Most of you have already heard that Secretary of the U.S. Department of Housing and Urban Development announced yesterday that FHA is going to permit it's lenders to allow home buyers to use the $8,000 tax credit as down payment.
First of all, it was not clear that this was to be a short term or bridge loan from approved entities. And there are no entities offering this short term loan as of yet.
Second, the letter has been removed from HUD"s website and we have been told that it has been recinded. Speculation is that it goes against HUD's policy of allowable sources of funds for closing which includes:
1. Buyers own funds
2. Gift from relative or employer
3. Monies from Federal, state and Local Governmental agencies and non profit agencies of government.
4. Secured funds ie 401k loans
As of now, nothing has been changed in the guidelines to allow for this short term bridge loan against a future tax credit.
Please clarify this with your clients who may be getting mis information from the media, or other lenders that have jumped the gun and not gotten the facts.
For more information, please visit or refer your clients to my website for recent blogs about the subject.
www.colleencraig.com
In a later email from another lender, Eric Mitchell of Prospect Mortgage:
"FHA has announced they will allow buyers to finance their tax credit and use that as their down payment. However, this new policy will probably take at least 30 to 60 days to filter through the system before investors will buy the paper. The announcement was made but the system is not allowing it yet."
The Obama Administration's Housing and Urban Development Department has thrown open the doors to high expectations for many first-time buyers. How this will play out in the short, medium, and long term is just unknown at this point.
`` SCV Home Team
Thursday, May 14, 2009
Update on FHA plan to allow use of tax credit for down payments
FHA plans to allow use of tax credit for down payments
By AUBREY COHEN
SEATTLEPI.COM STAFF
According to a release, HUD Secretary Donovan is going to allow an advance of the $8000 tax credit for first time home buyers to be used for the down payment on FHA loans. Rather than waiting for refunds after the closing, funds will be available at the closing. A second mortgage will be filed and repayment terms will vary. It is important to keep the home as a primary residence for at least 3 years.
Updates to the HUD handbook are as follows [although lenders who implement the program will have clearer instructions]:
II. FHA Guidance
The Tax Credit: Secondary Financing:
Entities that can offer tax credit advances with second liens.
• Federal, state, and local governmental agencies and nonprofit instrumentalities of government.
• FHA-approved nonprofits.
Additional information about these entities:
• Government agencies and instrumentalities of government are described in handbook HUD-4155.1 REV-5, paragraphs 1-13 A and B.
• FHA-approved nonprofits can be found, per each Homeownership Center jurisdiction, at: http://www.hud.gov/offices/hsg/sfh/np/np_hoc.cfm
How the secondary financing works:
• The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower. The second lien may not exceed the total needed for the downpayment, closing costs and prepaid expenses.
• The tax credit advance must provide that if the borrower does not repay the amount borrowed by the designated deadline, that principal and interest payments begin automatically.
• If payments on the tax credit advance are required, they must be included in qualifying the borrower and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.
• If payments on the tax credit are deferred, the deferment must be for a minimum of 36 months in order for the payment to not be included in the qualifying ratios.
• The tax credit advance second mortgage must not provide for a balloon payment before ten years.
The Tax Credit: Short-Term Loan:
Entities that can offer the tax credit advance with short-term loans:
• Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or “bridge loans” secured only by the anticipated tax credit due the homebuyer as collateral.
How the short-term tax credit advance loan works:
• The amount that may be borrowed in this manner may not exceed the anticipated tax credit due the homebuyer based on the computations of form IRS 5405.
• Fees and charges for the tax credit advance loan are not to exceed a nominal amount necessary for preparing and administering the loan.
The Down Payment Assistance Program has come back in another form.
[Is this a repeat of the public policy mistakes of the past, using 'no-down mortgages'? Since something should be done to stop the continuing slide in prices, encouraging those who have limited means to buy homes is one way to do it. Will this just extend the time of foreclosures further into the future? Probably. However, we as Realtors and as Homebuyers will always continue to take action in our own best interest. As they say, public policy issues are above our pay grade. We just hope that those who are in that pay grade have the experience and the wisdom to make the best decisions on behalf of the national interest. If time proves them wrong, we should vote them out, and the sooner the better.]
By AUBREY COHEN
SEATTLEPI.COM STAFF
According to a release, HUD Secretary Donovan is going to allow an advance of the $8000 tax credit for first time home buyers to be used for the down payment on FHA loans. Rather than waiting for refunds after the closing, funds will be available at the closing. A second mortgage will be filed and repayment terms will vary. It is important to keep the home as a primary residence for at least 3 years.
Updates to the HUD handbook are as follows [although lenders who implement the program will have clearer instructions]:
II. FHA Guidance
The Tax Credit: Secondary Financing:
Entities that can offer tax credit advances with second liens.
• Federal, state, and local governmental agencies and nonprofit instrumentalities of government.
• FHA-approved nonprofits.
Additional information about these entities:
• Government agencies and instrumentalities of government are described in handbook HUD-4155.1 REV-5, paragraphs 1-13 A and B.
• FHA-approved nonprofits can be found, per each Homeownership Center jurisdiction, at: http://www.hud.gov/offices/hsg/sfh/np/np_hoc.cfm
How the secondary financing works:
• The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower. The second lien may not exceed the total needed for the downpayment, closing costs and prepaid expenses.
• The tax credit advance must provide that if the borrower does not repay the amount borrowed by the designated deadline, that principal and interest payments begin automatically.
