Letters From the Home Front
By Kris Berg, Wednesday, February 25, 2009. Inman News
It's the debate that "just won't go away," I read.
"Hmm," I think. What could that be? Is it the debate about how we got to a place where millions of people have lost their homes and many more will likely fall victim to foreclosure in the coming year?
Maybe it is the conversation about how lenders are pricing their foreclosure inventory using the dartboard and dreidel method of valuation, dragging an entire market into the abyss in the process. (In the case of a tie, the Ouija board shall dictate.)
Maybe it's the discussion on industry standards and ethics -- the one that challenges the theory that a home purchase or sale can easily be orchestrated while working the night shift at Jim's Pizza Emporium.
No, the real debate involves my tax return. I simply make too much.
If we are to be fair, this is not a new argument. I have been bilking the consumer for years -- in my case, 12 years. And what a fun and frolicking 12 years it has been.
Through up and down markets, through thick and thin, I have enjoyed the "freedom" that is a real estate career. I have been able to take calls and make calls from my daughters' birthday parties and field trips.
I was able to take time off to see my oldest receive her high school diploma and then spend the after-party crouched behind a parked car listening to a client counsel me. "I know you are busy with your daughter's school thingy, but I have left three messages in the past two quarks, and I need to know if you received the inspection report."
During the boom years, I made too much because homes sold quickly, forgetting for a moment that representing a buyer required us to set up encampments in our idling cars so we could beat the sign installer to the door with the offer, a process we would repeat 11 times before hitting pay dirt.
During the transition years, I made too much because, even though selling a home involved more heavy lifting, sellers were starting to see their net sheets shrinking and felt we should all toss a few coins in the jar. Today, I make too much because, well, it's just fun to say so I suppose.
It's the debate that won't go away.
Maybe it's just me, but all of this outrage where my paycheck is concerned is starting to feel a little manufactured. I am here to tell you there is no need. I have enough outrage to go around.
Suddenly, we are concerned that my compensation might not benefit the consumer. Last time I checked, the consumer had an unlimited number of choices regarding agents, services and fee structures.
You want a flat fee? Those models exist. If you want to pay $500 or $5,000, there is someone who will gladly take the job. If you want to employ Aunt Margaret to represent you in exchange for a testimonial letter and a Bundt cake at closing, she just might bite.
You can pay 1 percent or 20 percent, or you can pay as you go. You can even do it yourself. The world is full of choices. What I charge is what I am worth, and what you charge is what you think you are worth. The debate is lost on me.
If, as an agent, you think you are overpaid, then you are. Change your model and charge less. And if we are running out of controversy, maybe we should move on to more pressing issues like customer service, industry standards, and ethics -- and something about the other agent who won't return my phone calls when I have a offer to present because I am not a buyer waiving a checkbook above my head.
For me, I charge what I am worth, but I make far less than I am worth. When a client was recently laid off one week before closing, I was laid off, except he had severance pay and now qualifies for unemployment benefits. I enjoy neither. I suspect many of you, like me, have spent six months with a buyer who decides not to buy.
Many of us have spent our weekends running the Chamber of Commerce shuttle tours for people expecting to relocate and then decide not to accept the job offer or don't get the job offer. We routinely find that we have spent weeks or months promoting a listing and generating an offer only to learn that the seller "needs" to get a little more, even though the number on the purchase agreement looks suspiciously like the one we suggested should be reasonably expected when we initially met to get things rolling.
Deaths, births, divorces, marriages, employment, unemployment, and change of heart: Stuff happens. And when it does, we haven't worked for free; we have worked at a loss.
Yesterday, I called in sick. Well, that's not entirely true. I delivered the message in person, on all fours and looking like I had been whopped repeatedly with an ugly stick, as I met with two clients to get contracts signed and another to attend a final walk-through.
You see, I am paid only for delivering the goods and, more importantly, my clients aren't buying or selling a pair of shoes. We are talking about a financially enormous, highly stressful, life-changing event. There are no sick days.
I take vacations. They involve enough electronics and power cords to stock a small trade show. Did you know that your cell phone works on the beaches of St. John? I do.
It was a $1,000 lesson learned while trying to negotiate a purchase agreement on the behalf of a client who was quite irritated that a trip I had booked six months prior happened to coincide with a buyer's decision to make an offer on their home. Of course we do get "paid vacations." This is what we call the vacations we take while we are paying another agent to cover our business.
I also get paid health insurance. It's paid by me, in gold bullion, and I have had three carriers in as many years because it seems that a member organization numbering in the millions cannot find an insurer willing to make a long-term commitment to my well-being.
As an independent contractor, I pay Social Security and then I get to pay it again -- the employer's share. I pay board dues and lockbox and license fees. I pay for the business trappings that result in my garage frequently being confused with a Staples distribution center, while my home office looks like the clearance aisle at Best Buy.
I pay for my own pension plan. The latter is whatever I can sock away depending on the winds. This year, it is sorely underfunded, which is probably a good thing considering what the stock market has done.
My job is flexible, though. It is so flexible that I can work all seven days. Escrow companies, photographers, print shops and the county recorder are open weekdays.
Our clients are open on weekends -- and in the evenings after 7 p.m., because that is when the baby sleeps. During my free time, I blow off steam with a legal brief, a good article on housing trends, or a class on new disclosure laws.
What I am selling is a service, but it is the product that drives my income, and I do not control its production. I live on a cash-flow rollercoaster that involves very high "highs" and excruciatingly low "lows."
For all of my exceptional efforts, selfless heroics and best intentions, one terrorist event or economic recession can change my pay scale, as can the occasional change of heart or mind, and I rarely get my 30 days' notice.
