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A key piece of Congress's forthcoming comprehensive reforms for the home mortgage market was made public last week -- and safeguarding appraiser independence is at its core.

Rep. Paul E. Kanjorski (D-Pa.) introduced his “Escrow, Appraisal and Mortgage Servicing Improvements Act” (H.R. 3837) with the understanding that it will be rolled into House Financial Services Committee chairman Rep. Barney Frank's larger anti-predatory lending bill that is expected to be unveiled on Capitol Hill shortly.

Kanjorski, who says he is concerned about the role of inflated appraisals in the nation's mortgage mess, is proposing a series of changes that would touch every home buyer who applies for a loan. If enacted, the bill would:

• Amend the Truth-in-Lending Act to require that home buyers be given access to all appraisals performed in connection with the purchase. If a lender or broker ordered multiple appraisals-but only used the one with the higher valuation that justified the mortgage amount needed to close the sale-the buyer would be guaranteed the right to see all estimates.

“This requirement will help to ensure that consumers know if an appraiser calculated a different value than the one actually used (in) the transaction, and would help them to avoid incidents of relying on faulty appraisals that overvalue the underlying property,” according to a summary of the bill released by Kanjorski.

• Add tough new language to the federal Truth-in-Lending Act prohibiting interference by loan officers in appraisals. Specifically the bill would ban all forms of “compensation, coercion, extortion, collusion, instruction, inducement, bribing or intimidation … for the purpose of causing the appraised value assigned to the property to be based on any fact other than the independent judgment of the appraiser. “

The bill prohibits efforts to force appraisers “to hit a targeted value” and withholding payment for appraisals that did not hit the desired value. In several recent national surveys appraisers ranked interference by loan officers-especially demands that they “hit the number” needed to close the deal or forfeit payment for their services-as the greatest obstacles to their rendering objective, honest valuations.

Proposed penalties for such behavior would be severe: up to $10,000 for the first violation, and $20,000 each for subsequent violations.

• Require any lender making a high-cost subprime mortgage to obtain a full written appraisal, based on interior and exterior inspections of the property. If the house is being resold within a 180-day period after its purchase by the seller, lenders would be required to obtain and deliver a second appraisal at no cost to the home buyer “in order to protect (consumers) against property flipping scams.”

In other sections, Kanjorski's bill would impose new rules designed to prevent credit-impaired borrowers from taking out loans with no escrow accounts. According to Kanjorski, less than 25 percent of all subprime borrowers in recent years have been provided escrow accounts for tax and insurance payments-an omission that frequently has led to delinquencies and foreclosures. Escrow accounts are virtually mandatory in the prime mortgage market.

The bill would also clamp new limitations on mortgage servicers' ability to “force-place” property hazard insurance at high premiums, and would bar servicers from charging fees for responding to borrowers' written requests for information about their loan accounts.

California home prices fell year-to-year for the first time in 10 years in September. The fall came with a record month-to-month sales slump, accompanied by double-digit home price plunges largely in the south but also in the state's capital city.

Some of the state's softest markets are also areas devastated by wild fires this week and the impact is likely to show up in the months ahead as, well, a fire sale.

When the smoke is clear, the area's population will turn to recovery and rebuilding activities more so than home buying and selling.

Another major disaster, the Loma Prieta earthquake in 1989 in Northern California, likewise came at a time when other factors were already putting downward pressure on the state's housing market.

The median price of an existing single-family detached home in the Golden State in September slipped 4.7 percent to $530,830, down from the $557,150 median a year earlier, according to the California Association of Realtors (CAR).

Meanwhile, sales tanked by 38.9 percent year-to-year, falling 14.9 percent just from August to September, the largest month-to-month decline on record.

The association said while seasonal factors typically impact the market right about now, the mortgage market crunch was largely to blame. California's high cost of housing in a tight money market and soft economy also come into play.

Areas scorched by wildfires were among those hit hardest by year-to-year sales and home price declines. With sales declines first, followed by price declines, the Riverside/San Bernardino area's numbers were down 47.7 percent and 12.5 percent; Orange County, 32.9 percent and 4.6 percent; San Diego, 36.4 and 5.6 percent: and the Los Angeles metro area down 38.4 and 2.8 percent.

The greatest sales and price declines, however, were in the High Desert region further east of the scorched earth where sales crashed by 62.7 percent and prices dove by 17.4 percent.