• If payments on the tax credit advance are required, they must be included in qualifying the borrower and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.
• If payments on the tax credit are deferred, the deferment must be for a minimum of 36 months in order for the payment to not be included in the qualifying ratios.
• The tax credit advance second mortgage must not provide for a balloon payment before ten years.
The Tax Credit: Short-Term Loan:
Entities that can offer the tax credit advance with short-term loans:
• Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or “bridge loans” secured only by the anticipated tax credit due the homebuyer as collateral.
How the short-term tax credit advance loan works:
• The amount that may be borrowed in this manner may not exceed the anticipated tax credit due the homebuyer based on the computations of form IRS 5405.
• Fees and charges for the tax credit advance loan are not to exceed a nominal amount necessary for preparing and administering the loan.
The Down Payment Assistance Program has come back in another form.
[Is this a repeat of the public policy mistakes of the past, using 'no-down mortgages'? Since something should be done to stop the continuing slide in prices, encouraging those who have limited means to buy homes is one way to do it. Will this just extend the time of foreclosures further into the future? Probably. However, we as Realtors and as Homebuyers will always continue to take action in our own best interest. As they say, public policy issues are above our pay grade. We just hope that those who are in that pay grade have the experience and the wisdom to make the best decisions on behalf of the national interest. If time proves them wrong, we should vote them out, and the sooner the better.]
Wednesday, May 13, 2009
Surprise: FHA Will Allow 'Advances' on FTHB Tax Credit
National Mortgage News and SourceMedia, Inc.
May 12, 2009
The government today gave the green light to the financing of bridge loans of up to $8,000 to first time home buyers who qualify for tax credits under the Obama Administration's economic stimulus plan. The new mortgagee letter stipulates that government agencies, non-profits and FHA-approved lenders can give advances on the tax credits. Housing secretary Shaun Donovan told a national Realtor group Tuesday that, "We want to enable FHA consumers to access the tax credit funds when they close on their home loans so that cash can be used as a downpayment." The mortgagee letter is now available online but more details are to follow.
May 12, 2009
The government today gave the green light to the financing of bridge loans of up to $8,000 to first time home buyers who qualify for tax credits under the Obama Administration's economic stimulus plan. The new mortgagee letter stipulates that government agencies, non-profits and FHA-approved lenders can give advances on the tax credits. Housing secretary Shaun Donovan told a national Realtor group Tuesday that, "We want to enable FHA consumers to access the tax credit funds when they close on their home loans so that cash can be used as a downpayment." The mortgagee letter is now available online but more details are to follow.
Understanding Your Credit Part 3
Understanding Your Credit
And Making The Most Of It. (Part 3)
A Quick Recap!
A credit score is a number lenders use to help them decide: If I give this person a loan or credit card, how likely is it that he or she will become 90 days or more late in a 24 month period. A credit score is a snapshot of your credit risk at a particular point in time. It may range from 350 to 850 with the average consumer score being 686. Credit scores are provided to lenders by the three major credit reporting agencies also know as repositories: Equifax, Experian and TransUnion.
Five Factors Determining A Credit Score
1. Late payments.
2. Frequency and patterns of credit use.
3. How long credit has been established.
4. The number of times credit has been requested (inquires).
5. The types of credit (i.e. revolving, installment, secured, unsecured.)
How Credit Bureaus Rank your Credit Score
1. 35% is based on payment history.
A recent 30 day late payment is worse than a 90 day late payment that occurred more than 12 months ago. This can lower your score by 60 points or more.
2. 30% is based on existing balances.
Make sure the balances do not exceed 50% of the maximum limit on each card. Over 50% of the credit card limit will have a significant negative effect on your credit score. Distribute existing credit card debt among three to five cards.
3. 15% is based on how long your credit has been established.
Do not close accounts that have a perfect payment history and have been open for at least three years. These cards have a positive effect on your credit score.
4. 10% is based on types of credit.
A combination of credit types is best. For example, a mortgage, an auto loan and three to five revolving credit cards is ideal. Home equity lines of credit are reported as a credit card debt when the amount is less then $30,000. Try to apply for lines of credit for at least $30,000.
5. 10% is based on inquiries.
Credit inquiries from various industries can lower your credit score up to 60 points. If multiple mortgage inquiries are within a 30-day window, they count as one inquiry in total. This is also true for the auto and insurance Industry inquiries. Personal credit and bank account review inquiries do not count.
Tips To Help Protect Your Credit
1) Be very careful providing personal financial information over the internet. If you are going to provide credit card numbers, social security number, etc over the internet make sure it is through a secure website. Look for https:// instead of http:// at the website address and look for the little yellow padlock on the lower right corner of the screen.
2) Use a paper shredder when discarding any personal credit information such as credit solicitations, credit card statements, pay stubs, invoices, bank statements, etc
3) Keep a list of all credit card accounts with their respective customer service phone numbers in a safe place in the event your wallet or purse is lost or stolen.
4) Never use your full name on personal checks, use your initials instead. For example: J. Doe or J.C. Doe. If your checkbook is lost or stolen, no one will know how to sign your check (except for the bank.)
5) When paying your credit card bill, do not put your full credit card number on the memo line of your personal check. Only list the last 4 digits of your account number.
6) It is not wise nor is it necessary to carry your social security card in your wallet or purse. Commit the number to memory and keep the card at home in a safe place.