"But representing the sale of a condo is no more or less difficult than representing the sale of Belarus!" you say. Sometimes that's true and sometimes not.
Yet, percentage-based pay systems are not foreign to us. Try charging the same flat sales tax on a Hummer that you do on a pair of Rollerblade skates and see what a big round of applause you get.
And there are losses. Because we at least strive to be for-profit businesses, the losses have to be considered in the fees we charge. Not fair? When you buy that pair of shoes you are paying in part for the guy who shoplifted his, much like the price of the steak at the store reflects all of the steaks that were not purchased and had to be tossed out.
Consumers should pay up-front, then. Only they won't. It is much more appealing to play with house money, which brings us to the subject of risk. I incur it all. There is risk every time I pay thousands to market a home only to find that the seller has changed his mind and every time I write the fifth offer for a buyer client to learn they that aren't having fun anymore or that her brother just got his license. And there is risk every time I walk into the office that a frivolous lawsuit will be waiting for me.
If I sound angry about the work, I am not, because I have defined my own scope. What I am angry about is that my income is even up for debate. This business of bilking the customer, while fun and sometimes extremely rewarding, is costly. I have paid dearly with time, money and sacrifices in my personal life. So I charge what I am worth, as should you.
Oh, and I wouldn't worry too much about the consumer where our fees are concerned. He has plenty of choices, and I respect him enough to know he will weigh his options and make the decision that is in his best interests given his particular circumstances. Respecting the customer -- now that might be a topic worth debating.
Kris Berg is broker-owner of San Diego Castles Realty. She also writes a consumer-focused real estate blog, The San Diego Home Blog
Thursday, February 26, 2009
Understanding Your Credit
And Making The Most Of It. (Part 1)
Where do we begin? For most consumers, the world of credit is confusing and at times, seems almost without common sense. Credit plays an important role in your life. It affects the purchases you make and much more. Here are the basics, simply explained. Paying your bills on time is the single most important contributor to having good credit. No matter what the minimum payment is, it is critical that you always make all payments on time. Whether the minimum payment is $10 or $1,000, paying it late will negatively affect your credit. What does "late" really mean? Here's an example: Let's assume your latest monthly statement says a payment is due on the 1st of the month. There is almost always a grace period, which can be around 10 days. If you make the payment after the grace period, your credit provider will likely charge you a late fee. Does this hurt your overall credit or "credit score"? No. Even though they charged you a late fee, as long as you get your payment and late fee to the creditor within 30 days of the due date, which began on the 1st of the month, your credit will not get "dinged". In other words, no negatives. Creditors regularly supply your credit history to outside credit reporting agencies, also known as credit bureaus.
There are 3 main credit reporting agencies/credit bureaus, which are Experian (formerly TRW), Equifax and TransUnion. They are companies that collect (and sell) information about how people handle their credit. Their credit reports list how individuals manage their debts, make payments, how much untapped credit they have available and whether they have applied for any loans or other financing. The reports are made available to authorized individuals and creditors. Sometimes unauthorized individuals gain access to your information. We'll save that for a later date.
What is a credit score? The most well known type of credit score is the Fair Isaac or FICO score. Each of the 3 main agencies determine their own score and can provide it within their credit report. It is a number ranging from 300 to 900 which reflects the credit worthiness of the borrower. A credit score is primarily determined by the timeliness of past loan payments and balances owed in relation to the maximum credit limits available. Huh? What was that second part again? Let's say you have a credit card with a maximum credit limit of $4000. Owing less than 50% of that limit is a good thing. Owing any more will negatively affect your credit score. So, in this case, it is better to spread your debt around various other credit cards you have, rather than to have that one big balance. Keeping your credit cards with less than 50% of the limit is always a good idea, especially if you are planning to obtain more credit in the near future.
Most mortgage lenders will want to see all 3 reports and all 3 scores. If a single person is applying for a mortgage, lenders will typically use the middle number of the 3 scores. So, if your scores are 650, 698 and 735, they will grant you credit based on 698. With a married couple, they use the middle score of the greater income earner. The national credit score average is 678.
As always, if you need help or advice, just email Adam Ford of Mortgage Advisors Group at AdamFord@skylinefinancialcorp.com. More to come later!
[Adam Ford sent me this article for inclusion in The Real Blog]
Where do we begin? For most consumers, the world of credit is confusing and at times, seems almost without common sense. Credit plays an important role in your life. It affects the purchases you make and much more. Here are the basics, simply explained. Paying your bills on time is the single most important contributor to having good credit. No matter what the minimum payment is, it is critical that you always make all payments on time. Whether the minimum payment is $10 or $1,000, paying it late will negatively affect your credit. What does "late" really mean? Here's an example: Let's assume your latest monthly statement says a payment is due on the 1st of the month. There is almost always a grace period, which can be around 10 days. If you make the payment after the grace period, your credit provider will likely charge you a late fee. Does this hurt your overall credit or "credit score"? No. Even though they charged you a late fee, as long as you get your payment and late fee to the creditor within 30 days of the due date, which began on the 1st of the month, your credit will not get "dinged". In other words, no negatives. Creditors regularly supply your credit history to outside credit reporting agencies, also known as credit bureaus.
There are 3 main credit reporting agencies/credit bureaus, which are Experian (formerly TRW), Equifax and TransUnion. They are companies that collect (and sell) information about how people handle their credit. Their credit reports list how individuals manage their debts, make payments, how much untapped credit they have available and whether they have applied for any loans or other financing. The reports are made available to authorized individuals and creditors. Sometimes unauthorized individuals gain access to your information. We'll save that for a later date.