A double-digit home price decline also hit Sacramento, one of the state's first metro areas to feel the downturn. Sacramento home prices were down nearly 12 percent as sales tanked by 38.9 percent.

Sales were down by at least 27 percent in every major metro in the state. Prices fell in 14 of the 19 areas tracked.

However, even as sales slumped by 39.3 percent in Santa Clara County (Silicon Valley) the median price of homes moved ahead of last year's prices by 10.4 percent buoyed largely by sales in the upper end of the market.

Other than the posh Santa Barbara South Coast where the statistically insignificant number of homes sold pushed prices up 55 percent over the year, only Santa Barbara County, Palm Springs/Lower Desert and Monterey County, in addition to Silicon Valley, enjoyed home prices increases -- but not by more than 1.5 percent.

Even less expensive, but still often unaffordable condos were hit. For the year ending in September, condo sales were down 38.9 percent and prices dropped 4.6 percent.

The falling sales and prices don't yet reflect the impact of the ring of fire in Southern California which had not flared up when the numbers were tallied.

The coming months are likely to tell a different story as current residents rebuild and those thinking about buying in the area, already put off by the high cost of housing and finance hurdles, will think twice about buying in the drought-stricken, fire-prone region -- at least for a while.

The post-disaster potential of higher homeowners insurance premiums, scarcer coverage or both, the potential for tougher, more fire-resistant building codes even possible limitations on further development in certain remote, arid locales are among other concerns that could plague home buying in some California areas.

Right now, the fundamentals apply.

"California's sales fell more steeply than those of the U.S. as a whole because of its heavy reliance on jumbo loans – those above the conforming loan limit of $417,000," said CAR president Colleen Badagliacco.

"This speaks to the need to raise the conforming loan limit in higher-cost states like California to more accurately reflect the cost of housing," added Badagliacco, also co broker-owner of RE/MAX Valley Properties in San Jose.

Foreclosures are up, and many families are losing their home. That's bad enough, but the Internal Revenue and the Tax Code has a surprise for you: you may have to report income and capital gains tax, even though you will not receive any money.

The concept is called "debt cancellation". Section 61 (a) of the Tax Code specifically states that "gross income means all income from whatever source derived, including (12) income from discharge of indebtedness ... ."

Most homeowners are completely unaware of this obscure provision. They usually consider that such matters apply to corporations and high-income individuals, but unfortunately the law applies to all taxpayers, regardless of income.

There are two different taxes that may be assessed against you: ordinary income and capital gains tax.

Let's look at this example:

You bought your home a couple of years ago for $170,000. Earlier this year, when your house was worth approximately $200,000, your lender foreclosed. Because you did not make mortgage payments for some time, your mortgage had increased to $220,000.

The IRS wants you to subtract the fair market value from the amount of your debt. This comes to $20,000 ($220,000 - 200,000).

Unless you qualify for an exclusion (discussed below) this $20,000 is taxable income and must be included on your Form 1040 next year.

But that's not the end of the analysis. You then have to subtract your adjusted basis from the fair market value of the house. In our example, that is $30,000 (200,000 - 170,000). It should be noted that this analysis is the same as if you had sold your house for $200,000. If you have owned and lived in the house for at least two years before the foreclosure, you can exclude up to $250,000 of this profit – or up to $500,000 if you are married and file a joint tax return. Otherwise, the $30,000 is considered profit and you will have to pay capital gains tax to the IRS and possibly to the State in which you live.

There are, however, two exclusions, which may be of assistance: when the discharge occurs in a title 11 bankruptcy case or if the discharge occurs when the taxpayer is insolvent, you will not have to pay money if you lose your house by way of a foreclosure.

In our example, if at the time of the foreclosure you had other debts -- such as credit cards or car loans -- which exceed your assets, you are considered "insolvent" and will not have to pay any tax. According to the IRS, you should "determine your liabilities and the fair market value of your assets immediately before the cancellation of your debt to determine whether or not you are insolvent and the amount by which you are insolvent." (IRS Publication 908, Bankruptcy Tax Guide).

If your home is foreclosed, your lender must sent you a year-end statement (Form 1099-C). This form will show you the amount of debt forgiven and the fair market value of the property at the time of the foreclosure.

You should review this form carefully. The value that your lender places on your property is critical. As discussed above, the income tax you may have to pay is based on the difference between that value and the amount of your mortgage at the time of the foreclosure. So if you believe your home has been undervalued, make sure that you obtain independent appraisals from real estate brokers or from your local government assessor. If the form contains errors, get in touch with your lender. If they agree with you, they will send you a corrected Form.