7) If your wallet or purse is stolen, contact one of the three credit bureaus immediately and have them issue a fraud alert. That credit bureau will notify the other two. This will be done free of charge and you will receive a credit report showing that the fraud alert has been issued.
Here are the three credit bureaus:
Equifax 800-685-1111 www.equifax.com
Experian 888-EXPERIAN www.experian.com
Trans Union 800-916-8800 www.transunion.com
As always, if you need help or advice, just give me a call or email. More to follow!
And Making The Most Of It. (Part 3)
A Quick Recap!
A credit score is a number lenders use to help them decide: If I give this person a loan or credit card, how likely is it that he or she will become 90 days or more late in a 24 month period. A credit score is a snapshot of your credit risk at a particular point in time. It may range from 350 to 850 with the average consumer score being 686. Credit scores are provided to lenders by the three major credit reporting agencies also know as repositories: Equifax, Experian and TransUnion.
Five Factors Determining A Credit Score
1. Late payments.
2. Frequency and patterns of credit use.
3. How long credit has been established.
4. The number of times credit has been requested (inquires).
5. The types of credit (i.e. revolving, installment, secured, unsecured.)
How Credit Bureaus Rank your Credit Score
1. 35% is based on payment history.
A recent 30 day late payment is worse than a 90 day late payment that occurred more than 12 months ago. This can lower your score by 60 points or more.
2. 30% is based on existing balances.
Make sure the balances do not exceed 50% of the maximum limit on each card. Over 50% of the credit card limit will have a significant negative effect on your credit score. Distribute existing credit card debt among three to five cards.
3. 15% is based on how long your credit has been established.
Do not close accounts that have a perfect payment history and have been open for at least three years. These cards have a positive effect on your credit score.
4. 10% is based on types of credit.
A combination of credit types is best. For example, a mortgage, an auto loan and three to five revolving credit cards is ideal. Home equity lines of credit are reported as a credit card debt when the amount is less then $30,000. Try to apply for lines of credit for at least $30,000.
5. 10% is based on inquiries.
Credit inquiries from various industries can lower your credit score up to 60 points. If multiple mortgage inquiries are within a 30-day window, they count as one inquiry in total. This is also true for the auto and insurance Industry inquiries. Personal credit and bank account review inquiries do not count.
Tips To Help Protect Your Credit
1) Be very careful providing personal financial information over the internet. If you are going to provide credit card numbers, social security number, etc over the internet make sure it is through a secure website. Look for https:// instead of http:// at the website address and look for the little yellow padlock on the lower right corner of the screen.
2) Use a paper shredder when discarding any personal credit information such as credit solicitations, credit card statements, pay stubs, invoices, bank statements, etc
3) Keep a list of all credit card accounts with their respective customer service phone numbers in a safe place in the event your wallet or purse is lost or stolen.
4) Never use your full name on personal checks, use your initials instead. For example: J. Doe or J.C. Doe. If your checkbook is lost or stolen, no one will know how to sign your check (except for the bank.)
5) When paying your credit card bill, do not put your full credit card number on the memo line of your personal check. Only list the last 4 digits of your account number.
6) It is not wise nor is it necessary to carry your social security card in your wallet or purse. Commit the number to memory and keep the card at home in a safe place.
7) If your wallet or purse is stolen, contact one of the three credit bureaus immediately and have them issue a fraud alert. That credit bureau will notify the other two. This will be done free of charge and you will receive a credit report showing that the fraud alert has been issued.
Here are the three credit bureaus:
Equifax 800-685-1111 www.equifax.com
Experian 888-EXPERIAN www.experian.com
Trans Union 800-916-8800 www.transunion.com
As always, if you need help or advice, just give me a call or email. More to follow!
Thursday, April 23, 2009
Understanding Reverse Mortgages
The Basics
A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. Homeowners 62 and older who have paid off their mortgages or have only small mortgage balances remaining are eligible to participate in HUD's reverse mortgage program. The property must be your principal residence. The program allows homeowners to borrow against the equity in their homes in a variety of different ways. (What is HUD? The Department of Housing and Urban Development is the Federal agency responsible for national policy and programs that address America's housing needs, that improve and develop the Nation's communities, and enforce fair housing laws.)
Obtaining a traditional loan (a "forward" mortgage) requires that the lender check your credit/income to see how much you can afford to pay back each month. But with a reverse mortgage, you don't have to make monthly repayments. Your income generally has nothing to do with getting the loan. You could have no income and still be able to get a reverse mortgage. With most home loans, if you fail to make your monthly repayments, you could lose your home. Reverse mortgages do not have monthly repayments, so you can't lose your home by failing to make them. You can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:
• All at once, in a single lump sum of cash
• As a regular monthly cash payment to you
• As a "credit line" account that lets you decide when and how much of your available cash is paid to you
• As a combination of these payment methods
Another feature is that the money paid to you is not taxable. This is because it is not income, it is a loan! The amount of cash you can get from a reverse mortgage depends on the program you select and - within each program - on your age, home, and current mortgage rates. With a reverse mortgage, you are taking the equity out in cash, so your debt increases and your home equity decreases.