What is a credit score? The most well known type of credit score is the Fair Isaac or FICO score. Each of the 3 main agencies determine their own score and can provide it within their credit report. It is a number ranging from 300 to 900 which reflects the credit worthiness of the borrower. A credit score is primarily determined by the timeliness of past loan payments and balances owed in relation to the maximum credit limits available. Huh? What was that second part again? Let's say you have a credit card with a maximum credit limit of $4000. Owing less than 50% of that limit is a good thing. Owing any more will negatively affect your credit score. So, in this case, it is better to spread your debt around various other credit cards you have, rather than to have that one big balance. Keeping your credit cards with less than 50% of the limit is always a good idea, especially if you are planning to obtain more credit in the near future.
Most mortgage lenders will want to see all 3 reports and all 3 scores. If a single person is applying for a mortgage, lenders will typically use the middle number of the 3 scores. So, if your scores are 650, 698 and 735, they will grant you credit based on 698. With a married couple, they use the middle score of the greater income earner. The national credit score average is 678.
As always, if you need help or advice, just email Adam Ford of Mortgage Advisors Group at AdamFord@skylinefinancialcorp.com. More to come later!
[Adam Ford sent me this article for inclusion in The Real Blog]
Saturday, February 21, 2009
NAR Proud of New Housing Bill
National Association of Realtors President Charles McMillan sent this to the Realtors:
For nearly four months, NAR has been working to deliver to you and to our nation a comprehensive plan to stabilize the housing market.
This week, we saw countless hours of hard work pay off – in a MAJOR way – when the federal government implemented NAR's recommendations to stimulate housing with the signing of the American Recovery and Reinvestment Act of 2009.
This bold and unprecedented move to help housing did not happen by chance. Just a few months ago, the auto industry had Congress' ear. Yet, thanks to countless meetings, letters, phone calls, and public pressure that we – the REALTORS® of America – placed on lawmakers in Washington, D.C., housing emerged as the top priority in the new Administration and in Congress. While some of the items in the Act are controversial and are currently being debated, most of our top priorities were addressed.
Thanks to all of our hard work, America’s homebuyers and homeowners will soon have:
Lower interest rates for home mortgages;
A greater ability to get financing through FHA, Fannie Mae and Freddie Mac in high-cost areas;
A true tax credit incentive to buy a home NOW; and
Foreclosure mitigation and short-sale standards.
As a direct result of NAR's advocacy, we hope REALTORS® will see an increase in home sales this year. NAR also continues to make significant progress on our efforts to unclog the pipeline for foreclosures and to address administrative problems with short sales.
Such significant movement on these critical issues is rare. For more information and details on these new laws and programs, visit the Unlock America's Economy Page on Realtor.org:
http://www.realtor.org/government_affairs/gapublic/gses_conservatorship?LID=RONav0023
For nearly four months, NAR has been working to deliver to you and to our nation a comprehensive plan to stabilize the housing market.
This week, we saw countless hours of hard work pay off – in a MAJOR way – when the federal government implemented NAR's recommendations to stimulate housing with the signing of the American Recovery and Reinvestment Act of 2009.
This bold and unprecedented move to help housing did not happen by chance. Just a few months ago, the auto industry had Congress' ear. Yet, thanks to countless meetings, letters, phone calls, and public pressure that we – the REALTORS® of America – placed on lawmakers in Washington, D.C., housing emerged as the top priority in the new Administration and in Congress. While some of the items in the Act are controversial and are currently being debated, most of our top priorities were addressed.
Thanks to all of our hard work, America’s homebuyers and homeowners will soon have:
Lower interest rates for home mortgages;
A greater ability to get financing through FHA, Fannie Mae and Freddie Mac in high-cost areas;
A true tax credit incentive to buy a home NOW; and
Foreclosure mitigation and short-sale standards.
As a direct result of NAR's advocacy, we hope REALTORS® will see an increase in home sales this year. NAR also continues to make significant progress on our efforts to unclog the pipeline for foreclosures and to address administrative problems with short sales.
Such significant movement on these critical issues is rare. For more information and details on these new laws and programs, visit the Unlock America's Economy Page on Realtor.org:
http://www.realtor.org/government_affairs/gapublic/gses_conservatorship?LID=RONav0023
Wednesday, February 18, 2009
Home Foreclosure and Debt Cancellation Info from the IRS
Update Dec. 11, 2008 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
The amount excluded reduces the taxpayer’s cost basis in the home. More details. Further information, including detailed examples, can also be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.
Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form
Updated with FAQs at bottom — Feb. 28, 2008
Updated with new link — Dec. 11, 2008
IR-2008-17, Feb. 12, 2008
WASHINGTON — Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service.
Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on this Web site.
“The new law contains important provisions for struggling homeowners,” said Acting IRS Commissioner Linda Stiff. “We urge people with mortgage problems to take full advantage of the valuable tax relief available.”
The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 982. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. The paper Form 982 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds.
The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b).
The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.
Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.
Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.
The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home ( Box 7).
Note: Legislation enacted in October 2008 extended this relief through 2012. Thus this relief now applies to debt forgiven in calendar years 2007 through 2012.
Related Items:
Frequently asked questions on the Mortgage Forgiveness Debt Relief Act
Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness
1099-C
Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments
MORE AT http://www.irs.gov/irs/article/0,,id=179073,00.html
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
The amount excluded reduces the taxpayer’s cost basis in the home. More details. Further information, including detailed examples, can also be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.
Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form
Updated with FAQs at bottom — Feb. 28, 2008
Updated with new link — Dec. 11, 2008
IR-2008-17, Feb. 12, 2008
WASHINGTON — Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service.
Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on this Web site.
