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posted: 12/20/2013 12:52 AM

About real estate: Borrowers to feel changes in mortgage market next year

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Another banking collapse is unlikely, but many borrowers in 2014 will feel the pinch of tighter loan requirements.

Q. I saw an economist on TV last week who said that another banking crisis like we had about five years ago "will be inevitable" in 2014. What do you think?

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A. It's doubtful. The number of foreclosures that crippled banks several years back has dropped sharply today, and the steady rise in home values has made it far easier for most homeowners to refinance rather than to lose their property through default.

While few experts foresee another collapse, though, it's clear that some major changes will occur in the lending industry next year. The refinancing boom that was trigged when interest rates began their prolonged decline is tapering off, a trend that has already forced many lenders to lay off thousands of employees or to shut their doors altogether. That means that buyers and refinancers in 2014 will have fewer options when shopping for a loan, or might see additional delays when banks begin processing their applications.

Compounding problems will be new federal legislation that takes effect next month. Called the "Qualified Mortgages" rule, it essentially requires lenders to eyeball their loan requests more closely. That won't hurt buyers or refinancers who have a good credit rating and solid income, but almost certainly will make it more difficult on loan seekers who have a less-than-sterling credit score or can't afford to make a big down payment on a house.

Q. As part of the mortgage that we got earlier this year to buy our home, the bank required that we purchase a homeowners insurance policy. Is the cost of the insurance tax-deductible because we are contractually obligated to have it?

A. No, the cost of the insurance probably is not deductible because the property is your personal residence. But a portion of your premium may be deductible if you have a home office, or if you rent out part of the home to someone else and declare the rental income on your tax return.

Talk to an accountant for details. Also get a free copy of Internal Revenue Service Publication 530, Tax Information for Homeowners, by calling the agency at 800-829-3676 or by downloading it from www.irs.gov.

Q. I was interested in your recent column about so-called "zombie homes." Are they the same thing as "vampire homes"?

A. No. A zombie home is a property that has been vacated by its owner but hasn't yet been officially foreclosed upon by the bank. A vampire home is a property that has already gone through the foreclosure process and is owned by the lender, but the previous owner still lives there without making any mortgage payments -- thereby "draining" the bank's coffers dry.

Q. We are selling our condominium in a 10-unit complex. Our monthly homeowners' dues are $195, but the HOA has a healthy $95,000 reserve to supposedly pay for future maintenance and repairs. When we sell, will the HOA be required to refund one-tenth of that amount ($9,500) to us to reflect our share of the reserves?

A. Probably not. The money that the HOA has set aside belongs to the association, not you. Unless its governing bylaws or its related set of covenants, codes and restrictions state otherwise, you shouldn't expect to get a refund check when the sale eventually closes.

Nonetheless, it would be a good idea to get a copy of the association's most recent financial statement so you can show it to potential buyers. Doing so would demonstrate that the HOA is solidly in the black, which would help to alleviate any concerns the purchaser might have that the monthly dues could soar if the project's maintenance costs rise.

REAL ESTATE TRIVIA: About 12,500 homeowners and renters each year go to an emergency room during the holiday season, the Consumer Product Safety Commission says, usually after falling off a ladder or getting shocked while stringing decorative lights or placing an angel atop their Christmas tree. Nearly 12,000 house fires are sparked by unattended candles.

• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405.

2013, Cowles Syndicate Inc.

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