Reverse mortgages allow you to use debt to turn your equity into income. You are reversing the deal you used to initially buy your home. Then, you had income and wanted equity. Now, you have equity and want income. There are also no limits on the value of homes qualifying for a HUD reverse mortgage. However, the amount that may be borrowed is capped by the maximum FHA loan limit for each city and county. It varies from $172,632 in rural areas to $312,895 in many major metropolitan areas (and even higher in Alaska, Hawaii & the U.S. Virgin Islands) depending on local housing costs. The size of reverse mortgage loans is determined by the borrower's age, the interest rate, and the home's value. The older a borrower, the larger the percentage of the home's value that can be borrowed. As always, if you need help or advice, just respond to this email.
A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. Homeowners 62 and older who have paid off their mortgages or have only small mortgage balances remaining are eligible to participate in HUD's reverse mortgage program. The property must be your principal residence. The program allows homeowners to borrow against the equity in their homes in a variety of different ways. (What is HUD? The Department of Housing and Urban Development is the Federal agency responsible for national policy and programs that address America's housing needs, that improve and develop the Nation's communities, and enforce fair housing laws.)
Obtaining a traditional loan (a "forward" mortgage) requires that the lender check your credit/income to see how much you can afford to pay back each month. But with a reverse mortgage, you don't have to make monthly repayments. Your income generally has nothing to do with getting the loan. You could have no income and still be able to get a reverse mortgage. With most home loans, if you fail to make your monthly repayments, you could lose your home. Reverse mortgages do not have monthly repayments, so you can't lose your home by failing to make them. You can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:
• All at once, in a single lump sum of cash
• As a regular monthly cash payment to you
• As a "credit line" account that lets you decide when and how much of your available cash is paid to you
• As a combination of these payment methods
Another feature is that the money paid to you is not taxable. This is because it is not income, it is a loan! The amount of cash you can get from a reverse mortgage depends on the program you select and - within each program - on your age, home, and current mortgage rates. With a reverse mortgage, you are taking the equity out in cash, so your debt increases and your home equity decreases.
Reverse mortgages allow you to use debt to turn your equity into income. You are reversing the deal you used to initially buy your home. Then, you had income and wanted equity. Now, you have equity and want income. There are also no limits on the value of homes qualifying for a HUD reverse mortgage. However, the amount that may be borrowed is capped by the maximum FHA loan limit for each city and county. It varies from $172,632 in rural areas to $312,895 in many major metropolitan areas (and even higher in Alaska, Hawaii & the U.S. Virgin Islands) depending on local housing costs. The size of reverse mortgage loans is determined by the borrower's age, the interest rate, and the home's value. The older a borrower, the larger the percentage of the home's value that can be borrowed. As always, if you need help or advice, just respond to this email.
Tuesday, April 21, 2009
US Treasury Dept. launches mortgage rescue plan
First participants in the Treasury Department's program to help homeowners avoid foreclosure include some of the nation's largest banks.By Tami Luhby, CNNMoney.com senior writer
Last Updated: April 16, 2009: 10:15 AM ET
NEW YORK (CNNMoney.com) -- The Obama administration's loan modification program is finally underway.
The Treasury Department announced Wednesday the first six participants to sign up for President Obama's plan. They include three of the nation's largest banks: JPMorgan Chase, which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo, $2.9 billion; and Citigroup , $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million.
Additional loan servicers will be added to the list over time, a Treasury spokesman said.
Several major servicers, including JPMorgan Chase and Wells Fargo, said they began modifying loans under the government initiative earlier this month. CitiMortgage signed up for the program on Monday and will start processing applications soon.
"We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership," Wells Fargo said in a statement.
Distressed homeowners and housing counselors have been eagerly awaiting the program's launch since Obama first announced it on Feb. 18. However, it took weeks for the government to clarify the terms and for the financial institutions to update their systems and start accepting applications, frustrating many of those in trouble.
Billed as helping up to 9 million borrowers stay in their homes, the two-part plan calls for servicers to reduce monthly payments to no more than 31% of eligible borrowers' pre-tax income or to refinance eligible mortgages even if the homeowner has little or no equity. The government is allocating $75 billion to subsidize part of payment reduction, as well as provide thousands of dollars in incentives for servicers and borrowers to participate.
The Treasury Department said Wednesday it is capping the payments to servicers to allow more companies to participate. It is allocating $50 billion to the program, with Fannie Mae , Freddie Mac and the Department of Housing and Urban Development providing the rest.
The modification plan calls for the servicer to reduce interest rates so that the monthly obligation is no more than 38% of a borrower's pre-tax income, and then the government would kick in money to bring payments down to 31% of income. Servicers can also reduce the loan balance to achieve these affordability levels. The government will share in the cost, up to the amount the servicer would have received if it had reduced the interest rates.
Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify. Also, Treasury will not provide subsidies to reduce rates to levels below 2%.
It was not immediately clear whether the servicers must pay the incentives to homeowners and investors out of their funding share.
In addition to subsidizing the interest rates, servicers will use the Treasury funding to pay for incentives for themselves, homeowners and investors. The program gives servicers $1,000 for each modification and another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.
Homeowners, meanwhile, will get up to $1,000 a year for five years if they keep up with payments. The funds will be used to reduce their loan principals.
The Treasury Department set the caps based on public data about the mortgages the servicers handle. Though the program mandates that servicers modify all loans that meet the requirements, the department feels the servicers will have sufficient funds to cover all troubled borrowers' applications.
"We're confident we'll have enough money," said Treasury spokesman Andrew Williams.
Separately, major servicers also recently started accepting applications under the refinance portion of the program.