“The new law contains important provisions for struggling homeowners,” said Acting IRS Commissioner Linda Stiff. “We urge people with mortgage problems to take full advantage of the valuable tax relief available.”
The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 982. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. The paper Form 982 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds.
The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b).
The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.
Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.
Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.
The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home ( Box 7).
Note: Legislation enacted in October 2008 extended this relief through 2012. Thus this relief now applies to debt forgiven in calendar years 2007 through 2012.
Related Items:
Frequently asked questions on the Mortgage Forgiveness Debt Relief Act
Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness
1099-C
Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments
MORE AT http://www.irs.gov/irs/article/0,,id=179073,00.html
FNMA Announces New Policy For Renters In REO Properties
On January 13 Fannie Mae released an announcement describing a new policy that will allow qualified renters to remain in Fannie Mae-owned foreclosure properties. Formally known as the National Real Estate Owned Rental Policy, it is meant to address the difficulties faced by tenants who – often through no fault of their own – face serious disruptions in their lives because the owner of the property in which they live has been foreclosed upon.
Said Michael Williams, chief operating officer of Fannie Mae, “This policy will allow qualified renters to remain in Fannie Mae-owned properties should they choose to do so, mitigate the disruption of personal lives that foreclosures can cause, and help bring a measure of stability to communities impacted by high foreclosure rates.”
The policy applies to renters who occupy the property at the time of foreclosure or deed-in-lieu of foreclosure. It will not apply to the borrowers who are losing the property, nor to their immediate families. The type of property occupied may be single-family homes, condos, co-ops, manufactured housing, or one-to-four unit buildings. The only requirement is that the property is a Fannie Mae REO, and that it conforms to all applicable local and state requirements for a rental property.
Key features of the new policy are as follows:
After the foreclosure is complete, renters will be offered the opportunity to either accept an incentive payment to vacate the property (“Cash for Keys”) or they may sign a new month-to-month rental agreement with Fannie Mae.
Fannie Mae will not require payment histories or credit checks.
Renters will be charged market rents. This may require a local rent survey for comparison purposes. Fannie Mae will “review each instance where the market rate may require a tenant to pay additional rent and will work to reach an equitable solution.”
No security deposit will be required. On the other hand, the announcement is silent on Fannie Mae’s possible obligations if an unreturned security deposit had been paid to the foreclosed- upon former owner.
The property will be for sale, and may undergo repair or rehab work, during the term of the tenancy. “If the property sells, the lease will transfer to the new owner.”
The property will be managed by a real estate broker and/or a property management company.
Whether the new Fannie Mae policy will be a good thing is yet to be determined. Having lost many, many millions of dollars, Fannie Mae has already demonstrated that it was not particularly good at its core business. There is little reason to think that it will be good at the landlord business either. Even with property management companies, someone has to manage the property managers.
Already, one can see that the policy may not be particularly good for many tenants. Suppose you had begun a one-year lease in September, and now, in January, the property has been foreclosed upon. Fannie Mae offers you a month-to-month tenancy while the property is for sale. You still might have to move before school is out.
Nor does it look terribly attractive on the buyer side. A prospective owner-occupant doesn’t want a tenant in possession when he closes escrow. And neither he nor an investor buyer can be very positive about taking a property where the tenant occupant has paid no security deposit.
It’s a nice idea, but the new Fannie Mae policy is probably going to require some refinement.
January 2009
Said Michael Williams, chief operating officer of Fannie Mae, “This policy will allow qualified renters to remain in Fannie Mae-owned properties should they choose to do so, mitigate the disruption of personal lives that foreclosures can cause, and help bring a measure of stability to communities impacted by high foreclosure rates.”
The policy applies to renters who occupy the property at the time of foreclosure or deed-in-lieu of foreclosure. It will not apply to the borrowers who are losing the property, nor to their immediate families. The type of property occupied may be single-family homes, condos, co-ops, manufactured housing, or one-to-four unit buildings. The only requirement is that the property is a Fannie Mae REO, and that it conforms to all applicable local and state requirements for a rental property.
Key features of the new policy are as follows:
After the foreclosure is complete, renters will be offered the opportunity to either accept an incentive payment to vacate the property (“Cash for Keys”) or they may sign a new month-to-month rental agreement with Fannie Mae.
Fannie Mae will not require payment histories or credit checks.
Renters will be charged market rents. This may require a local rent survey for comparison purposes. Fannie Mae will “review each instance where the market rate may require a tenant to pay additional rent and will work to reach an equitable solution.”
No security deposit will be required. On the other hand, the announcement is silent on Fannie Mae’s possible obligations if an unreturned security deposit had been paid to the foreclosed- upon former owner.
The property will be for sale, and may undergo repair or rehab work, during the term of the tenancy. “If the property sells, the lease will transfer to the new owner.”
The property will be managed by a real estate broker and/or a property management company.
Whether the new Fannie Mae policy will be a good thing is yet to be determined. Having lost many, many millions of dollars, Fannie Mae has already demonstrated that it was not particularly good at its core business. There is little reason to think that it will be good at the landlord business either. Even with property management companies, someone has to manage the property managers.
Already, one can see that the policy may not be particularly good for many tenants. Suppose you had begun a one-year lease in September, and now, in January, the property has been foreclosed upon. Fannie Mae offers you a month-to-month tenancy while the property is for sale. You still might have to move before school is out.
Nor does it look terribly attractive on the buyer side. A prospective owner-occupant doesn’t want a tenant in possession when he closes escrow. And neither he nor an investor buyer can be very positive about taking a property where the tenant occupant has paid no security deposit.
It’s a nice idea, but the new Fannie Mae policy is probably going to require some refinement.
