of deferring their gain, but when they analyze their situation, they realize that the tax will only be a few thousand dollars. Additionally, becoming a landlord again may not be that attractive.

There are two important time limitations that are spelled out in the statute and cannot be waived or modified:

1. Identification of the replacement property within 45 days. Congress did not like the fact that Mr. Starker had no time limitations on when the exchange could take place. Accordingly, the law now requires that the taxpayer identify the replacement property no later than 45 days after the relinquished property has been sold. According to the IRS, the taxpayer may identify more than one property as replacement property. However, the maximum number of replacement properties that the taxpayer may identify is either three properties of any fair market value, or any number of properties as long as their aggregate fair market value does not exceed 200 percent of the aggregate fair market value of all of the relinquished properties.

The replacement property or properties must be unambiguously described in a written document. According to the IRS, real property must be described by a legal description, street address or distinguishable name (e.g., The Nathan Apartment Building).

2. A neutral party is essential. If the taxpayer has any control of even one penny of the relinquished property’s sales proceeds — even for one minute — the exchange will fail. All such proceeds must be held in escrow by a neutral party until the taxpayer is ready to close on the replacement property. At that time, the funds must go directly into that purchase. Generally, an intermediary or escrow agent is involved in the transaction. In order to make absolutely sure that the taxpayer does not have control or access to these funds during this interim period, the IRS requires that this agent cannot be the taxpayer or a related party. The holder of the escrow account can be a broker or an attorney, unless the attorney had within the past two years represented the taxpayer. In such cases, the IRS takes the position that the client controls the attorney and the funds would be constructively in the hands of the taxpayer.

3. Take title within 180 days: Title to the replacement property must be obtained no later than the earlier of 180 days after the relinquished property is transferred or the due date of the taxpayer’s income tax return for the year in which the transfer is made. If, for example, you transferred the relinquished property on Dec. 1, 2008, your tax return is due on April 15, 2009, which is only 136 days. You either have to obtain the replacement property by that date or get extensions from the IRS so that you can extend out to the full 180 days. Nowadays, getting an extension is automatic. If by the due date, you file Form 4868, you will get an extension for six months. Please note, however, that while this allows you to late file your tax return, you still have to pay the tax by April 15, 2009.

4. Interest on the exchange proceeds.

What happens to the interest earned while the sales proceeds are held in escrow? The IRS calls this the “growth factor,” and any such interest to the taxpayer has to be reported as earned income. Once the replacement property is obtained by the exchanger, the interest can either be used for the purchase of that property or paid directly to the exchanger.

Reverse exchanges: It is often difficult to meet the 45/180-day requirements. You have found the replacement property, but do not yet have a buyer for your relinquished property. And the owner of the new property is not prepared to wait until you are able to go to closing on your current property.

The reverse Starker — if done properly — can solve this dilemma. Here are some of the important rules:

1. The taxpayer must arrange for the replacement property to be held in a “qualified exchange accommodation arrangement.” In government language, this is called “QEAA.”

2. Qualified indicia of ownership of the property by the QEAA is required. This means that the QEAA must either have legal title to the replacement property or some other arrangement that is acceptable to the IRS to demonstrate ownership. For example, a land sales contract (also called “contract for deed”) may suffice. Under this latter arrangement, the QEAA will not have actual legal title, but will have contractual obligations. This may — depending on state or local law — avoid having to pay a double recordation-transfer tax. Otherwise, this tax must be paid when the property is first transferred to the QEAA and then again when it is transferred to the ultimate taxpayer.

3. No later than five business days after the property is transferred to the QEAA, the taxpayer and the exchange accommodation titleholder (called the QEAT) must enter into a written agreement that states that the latter is holding the property for the benefit of the taxpayer in order to facilitate an exchange under section 1031. Generally, this can be accomplished by a lease of the property from the QEAT to the taxpayer.

4. Both the taxpayer and the exchange accommodation titleholder (the QEAA) must file separate federal income tax returns, so as to advise the IRS of any income and expense incurred while the QEAT had ownership of the property.

5. No later than 45 days after the replacement property is transferred, the taxpayer must identify the relinquished property. The IRS allows the taxpayer to identify alternative and multiple properties, and if the taxpayer owns several investment properties, this provides some flexibility as to which property will be sold.

6. No later than 180 days after the replacement property is transferred to the QEAT, it must be conveyed to the taxpayer.

7. Perhaps the most important aspect of a reverse Starker is the requirement that the taxpayer have a legitimate desire to engage in a 1031 exchange. According to the IRS regulations:

At the time the qualified indicia of ownership of the property is transferred to the exchange accommodation titleholder, it is the taxpayer’s bona fide intent that the property held by the exchange accommodation titleholder represents … replacement property … in an exchange that is intended to qualify for non-recognition of gain (in whole or in part) or loss under a 1031.

In other words, you cannot buy the replacement property and then — as an afterthought — decide to treat the transaction as a 1031 exchange.

The rules are extremely complex. You must seek both legal and tax accounting advice before you enter into any like-kind exchange transaction — whether forward or reverse.