Last Updated: April 16, 2009: 10:15 AM ET
NEW YORK (CNNMoney.com) -- The Obama administration's loan modification program is finally underway.
The Treasury Department announced Wednesday the first six participants to sign up for President Obama's plan. They include three of the nation's largest banks: JPMorgan Chase, which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo, $2.9 billion; and Citigroup , $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million.
Additional loan servicers will be added to the list over time, a Treasury spokesman said.
Several major servicers, including JPMorgan Chase and Wells Fargo, said they began modifying loans under the government initiative earlier this month. CitiMortgage signed up for the program on Monday and will start processing applications soon.
"We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership," Wells Fargo said in a statement.
Distressed homeowners and housing counselors have been eagerly awaiting the program's launch since Obama first announced it on Feb. 18. However, it took weeks for the government to clarify the terms and for the financial institutions to update their systems and start accepting applications, frustrating many of those in trouble.
Billed as helping up to 9 million borrowers stay in their homes, the two-part plan calls for servicers to reduce monthly payments to no more than 31% of eligible borrowers' pre-tax income or to refinance eligible mortgages even if the homeowner has little or no equity. The government is allocating $75 billion to subsidize part of payment reduction, as well as provide thousands of dollars in incentives for servicers and borrowers to participate.
The Treasury Department said Wednesday it is capping the payments to servicers to allow more companies to participate. It is allocating $50 billion to the program, with Fannie Mae , Freddie Mac and the Department of Housing and Urban Development providing the rest.
The modification plan calls for the servicer to reduce interest rates so that the monthly obligation is no more than 38% of a borrower's pre-tax income, and then the government would kick in money to bring payments down to 31% of income. Servicers can also reduce the loan balance to achieve these affordability levels. The government will share in the cost, up to the amount the servicer would have received if it had reduced the interest rates.
Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify. Also, Treasury will not provide subsidies to reduce rates to levels below 2%.
It was not immediately clear whether the servicers must pay the incentives to homeowners and investors out of their funding share.
In addition to subsidizing the interest rates, servicers will use the Treasury funding to pay for incentives for themselves, homeowners and investors. The program gives servicers $1,000 for each modification and another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.
Homeowners, meanwhile, will get up to $1,000 a year for five years if they keep up with payments. The funds will be used to reduce their loan principals.
The Treasury Department set the caps based on public data about the mortgages the servicers handle. Though the program mandates that servicers modify all loans that meet the requirements, the department feels the servicers will have sufficient funds to cover all troubled borrowers' applications.
"We're confident we'll have enough money," said Treasury spokesman Andrew Williams.
Separately, major servicers also recently started accepting applications under the refinance portion of the program.
Sunday, April 05, 2009
California Approves a $10,000 Tax Credit for New Home Purchases
By Steve Doyle, President, Brookfield Homes San Diego
Dated: Feb 25, 2009
The Legislature for the state of California passed a revised budget plan last week and Gov. Arnold Schwarzenegger signed the historic legislation Feb. 20. Included in this new budget is a $10,000 tax credit for the purchasers of a new home.
Did you hear about the California $10,000 tax credit for the purchase of a newly constructed home?
The Legislature for the state of California passed a revised budget plan last week and Gov. Arnold Schwarzenegger signed the historic legislation Feb. 20. Included in this new budget is a $10,000 tax credit for the purchasers of a newly constructed home in the state of California. There are conditions to receive this tax credit, some of which are still being worked out. Let me tell you what we do know at this time:
1. The tax credit is good for 5 percent of the value of the newly constructed home, up to $10,000. (That would mean any home priced over $200,000 would qualify for the full credit.)
2. The tax credit will be available between March 1, 2009 and March 1, 2010, or when the funding authority runs out. (The Legislature has earmarked $100 million for this credit. That mean at least 10,000 new home sales. We don’t know yet if the tax credit will be based on when the contract for sale is written or when the escrow is closed for the purchase.)
3. The tax credit will be allocated by the Franchise Tax Board and will be available to new homebuyers over a three-year period. (Roughly one third of the tax credit will be available each year, details here are still being worked out.)
4. The new home purchaser must live in the home for at least two years.
5. There are no income limitations for the purchaser.
6. There is no “first time buyer” restriction.
7. There is no repayment requirement (unless the purchaser sells or rents out the home before two years have past from the close of escrow).
This is great news for California homebuyers. And, if the homebuyer also qualifies for the $8,000 Federal Tax Credit (see blog entry from Feb. 18 at www.expectmoreinahome.com/blog), then the total tax credit for buying a newly constructed home would be $18,000. That is $10,000 from the state of California and
$8,000 from the federal government.
Steve Doyle is president of Brookfield Homes San Diego/Riverside Division. The company’s homes are found in master-planned communities in San Diego, Riverside, and Imperial Counties.
Dated: Feb 25, 2009
The Legislature for the state of California passed a revised budget plan last week and Gov. Arnold Schwarzenegger signed the historic legislation Feb. 20. Included in this new budget is a $10,000 tax credit for the purchasers of a new home.
Did you hear about the California $10,000 tax credit for the purchase of a newly constructed home?
The Legislature for the state of California passed a revised budget plan last week and Gov. Arnold Schwarzenegger signed the historic legislation Feb. 20. Included in this new budget is a $10,000 tax credit for the purchasers of a newly constructed home in the state of California. There are conditions to receive this tax credit, some of which are still being worked out. Let me tell you what we do know at this time:
1. The tax credit is good for 5 percent of the value of the newly constructed home, up to $10,000. (That would mean any home priced over $200,000 would qualify for the full credit.)