January 2009
Obama's Housing Plan Gets Mixed Reviews
February 18, 2009, 9:42 am
Interesting plan, but as the sheriff said to the captain in Jaws: we're going to need a bigger boat.
Please read the whole article and then go to the Wall Street Journal website on the article and read the comments. You think you have some problems with this plan? Read the comments! People are angry!
Click for the article and comments.
Obama’s Plan Aimed at Helping Troubled Homeowners
Here’s the summary of the Obama administration’s plan aimed at helping Distressed Homeowners
Homeowner Affordability and Stability Plan
Executive Summary
The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country.
· Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance at lower mortgage rates.
· Millions of workers have lost their jobs or had their hours cut back, are now struggling to stay current on their mortgage payments – with nearly 6 million households facing possible foreclosure.
· Neighborhoods are struggling, as each foreclosed home reduces nearby property values by as much as 9 percent.
1. Refinancing for Up to 4 to 5 Million Responsible Homeowners to Make Their Mortgages More Affortdable
2. A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners
3. Supporting Low Mortgage Rages by Strengthening Confidence in Fannie Mae and Freddie Mac.
The Homeowner Affordability and Stability Plan is part of the President’s broad, comprehensive strategy to get the economy back on track. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. In doing so, the plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs. The key components of the Homeowner Affordability and Stability Plan are:
1. Affordability: Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From Falling Home Prices
· Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.
· Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year:
o Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 – making them ineligible for today’s low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% – reducing their annual payments by over $2,300.
2. Stability: Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners
· Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their mortgage payments rise to 40 or even 50 percent of their monthly income – particularly those who received subprime and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to make reasonable monthly mortgage payments to stay in their homes – providing families with security and neighborhoods with stability.
· No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay in their home – it will not aid speculators or house flippers.
· Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.
· Providing Support for Responsible Homeowners: Because loan modifications are more likely to succeed if they are made before a borrower misses a payment, the plan will include households at risk of imminent default despite being current on their mortgage payments.
· Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels: The Homeowner Stability Initiative has a simple goal: reduce the amount homeowners owe per month to sustainable levels. Using money allocated under the Financial Stability Plan and the full strength of Fannie Mae and Freddie Mac, this program has several key components:
§ A Shared Effort to Reduce Monthly Payments: For a sample household with payments adding up to 43 percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the borrower’s monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.
§ “Pay for Success” Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive “pay for success” fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years.
§ Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
§ Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
§ Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more families to keep their homes, the Administration — together with the FDIC — has developed an innovative partial guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion – will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall even further later on. Holders of mortgages modified under the program would be provided with an additional insurance payment on each modified loan, linked to declines in the home price index.
· Institute Clear and Consistent Guidelines for Loan Modifications: Treasury will develop uniform guidance for loan modifications across the mortgage industry, working closely with the bank agencies and building on the FDIC’s pioneering work. The Guidelines will be used for the Administration’s new foreclosure prevention plan. Moreover, all financial institutions receiving Financial Stability Plan financial assistance going forward will be required to implement loan modification plans consistent with Treasury Guidance. Fannie Mae and Freddie Mac will use these guidelines for loans that they own or guarantee, and the Administration will work with regulators and other federal and state agencies to implement these guidelines across the entire mortgage market. The agencies will seek to apply these guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the FDIC, Veterans’ Affairs and the Department of Agriculture.
· Other Comprehensive Measures to Reduce Foreclosure and Strengthen Communities
§ Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the FDIC, the Federal Reserve and HUD to Monitor Performance
§ Allow Judicial Modifications of Home Mortgages During Bankruptcy for Borrowers Who Have Run Out of Options
§ Provide $1.5 Billion in Relocation and Other Forms of Assistance to Renters Displaced by Foreclosure and $2 Billion in Neighborhood Stabilization Funds
§ Improve the Flexibility of Hope for Homeowners and Other FHA Programs to Modify and Refinance At-Risk Borrowers
3. Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac:
· Ensuring Strength and Security of the Mortgage Market: Today, using funds already authorized in 2008 by Congress for this purpose, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability.
o Provide Forward-Looking Confidence: The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.
o Treasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level of $100 billion each.
· Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.
· Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the GSEs’ retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with corresponding increases in the allowable debt outstanding.
· Support State Housing Finance Agencies: The Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving homebuyers.
· No EESA or Financial Stability Plan Money: The $200 billion in funding commitments are being made under the Housing and Economic Recovery Act and do not use any money from the Financial Stability Plan or Emergency Economic Stabilization Act/TARP.
Interesting plan, but as the sheriff said to the captain in Jaws: we're going to need a bigger boat.
Please read the whole article and then go to the Wall Street Journal website on the article and read the comments. You think you have some problems with this plan? Read the comments! People are angry!
Click for the article and comments.
Obama’s Plan Aimed at Helping Troubled Homeowners
Here’s the summary of the Obama administration’s plan aimed at helping Distressed Homeowners
Homeowner Affordability and Stability Plan
Executive Summary
The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country.
· Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance at lower mortgage rates.
· Millions of workers have lost their jobs or had their hours cut back, are now struggling to stay current on their mortgage payments – with nearly 6 million households facing possible foreclosure.
· Neighborhoods are struggling, as each foreclosed home reduces nearby property values by as much as 9 percent.
1. Refinancing for Up to 4 to 5 Million Responsible Homeowners to Make Their Mortgages More Affortdable
2. A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners
3. Supporting Low Mortgage Rages by Strengthening Confidence in Fannie Mae and Freddie Mac.
The Homeowner Affordability and Stability Plan is part of the President’s broad, comprehensive strategy to get the economy back on track. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. In doing so, the plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs. The key components of the Homeowner Affordability and Stability Plan are:
1. Affordability: Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From Falling Home Prices
· Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.
· Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year:
o Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 – making them ineligible for today’s low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% – reducing their annual payments by over $2,300.
2. Stability: Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners
· Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their mortgage payments rise to 40 or even 50 percent of their monthly income – particularly those who received subprime and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to make reasonable monthly mortgage payments to stay in their homes – providing families with security and neighborhoods with stability.
· No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay in their home – it will not aid speculators or house flippers.
· Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.
· Providing Support for Responsible Homeowners: Because loan modifications are more likely to succeed if they are made before a borrower misses a payment, the plan will include households at risk of imminent default despite being current on their mortgage payments.
· Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels: The Homeowner Stability Initiative has a simple goal: reduce the amount homeowners owe per month to sustainable levels. Using money allocated under the Financial Stability Plan and the full strength of Fannie Mae and Freddie Mac, this program has several key components:
§ A Shared Effort to Reduce Monthly Payments: For a sample household with payments adding up to 43 percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the borrower’s monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.
§ “Pay for Success” Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive “pay for success” fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years.
§ Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
§ Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
§ Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more families to keep their homes, the Administration — together with the FDIC — has developed an innovative partial guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion – will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall even further later on. Holders of mortgages modified under the program would be provided with an additional insurance payment on each modified loan, linked to declines in the home price index.
· Institute Clear and Consistent Guidelines for Loan Modifications: Treasury will develop uniform guidance for loan modifications across the mortgage industry, working closely with the bank agencies and building on the FDIC’s pioneering work. The Guidelines will be used for the Administration’s new foreclosure prevention plan. Moreover, all financial institutions receiving Financial Stability Plan financial assistance going forward will be required to implement loan modification plans consistent with Treasury Guidance. Fannie Mae and Freddie Mac will use these guidelines for loans that they own or guarantee, and the Administration will work with regulators and other federal and state agencies to implement these guidelines across the entire mortgage market. The agencies will seek to apply these guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the FDIC, Veterans’ Affairs and the Department of Agriculture.
· Other Comprehensive Measures to Reduce Foreclosure and Strengthen Communities
§ Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the FDIC, the Federal Reserve and HUD to Monitor Performance
§ Allow Judicial Modifications of Home Mortgages During Bankruptcy for Borrowers Who Have Run Out of Options
§ Provide $1.5 Billion in Relocation and Other Forms of Assistance to Renters Displaced by Foreclosure and $2 Billion in Neighborhood Stabilization Funds
§ Improve the Flexibility of Hope for Homeowners and Other FHA Programs to Modify and Refinance At-Risk Borrowers
3. Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac:
· Ensuring Strength and Security of the Mortgage Market: Today, using funds already authorized in 2008 by Congress for this purpose, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability.
o Provide Forward-Looking Confidence: The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.
o Treasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level of $100 billion each.
· Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.
· Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the GSEs’ retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with corresponding increases in the allowable debt outstanding.
· Support State Housing Finance Agencies: The Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving homebuyers.
· No EESA or Financial Stability Plan Money: The $200 billion in funding commitments are being made under the Housing and Economic Recovery Act and do not use any money from the Financial Stability Plan or Emergency Economic Stabilization Act/TARP.
Sunday, February 15, 2009
First Time Home Buyer Tax Credit Information
Information about first time home buyer tax credits as amended by the American Recovery and Reinvestment Act of 2009 (HR 1).
Please consult your tax advisor / accountant to determine whether you are eligible for this tax credit before making any decisions or changes to your tax status. This website is for information only and should be verified by a tax professional.
The 3 changes to the first-time home buyers tax credit program include:
Tax credit has been increased to $8,000.
Homes have to be purchased between January 1, 2009 and December 31, 2009
No repayment/recapture clause for homes sold after 36 months of occupancy and ownership.
The Tax Credit is for home buyers (either spouse if filing jointly) who have NOT owned a principle residence during the three-year period prior to the purchase. Ownership of vacation property or rental property does not disqualify home buyers from this program.
The maximum credit is $8,000 or 10% of the home purchase, whichever is less.
The credit is available for homes purchased on or after January 1, 2009 and before December 31, 2009.
To qualify for the full tax credit, married couples' modified adjusted gross income (MAGI) should be under $150,000 and single filers' MAGI should be less than $75,000. Partial tax credits may be available for married couples with MAGI incomes of over $150,000 but under $170,000 and single filers with incomes over $75,000 but under $95,000. If married couples who qualify for the first-time tax credit file separately, they would both claim 5% of the home purchase or $4,000 each (whichever is less) on their tax returns.
Home buyers who qualify for this program, but who do not intend to purchase a home till the end of 2009, may elect to alter their tax withholdings (up to the amount of the of the tax credit) in order to save up money for a down payment. However, if the purchase of the home does not occur, the taxes must be repaid to the IRS.
There is no recapture or repayment clause IF the home is owned for at least 36 months.
The effective date of purchase for new construction (even if buyer owns title to the lot) is the date the owner first occupies the house. So even if construction began in 2008, as long as the home and buyers qualify for the tax credit, they will be eligible if they take possession any time during 2009. However, new construction bought from the builder is only eligible if the settlement date (closing) takes place between January 1, 2009 and December 31, 2009.
The law allows taxpayers to elect to treat qualified 2009 purchases as a 2008 purchase so that they can receive the tax credit on their 2008 tax returns.
The full amount of the eligible tax credit is refunded to the buyer, regardless of whether the buyer has paid an equivalent amount in taxes.