This is a highly complex and specialized area of tax law. Recognizing this, the Internal Revenue Service just announced that they have "unveiled a special new section today on IRS.gov for people who have lost their homes due to foreclosure." (IR-2007-159, dated September 17, 2007).

Well, its not yet a section on their website. According to a spokesperson in the Public Affairs Section of the IRS, to date there is currently only one item there. However, that material is quite helpful and should be read by every homeowner who is in debt, It is entitled "Questions and Answers on Home Foreclosure and Debt Cancellation".

Foreclosure should be the last resort. If you are in debt, and start missing your monthly mortgage payments, don't ignore this. You should immediately talk with your lender and see what options are available to you. Keep in mind that legitimate lenders do not want to foreclose on you home. Especially in todays market, where home sales are weak, the lender does not want to add your house to the rest of their inventory (called "Real Estate Owned" or REO).

Additionally, the jurisdiction in which you live may have set up programs to give temporary relief for delinquent homeowners.

And perhaps the most important thing to do is to consult with your financial advisors, who can assist you in determining whether you will have to pay any tax should you ultimately lose your house.

Mortgage market meltdown has nothing on planetary meltdown.

With most global warming conspiracy theories debunked, with climate-isn't-changing quacks sent packing and with a more informed media reporting what the bulk of the world's scientific community has long known, planetary meltdown is really hitting home.

Americans consider global warming an urgent threat, according to a new survey, "American Opinions on Global Warming" conducted by Yale University's Project on Climate Change, Gallup and the ClearVision Institute.

That's not surprising, given the effects of global warming are already impacting the world's most climate-change vulnerable regions where much of the world's populations lives.

The World According To Al Gore in the Oscar-winning documentary and book, "An Inconvenient Truth," doesn't include much of Manhattan, the Florida Peninsula, the San Francisco Bay Area or other coastal and low-lying regions where, within 50 years, homes could be under 20 feet of water as oceans swell from glacier-melting temperatures.

But Al Gore didn't invent global warming.

One in 10 people worldwide, including one in eight city-dwellers, live less than 10 meters (33 feet) above sea-level and near the coast and are at risk for flooding and stronger storms exacerbated by climate change, according to the International Institute for Environment and Development.

Its "The Rising Tide: Assessing The Risks Of Climate Change And Human Settlements In Low Elevation Coastal Zones", says popular low-lying-development digs up a double whammy.

Human masses flock to zones at higher risk of suffering from ever more inclement weather, rising sea-levels and flooding. Compared to regions with smaller, thinner populations, the higher population at greater density puts more people in harms way, making survival, emergency and rescue operations more difficult should a natural disaster hit.

And it's not just the upward motion of the ocean.

The United Nations Environment Programme's (UNEP) report "Global Deserts Outlook", said earlier this year, even as global warming is beginning to cause higher sea levels to nip at coastlines, hotter weather is fueling "desertification," which pushes the desert frontier out, closer to population centers typically situated on the previously cooler desert fringes.

In addition to the distant potential for apocalyptic disaster, the more down-to-earth reality of higher costs to insure, build and heat homes and otherwise live with the effects of global warming is what really hits home for the American populace.

It's as if the planet is squeezing populations between a rocky shore and a hard, hot place.

Earlier this year, Philip J. Trounstine, director of the Survey & Policy Research Institute at San Jose (CA) State University said, "My suspicion is that those who are highly educated are aware of this issue and there is some caution about purchasing in low-lying coastal areas. You are thinking in 50-year increments, which means leaving the property to children and projections in the rise in sea levels in 50 to 100 years."

But the Yale-Gallup-ClearVision survey indicates global warming concerns have been imbued with a time lapse photography-like sense of urgency as more and more Americans call for action now rather than in the next generation.

According to the survey:

• Sixty-two percent of respondents believe that life on earth will continue without major disruptions only if society takes immediate and drastic action to reduce global warming.
• Sixty-eight percent of Americans support a new international treaty requiring the United States to cut its emissions of carbon dioxide 90 percent by the year 2050. The United States has been dragging its heels on signing the Kyoto Protocol, an international treaty that would require the United States to cut its emissions 7 percent by the year 2012.

Unfortunately, that's not surprising from a nation that spends a fortune turning corn into nutritionally harmful high fructose corn syrup instead of bio fuel.