2. The tax credit will be available between March 1, 2009 and March 1, 2010, or when the funding authority runs out. (The Legislature has earmarked $100 million for this credit. That mean at least 10,000 new home sales. We don’t know yet if the tax credit will be based on when the contract for sale is written or when the escrow is closed for the purchase.)
3. The tax credit will be allocated by the Franchise Tax Board and will be available to new homebuyers over a three-year period. (Roughly one third of the tax credit will be available each year, details here are still being worked out.)
4. The new home purchaser must live in the home for at least two years.
5. There are no income limitations for the purchaser.
6. There is no “first time buyer” restriction.
7. There is no repayment requirement (unless the purchaser sells or rents out the home before two years have past from the close of escrow).
This is great news for California homebuyers. And, if the homebuyer also qualifies for the $8,000 Federal Tax Credit (see blog entry from Feb. 18 at www.expectmoreinahome.com/blog), then the total tax credit for buying a newly constructed home would be $18,000. That is $10,000 from the state of California and
$8,000 from the federal government.
Steve Doyle is president of Brookfield Homes San Diego/Riverside Division. The company’s homes are found in master-planned communities in San Diego, Riverside, and Imperial Counties.
Thursday, March 19, 2009
Federal Reserve Surprises Financial Markets
Here we go again, with the talking heads on financial news misinterpreting the impact of the Fed's actions on home loan rates.
Here's the scoop. What the Fed just announced is huge – they have committed to buy another $750B in Mortgage Backed Securities, and $300B in Treasuries.
But what does this mean and why do you care?
Their actions provide a demand for Mortgage Backed Securities, which should help keep a ceiling on home loan rates moving much higher in the foreseeable future. That's good news, for homebuyers who are seeing the bargains out there and understanding that now is the time to act. Good news for those who are ready to refinance too.
But an important distinction – this does not mean rates may move significantly lower. Depending on exactly which coupons the Fed purchases when they go shopping for Mortgage Backed Securities, their actions may keep a lid on rates, but not push them very much lower. And based on what they've been buying since the beginning of this year when they started their purchasing program – that is exactly how it has played out.
Present home loan rates are within inches of historic lows. What is keeping you on the sidelines from acting now to refinance and get some dollars back into your own pocket, where they belong – or moving forward to buy the home of your dreams, while it is still on sale?
If you have questions – call me. You know there's no pressure, but let's discuss options and see if there is something we should be looking at to improve your situation.
Here's the scoop. What the Fed just announced is huge – they have committed to buy another $750B in Mortgage Backed Securities, and $300B in Treasuries.
But what does this mean and why do you care?
Their actions provide a demand for Mortgage Backed Securities, which should help keep a ceiling on home loan rates moving much higher in the foreseeable future. That's good news, for homebuyers who are seeing the bargains out there and understanding that now is the time to act. Good news for those who are ready to refinance too.
But an important distinction – this does not mean rates may move significantly lower. Depending on exactly which coupons the Fed purchases when they go shopping for Mortgage Backed Securities, their actions may keep a lid on rates, but not push them very much lower. And based on what they've been buying since the beginning of this year when they started their purchasing program – that is exactly how it has played out.
Present home loan rates are within inches of historic lows. What is keeping you on the sidelines from acting now to refinance and get some dollars back into your own pocket, where they belong – or moving forward to buy the home of your dreams, while it is still on sale?
If you have questions – call me. You know there's no pressure, but let's discuss options and see if there is something we should be looking at to improve your situation.
Saturday, March 07, 2009
Among Home Buyers, Keller Williams Ranks Highest in Customer Satisfaction
Despite Popularity of Online Home Buying and Selling Tools,
Real Estate Agents are Key to Customer Satisfaction
WESTLAKE VILLAGE, Calif.: 23 July 2008 — Keller Williams ranks highest among real estate companies in satisfying home buyers according to the J.D. Power and Associates 2008 Home Buyer StudySM released today.
The inaugural study measures customer satisfaction of home buyers with the largest national real estate firms. Overall satisfaction is determined by examining three factors for the home-buying experience: agent (65%); office (21%); and services (13%).
Among home-buyers, Keller Williams achieves a score of 831 on a 1,000-point scale, and receives highest ratings from customers in all three factors. Following in the rankings are Prudential (820) and Coldwell Banker (816). Prudential performs well in the agent and office factors, while Coldwell Banker performs particularly well in the services factor.
“When buying a home, customers particularly appreciate agent professionalism, responsiveness to calls and e-mails and the agent’s skill in locating and showing properties in the appropriate price range—all areas in which Keller Williams excels,” said Jim Howland, senior director of the real estate and construction practice at J.D. Power and Associates.
The study finds that despite the popularity of home-buying and -selling resources on the Internet, real estate agents are key to customer satisfaction with real estate companies. A large proportion of both home buyers and sellers rely on the Internet to facilitate the buying or selling process, with 68 percent of buyers saying that they used Internet tools to help them in the purchase process and 61 percent of sellers reporting that they used a Web site listing to market their home. In addition, among home sellers, online methods are the most important aspect of marketing. However, the agent factor carries the greatest importance among the factors that comprise overall satisfaction among both home buyers and sellers.