The American Recovery and Reinvestment Act of 2009
Please consult your tax advisor / accountant to determine whether you are eligible for this tax credit before making any decisions or changes to your tax status. This website is for information only and should be verified by a tax professional.
The 3 changes to the first-time home buyers tax credit program include:
Tax credit has been increased to $8,000.
Homes have to be purchased between January 1, 2009 and December 31, 2009
No repayment/recapture clause for homes sold after 36 months of occupancy and ownership.
The Tax Credit is for home buyers (either spouse if filing jointly) who have NOT owned a principle residence during the three-year period prior to the purchase. Ownership of vacation property or rental property does not disqualify home buyers from this program.
The maximum credit is $8,000 or 10% of the home purchase, whichever is less.
The credit is available for homes purchased on or after January 1, 2009 and before December 31, 2009.
To qualify for the full tax credit, married couples' modified adjusted gross income (MAGI) should be under $150,000 and single filers' MAGI should be less than $75,000. Partial tax credits may be available for married couples with MAGI incomes of over $150,000 but under $170,000 and single filers with incomes over $75,000 but under $95,000. If married couples who qualify for the first-time tax credit file separately, they would both claim 5% of the home purchase or $4,000 each (whichever is less) on their tax returns.
Home buyers who qualify for this program, but who do not intend to purchase a home till the end of 2009, may elect to alter their tax withholdings (up to the amount of the of the tax credit) in order to save up money for a down payment. However, if the purchase of the home does not occur, the taxes must be repaid to the IRS.
There is no recapture or repayment clause IF the home is owned for at least 36 months.
The effective date of purchase for new construction (even if buyer owns title to the lot) is the date the owner first occupies the house. So even if construction began in 2008, as long as the home and buyers qualify for the tax credit, they will be eligible if they take possession any time during 2009. However, new construction bought from the builder is only eligible if the settlement date (closing) takes place between January 1, 2009 and December 31, 2009.
The law allows taxpayers to elect to treat qualified 2009 purchases as a 2008 purchase so that they can receive the tax credit on their 2008 tax returns.
The full amount of the eligible tax credit is refunded to the buyer, regardless of whether the buyer has paid an equivalent amount in taxes.
The American Recovery and Reinvestment Act of 2009
Thursday, February 12, 2009
Affordability More than Doubles
Affordability More than Doubles
Lower resale prices and recent declines in the mortgage interest rate are prompting more people to jump into a market that is dramatically more inviting for entry-level buyers.
A study conducted recently found that the percentage of households that could afford to buy an entry level home in California stood at 53 percent in the third quarter of 2008.
That's more than double for the same period from a year ago when only 24 percent of households could qualify.
The First-Time Buyer Housing Affordability Index study conducted by the California Association of Realtors found that the minimum household income needed to purchase an entry-level home at $287,760 in California in the third quarter of 2008 was $56,100, based on an adjustable interest rate of 5.91 percent and assuming a 10 percent down payment.
First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $1,870 for the third quarter of 2008.
At $56,100, the minimum qualifying income was 44 percent lower than a year earlier when households needed $100,500 to qualify for a loan on an entry-level home.
Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California households, where the median household income is $59,160.
The Index also rose 5 percentage points in the third quarter of this year compared to the second quarter of 2008, due to an 11.9 percent decrease in the entry-level median home price.
At 73 percent, the High Desert region was the most affordable area in the state.
The San Francisco Bay Area region was the least affordable in the state at 35 percent, followed by the San Luis Obispo County region at 38 percent.
In Los Angeles County the index stood at 42 percent, up from 20 percent a year ago.
The L.A. entry-level price of $332,680 requires a minimum-qualifying income of $64,8000 and comes with a monthly loan payment of $2,160.
Lower resale prices and recent declines in the mortgage interest rate are prompting more people to jump into a market that is dramatically more inviting for entry-level buyers.
A study conducted recently found that the percentage of households that could afford to buy an entry level home in California stood at 53 percent in the third quarter of 2008.
That's more than double for the same period from a year ago when only 24 percent of households could qualify.
The First-Time Buyer Housing Affordability Index study conducted by the California Association of Realtors found that the minimum household income needed to purchase an entry-level home at $287,760 in California in the third quarter of 2008 was $56,100, based on an adjustable interest rate of 5.91 percent and assuming a 10 percent down payment.
First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $1,870 for the third quarter of 2008.
At $56,100, the minimum qualifying income was 44 percent lower than a year earlier when households needed $100,500 to qualify for a loan on an entry-level home.
Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California households, where the median household income is $59,160.
The Index also rose 5 percentage points in the third quarter of this year compared to the second quarter of 2008, due to an 11.9 percent decrease in the entry-level median home price.
At 73 percent, the High Desert region was the most affordable area in the state.
The San Francisco Bay Area region was the least affordable in the state at 35 percent, followed by the San Luis Obispo County region at 38 percent.
In Los Angeles County the index stood at 42 percent, up from 20 percent a year ago.
The L.A. entry-level price of $332,680 requires a minimum-qualifying income of $64,8000 and comes with a monthly loan payment of $2,160.
Tuesday, February 10, 2009
Good News for Investors
To speed recovery of the housing market, Fannie Mae in March will begin purchasing and guaranteeing mortgages for borrowers carrying loans on as many as nine other properties, up from the current limit of three. However, the number of months of reserve payments that must be held by investors will rise to six in June from two currently. "One of the things that leads the economy out of a housing crisis is when prices get cheap enough that investors start moving in and buying things," says Joe Garrett of the Berkeley, Calif.-based consulting firm Garrett, Watts & Co.
Thursday, February 05, 2009
Local property tax scam targets underwater homeowners
Company charges for free tax reassessment filing
By Josh Premako
Signal Senior Writer
jpremako@the-signal.com
661-259-1234 x519
Posted: Feb. 5, 2009 12:52 a.m.