• However, Americans don't think they should be taxed for heel dragging and oppose carbon taxes as a way to address global warming -- either in the form of gasoline taxes (67 percent against) or electricity taxes (71 percent against).
• Americans are, however, ready to bite the bullet and pay for change even if those it those elected, car makers, and utility companies would prefer other approaches. A whopping 85 percent of those polled support requiring automakers to increase the fuel efficiency of all new consumer motor vehicles to 35 miles per gallon, even if it meant a new car would cost up to $500 more; and 82 percent support requiring electric utilities to produce at least 20 percent of their electricity from renewable energy sources, even if it cost the average household an extra $100 a year.
• Move over Iraq war and wake up presidential candidates. What is surprising is that 40 percent of respondents say a presidential candidate's position on global warming will be either extremely important (16 percent) or very important (24 percent) when casting their ballots.

That's provided, of course, the candidates actually detail their global warming platforms.

• Finally, 50 percent of those polled say they are personally worried about global warming and 15 percent said they are worried "a great deal."

If only worry could cool the planet.

The chairman of a key congressional committee has provided new details on his controversial plans to deny mortgage interest deductions to people who own large homes.

Rep. John D. Dingell (D-Mich.), who as chairman of the Energy and Commerce committee is one of the most powerful leaders in the House, last Thursday unveiled a draft of his forthcoming "carbon tax" legislative reform package. As expected, the bill would impose new federal taxes of $50 a ton on coal, petroleum, natural gas and other carbon-based fuels; a new 50 cents per gallon tax surcharge on gasoline, jet fuel and kerosene; and "phase out the mortgage interest deduction on large homes."

Dingell defines large as 3,000 square feet or more of interior space. The draft language does not explain who will be responsible for measuring houses' square footage or how the federal government will audit compliance.

The bill, which will be part of Dingell's comprehensive plan to address global warming, would offer exemptions to certain "historical homes" built before 1900, houses on farms, and houses whose owners purchase "carbon offsets" to make their properties "carbon neutral." The bill would also provide exemptions for large houses built to certified high energy-efficiency standards.

In a statement, Dingell said he is targeting big houses because they "have contributed to increased sprawl and longer commutes. Despite new houses in and of themselves being more energy efficient," he said, "the sheer size, sprawl and commutes lead to drastically more energy use-or to put it more simply, a larger carbon footprint."

In the draft released Thursday, Dingell offered a detailed phase-out schedule for the mortgage interest writeoff, beginning with houses of 3,000 square fee-which would lose 15 percent of their deductions-and ending with houses of 4,200 square feet and larger, which would receive no deductions at all.

An example of how the sliding scale would work was included in the draft: Assuming a series of houses of various sizes, all with first mortgages of $300,000 at 6 percent, and all owned by taxpayers in the 25 percent marginal bracket, each house would generate $18,000 a year in interest payments. The current value of the deduction for each owner would be $4,500 ($18,000 x 0.25).

Under the Dingell plan, however, owners of homes 3,000-3,499 square feet would be limited to claiming 85 percent of that $4,500 writeoff ($3,825). Owners of homes between 3,200-3,399 square feet would be capped at 70 percent ($3,150.) Those with 3,400-3,599 square feet could only take 55 percent of the deduction ($2,475); owners with 3,600-3,799 square feet would get 40 percent ($1,800); homes of 3,800-3,999 square feet would be limited to 25 percent ($1,125); those with 4,000-4,199 would get just 10 percent ($450); and anyone owning a home of 4,200 square feet or more would get zero.

Dingell defends his tax proposals as needed remedies to overconsumption and wasteful use of energy, which he argues are contributing to excessive greenhouse gas emissions and global warming.

"In order to address the issues of climate change," he said, "we must address the issue of consumption-we do that by making consumption more expensive."

Dingell's plans have drawn criticism from the National Association of Realtors and the National Association of Home Builders, both of whom questioned its practicality and its focus on square footage rather than energy efficiency and measured usage. The NAR estimated that roughly 10.4 million single family homes in the U.S. have more than 3,000 square feet, and represent 27 percent of the total valuation of single family units.

Dingell's legislation is still at the drafting stage, but is heading for introduction in the weeks ahead. Dingell's committee has congressional jurisdiction over energy issues, but tax proposals must go before the Ways and Means committee, where the limitation on mortgage interest deductibility is likely to meet strong, bipartisan opposition.