“Although the Internet provides home buyers and sellers with the ability to perform some essential tasks—such as listing a home for sale or researching a neighborhood in which to purchase a home—it still does not replace the importance of a good real estate agent,” said Howland. “Particularly in an uncertain real estate market, professional advice from agents can be especially valuable to buyers and sellers. The knowledge and expertise provided by experienced agents is an important benefit of using a full-service real estate company.”
Real Estate Agents are Key to Customer Satisfaction
WESTLAKE VILLAGE, Calif.: 23 July 2008 — Keller Williams ranks highest among real estate companies in satisfying home buyers according to the J.D. Power and Associates 2008 Home Buyer StudySM released today.
The inaugural study measures customer satisfaction of home buyers with the largest national real estate firms. Overall satisfaction is determined by examining three factors for the home-buying experience: agent (65%); office (21%); and services (13%).
Among home-buyers, Keller Williams achieves a score of 831 on a 1,000-point scale, and receives highest ratings from customers in all three factors. Following in the rankings are Prudential (820) and Coldwell Banker (816). Prudential performs well in the agent and office factors, while Coldwell Banker performs particularly well in the services factor.
“When buying a home, customers particularly appreciate agent professionalism, responsiveness to calls and e-mails and the agent’s skill in locating and showing properties in the appropriate price range—all areas in which Keller Williams excels,” said Jim Howland, senior director of the real estate and construction practice at J.D. Power and Associates.
The study finds that despite the popularity of home-buying and -selling resources on the Internet, real estate agents are key to customer satisfaction with real estate companies. A large proportion of both home buyers and sellers rely on the Internet to facilitate the buying or selling process, with 68 percent of buyers saying that they used Internet tools to help them in the purchase process and 61 percent of sellers reporting that they used a Web site listing to market their home. In addition, among home sellers, online methods are the most important aspect of marketing. However, the agent factor carries the greatest importance among the factors that comprise overall satisfaction among both home buyers and sellers.
“Although the Internet provides home buyers and sellers with the ability to perform some essential tasks—such as listing a home for sale or researching a neighborhood in which to purchase a home—it still does not replace the importance of a good real estate agent,” said Howland. “Particularly in an uncertain real estate market, professional advice from agents can be especially valuable to buyers and sellers. The knowledge and expertise provided by experienced agents is an important benefit of using a full-service real estate company.”
Friday, March 06, 2009
Knights to the Rescue
The world is in the throes of a global recession. But as usual, the very poorest are being hurt the most. I want to close by quickly asking you to consider helping one of my favorite causes, emergency relief for the poorest of the poor. My friends at Knightsbridge (Ed Artis, et al.) currently have three hundred thousand dollars of medical equipment and supplies (relief) sitting in two separate locations here in the United States. It's worthless while stored here but "gold" in the developing world. We need $37,000 to ship these items to the Philippines, where we can stage them for delivery to clinics in Cambodia, Vietnam, Myanmar, and the Philippines. This medical relief, when delivered, will save the lives of thousands of people affected by disease and poverty.
Knightsbridge works with many people around the world who volunteer their time to help us hand-deliver this relief, as you can see in Adrian Belic's multi-award-winning documentary film Beyond The Call (http://www.beyondthecallthemovie.com/) and (http://www.pbs.org/independentlens/beyondthecall/).
For every additional $18,500 that is raised, we can obtain and ship 40 cargo containers of valuable medical supplies and equipment, worth between $150,000 and $500,000, to the staging area in the Philippines.
We have almost unlimited resources here in America for the collection and staging of medical equipment and supplies to be shipped overseas. We will run out of shipping dollars long before we ever run out of medical relief goods in need of shipping.
Each dollar that you donate will ship many times that much in lifesaving medical relief. Your donations can be sent to Knightsbridge in two ways:
* Online donations are immediate and can be sent to us via the PayPal / DONATION icon located on our website at www.kbi.org
* Checks should be made out to our NEW partner NGO, A Prescription for Peace, in the US (http://www.APrescriptionForPeace.org).
These checks will be processed, appropriate receipts issued, and the proceeds deposited to our credit.
A Prescription For Peace (a California 501[c]3)
P.O. Box 67696
Century City, CA 90067
Knightsbridge works with many people around the world who volunteer their time to help us hand-deliver this relief, as you can see in Adrian Belic's multi-award-winning documentary film Beyond The Call (http://www.beyondthecallthemovie.com/) and (http://www.pbs.org/independentlens/beyondthecall/).
For every additional $18,500 that is raised, we can obtain and ship 40 cargo containers of valuable medical supplies and equipment, worth between $150,000 and $500,000, to the staging area in the Philippines.
We have almost unlimited resources here in America for the collection and staging of medical equipment and supplies to be shipped overseas. We will run out of shipping dollars long before we ever run out of medical relief goods in need of shipping.
Each dollar that you donate will ship many times that much in lifesaving medical relief. Your donations can be sent to Knightsbridge in two ways:
* Online donations are immediate and can be sent to us via the PayPal / DONATION icon located on our website at www.kbi.org
* Checks should be made out to our NEW partner NGO, A Prescription for Peace, in the US (http://www.APrescriptionForPeace.org).
These checks will be processed, appropriate receipts issued, and the proceeds deposited to our credit.