Local residents might have noticed an official-looking letter in their mail lately, touting a rate of $179 to file a homeowner's property tax reassessment form.
Of course, they could just opt to download the one-page form off the Los Angeles County Web site and file it for free.
Los Angeles-based Property Tax Reassessment mailed the two-page letters that looks very much like a bill.
The company advertises a filing fee of $179, or $209 after Feb. 26.
"Right now, the scams out there are rampant," said City Councilman Bob Kellar, who is a real estate agent. "They're taking advantage of people."
If homeowners have questions about lowering their property tax by proving their home's value has decreased, Kellar advised they speak with a real estate agent or the county assessor's office.
A Property Tax Assessment customer service representative named Thomas said Wednesday the company serves, "pretty much California."
"Some people don't have time. We're just offering a service," said the representative, who didn't give his last name.
A man who said he was a supervisor refused to answer any further questions and said all media inquiries must be submitted by mail.
The company notes in the fine print of the letter that, "Property Tax Reassessment is not a government agency."
The Los Angeles County Assessor's Office provides the reassessment form for free, requiring the homeowner to provide two recent homes sales, preferably in their neighborhood.
"There's no benefit (in paying)," said Rayleen, an intermediate assessor who asked her last name not be used. "They could do this for free."
She said what Property Tax Reassessment does is not illegal but certainly unnecessary.
On the county form, a homeowner must list two recent comparable home sales that were less than the current assessed value of their home.
Property tax bills are sent out in October.
For information about property tax reassessment, or to download the necessary form visit www.assessor.lacounty.gov.
jpremako@the-signal.com
By Josh Premako
Signal Senior Writer
jpremako@the-signal.com
661-259-1234 x519
Posted: Feb. 5, 2009 12:52 a.m.
Local residents might have noticed an official-looking letter in their mail lately, touting a rate of $179 to file a homeowner's property tax reassessment form.
Of course, they could just opt to download the one-page form off the Los Angeles County Web site and file it for free.
Los Angeles-based Property Tax Reassessment mailed the two-page letters that looks very much like a bill.
The company advertises a filing fee of $179, or $209 after Feb. 26.
"Right now, the scams out there are rampant," said City Councilman Bob Kellar, who is a real estate agent. "They're taking advantage of people."
If homeowners have questions about lowering their property tax by proving their home's value has decreased, Kellar advised they speak with a real estate agent or the county assessor's office.
A Property Tax Assessment customer service representative named Thomas said Wednesday the company serves, "pretty much California."
"Some people don't have time. We're just offering a service," said the representative, who didn't give his last name.
A man who said he was a supervisor refused to answer any further questions and said all media inquiries must be submitted by mail.
The company notes in the fine print of the letter that, "Property Tax Reassessment is not a government agency."
The Los Angeles County Assessor's Office provides the reassessment form for free, requiring the homeowner to provide two recent homes sales, preferably in their neighborhood.
"There's no benefit (in paying)," said Rayleen, an intermediate assessor who asked her last name not be used. "They could do this for free."
She said what Property Tax Reassessment does is not illegal but certainly unnecessary.
On the county form, a homeowner must list two recent comparable home sales that were less than the current assessed value of their home.
Property tax bills are sent out in October.
For information about property tax reassessment, or to download the necessary form visit www.assessor.lacounty.gov.
jpremako@the-signal.com
Wednesday, February 04, 2009
SCV Sheriff's Launch Vacant House Check Program
During these challenging economic times and the downturn in the housing and real estate markets we may see an increase in the number of vacant houses and other structures throughout the Santa Clarita Valley. If not maintained, secured, and frequently checked, some of these vacant structures can become a haven for those intent on wrong doing. These vacant properties can lead to incidents of trespassing, vandalism, unlawful parties or gatherings, arson, drug use, and other illegal or nuisance related activities that can further reduce property values and challenge the peace, serenity, and safety of our neighborhoods.
As part of our forward-thinking approach towards best protecting our community, the Santa Clarita Valley Sheriff Station's Crime Prevention Unit, in direct partnership with the City of Santa Clarita and County of Los Angeles, has developed and launched a new "Vacant House Check" program. Although we also want property owners and agents to pay extra attention to these types of properties, the new program puts in place a system where deputies, volunteers on patrol, reserve deputies, and other station staff members can work directly with them. The personnel will randomly check vacant properties including houses, condominiums, businesses, or other structures, submitted by you throughout the Santa Clarita Valley.
If you are aware of a vacant or abandoned structure in your neighborhood or business community that appears to be run-down or attracting a criminal element, simply fill out the form at the following link: www.scvsheriff.com/vacanthouse/. Provide as much information as you can about the property and they will check it out. Working together during challenging times we can make a difference.
As part of our forward-thinking approach towards best protecting our community, the Santa Clarita Valley Sheriff Station's Crime Prevention Unit, in direct partnership with the City of Santa Clarita and County of Los Angeles, has developed and launched a new "Vacant House Check" program. Although we also want property owners and agents to pay extra attention to these types of properties, the new program puts in place a system where deputies, volunteers on patrol, reserve deputies, and other station staff members can work directly with them. The personnel will randomly check vacant properties including houses, condominiums, businesses, or other structures, submitted by you throughout the Santa Clarita Valley.
If you are aware of a vacant or abandoned structure in your neighborhood or business community that appears to be run-down or attracting a criminal element, simply fill out the form at the following link: www.scvsheriff.com/vacanthouse/. Provide as much information as you can about the property and they will check it out. Working together during challenging times we can make a difference.
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