A Prescription For Peace (a California 501[c]3)
P.O. Box 67696
Century City, CA 90067
Wednesday, March 04, 2009
Housing Plan Promises Mortgage Relief
RELIEF FOR RESPONSIBLE HOMEOWNERS
ONE STEP CLOSER UNDER NEW TREASURY GUIDELINES
With Detailed Program Requirements, Servicers Can Now Begin
‘Making Home Affordable’ Loan Modifications
US Treasury Department Press Release dated 3/4/09
Washington, DC – The Obama Administration today announced new U.S. Department of the Treasury guidelines to enable servicers to begin modifications of eligible mortgages under the Administration's Homeowner Affordability and Stability Plan – announced by President Barack Obama just two weeks ago. The release of detailed requirements for the “Making Home Affordable” program facilitates implementation of the critical provisions that will help bring relief to responsible homeowners struggling to make their mortgage payments, while preventing neighborhoods and communities from suffering the negative spillover effects of foreclosure such as lower housing prices, increased crime and higher taxes.
“Two weeks ago, the President laid out a clear path forward to helping up to nine million families restructure or refinance their mortgages to a payment that is affordable now and into the future. Today, we are providing servicers with the details they need to begin helping eligible borrowers,” said Treasury Secretary Tim Geithner. “It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets, just as we work to stabilize our financial system, create jobs and help businesses thrive. Economic recovery requires action on all three fronts.”
"Only two weeks after the President unveiled his plan to help promote homeowner affordability, we are moving forward today with these guidelines to implement that plan," HUD Secretary Shaun Donovan said. "This step forward represents a tremendous coordinated effort between major government and regulatory agencies to help bring relief to America's housing market and homeowners. This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans."
The guidelines will implement financial incentives for mortgage lenders to modify existing first mortgages and set standard industry practice for modifications.
Treasury announced today that the Making Home Affordable program will also include additional incentives for efforts made to extinguish second liens on loans modified under this program. Extinguishing second liens will make mortgages more affordable, improve loan performance, and help prevent foreclosures.
In conjunction with the release of the new guidelines, Treasury, HUD and other members of a broad interagency task force have prepared consumer friendly Q&A and eligibility assessment tools for borrowers available at FinancialStability.gov. To ensure the program can be implemented as quickly as possible, the agencies also have conducted extensive outreach with housing counselors and mortgage servicers, including the development of call center phone scripts, a training plan and detailed guides, to prepare them for incoming inquiries from borrowers in the wake of the guidelines release.
An expanded online resource will soon be available for borrowers, and agency representatives will fan out across the country in the coming weeks to conduct outreach at homeownership events in communities hardest hit by the housing crisis.
Modification Program Guidelines
Summary of Guidelines
Fact Sheet
Thanks to Colleen Craig of Countryridge Financial (661-310-8536) for passing this on.
www.colleencraig.com
[The devil is in the details...
SCV Home Team]
ONE STEP CLOSER UNDER NEW TREASURY GUIDELINES
With Detailed Program Requirements, Servicers Can Now Begin
‘Making Home Affordable’ Loan Modifications
US Treasury Department Press Release dated 3/4/09
Washington, DC – The Obama Administration today announced new U.S. Department of the Treasury guidelines to enable servicers to begin modifications of eligible mortgages under the Administration's Homeowner Affordability and Stability Plan – announced by President Barack Obama just two weeks ago. The release of detailed requirements for the “Making Home Affordable” program facilitates implementation of the critical provisions that will help bring relief to responsible homeowners struggling to make their mortgage payments, while preventing neighborhoods and communities from suffering the negative spillover effects of foreclosure such as lower housing prices, increased crime and higher taxes.
“Two weeks ago, the President laid out a clear path forward to helping up to nine million families restructure or refinance their mortgages to a payment that is affordable now and into the future. Today, we are providing servicers with the details they need to begin helping eligible borrowers,” said Treasury Secretary Tim Geithner. “It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets, just as we work to stabilize our financial system, create jobs and help businesses thrive. Economic recovery requires action on all three fronts.”
"Only two weeks after the President unveiled his plan to help promote homeowner affordability, we are moving forward today with these guidelines to implement that plan," HUD Secretary Shaun Donovan said. "This step forward represents a tremendous coordinated effort between major government and regulatory agencies to help bring relief to America's housing market and homeowners. This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans."
The guidelines will implement financial incentives for mortgage lenders to modify existing first mortgages and set standard industry practice for modifications.
Treasury announced today that the Making Home Affordable program will also include additional incentives for efforts made to extinguish second liens on loans modified under this program. Extinguishing second liens will make mortgages more affordable, improve loan performance, and help prevent foreclosures.
In conjunction with the release of the new guidelines, Treasury, HUD and other members of a broad interagency task force have prepared consumer friendly Q&A and eligibility assessment tools for borrowers available at FinancialStability.gov. To ensure the program can be implemented as quickly as possible, the agencies also have conducted extensive outreach with housing counselors and mortgage servicers, including the development of call center phone scripts, a training plan and detailed guides, to prepare them for incoming inquiries from borrowers in the wake of the guidelines release.
An expanded online resource will soon be available for borrowers, and agency representatives will fan out across the country in the coming weeks to conduct outreach at homeownership events in communities hardest hit by the housing crisis.
Modification Program Guidelines
Summary of Guidelines
Fact Sheet
Thanks to Colleen Craig of Countryridge Financial (661-310-8536) for passing this on.
www.colleencraig.com
[The devil is in the details...
SCV Home Team]
Thursday, February 26, 2009
Much ado about compensation
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
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
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.
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