Proposal to Extend Tax-Credit Closings
By · CommentsThe National Association of REALTORS® today expressed thanks on behalf of America’s homebuyers to three Senators for introducing a measure to extend the present home buyer tax credit closing deadline to Sept. 30. They are Senate Majority Leader Harry Reid, D-Nev., and Sens. Johnny Isakson, R-Ga., and Chris Dodd, D-Conn.
“As the leading advocate for homeownership and housing issues, NAR commends these Senators for their attentiveness and sensitivity to thousands of qualified home purchasers, who through no fault of their own, are not able to meet the closing deadline of June 30 for the home buyer tax credit. Now we urge the Senate and the House to act quickly to pass this legislation and ease the minds and pocketbooks of these home buyers,” said NAR President Vicki Cox Golder.
NAR estimates that approximately 75,000 home buyers of distressed properties who have qualified for the tax credit and met the contract deadline of April 30 would not be able to close their transaction by the June 30 closing deadline. REALTORS® have reported as many as one-third of qualified applicants have been notified by lenders that their mortgages will not close before June 30 due to the sheer volume of applications in the pipeline.
“These are not buyers who just entered into the market. These are buyers who previously met all the qualifications for the tax credit, but find themselves at the mercy of a work-flow jam with the lenders or other delays and might not be able to complete the purchase of their homes,” said Golder. “It would be a tragedy for them not to be able to complete the purchase in time to claim the credit.”
Golder said she also wanted to make this clear: “This amendment does not extend the deadline for home buyers to qualify for the tax credit; it extends the deadline for closing the transaction, from June 30 to Sept. 30. Since these applications were already in the pipeline and figured into the program’s cost, the extension of the closing deadline should not incur any further government costs.”
Government Sponsored Enterprises (GSE) Fannie Mae and Freddie Mac last week released guidelines for implementing the Treasury Dept.’s Home Affordable Foreclosure Alternatives Program (HAFA). The new guidelines apply to loans owned or guaranteed by the GSEs; servicers are required to implement the new policies no later than Aug. 1.
While largely consistent with the HAFA guidelines for non-GSE mortgages, both Fannie and Freddie have implemented changes. To qualify for the Freddie Mac HAFA program, borrowers must be moreHAFA than 60 days delinquent and have cash reserves of less than $5,000 or three times the current monthly mortgage payment, whichever is greater. Similar to the non-GSE HAFA program, Fannie Mae allows borrowers to qualify if they are at imminent risk of default. However, Fannie prohibits borrowers from participating in HAFA if the borrower: Has the ability to continue making mortgage payment, but chooses not to do so; has substantial encumbered assets of significant cash reserves equal to or exceeding three times the borrower’s total monthly mortgage payment or $5,000, whichever is greater; or has high surplus income.
Fannie and Freddie both allow the real estate commission in the listing agreement, but not more than 6 percent. Consistent with the non-GSE HAFA program, Fannie and Freddie guidelines do not permit subordinate lien holders to require contributions from the real estate agent or borrower as a condition for releasing its lien and releasing the borrower from personal liability.
Easy Money is Gone!
By · CommentsThe 2010 NAR “Member Profile makes it clear that consumers’ difficulty in securing mortgage financing was the root problem in getting transactions to the closing table.” Agents haven’t studied financing in the last 15 years because obtaining a loan was so easy. The recently released Member Profile state that REALTORS with more than 16 years in the business were least likely to have some of the financing problems that agents with less experience were.
2010 NAR President Vicki L. Cox Golder suggest “It’s time to showcase your market knowledge and educate clients about why it’s still smart to buy a house or condominium – not only because of attractive interest rates and homeowner’s tax deductions but because home is where we make memories, build our future, and feel secure.”
People buy homes for emotional reasons like pride of ownership, a place to raise a family and share with friends. Owning a home is part of the American Dream. They justify the purchase with logical reasons like the tax benefits, investment aspects and current low interest rates.
Agents are turning their weaknesses into strengths with information and tools that help buyers and sellers understand the tax advantages, financing alternatives and investment aspects of homeownership. Buyers value agents who can skillfully guide them through this process of uncertainty and Sellers need professionals who understand how to package their home to sell.
Finding the “right” home is at the top of the list for buyers but if they can’t get financing, it will never have their address on it. Acquiring this specialized knowledge provides the solutions to the issues that are challenging buyers and keeping homes from selling.
This knowledge, accompanied with the proper tools, give professionals a distinct point of difference from other agents. Please let me know of any questions or unique assistance you may have!
Extra mortgage payments won’t boost profit!
By · CommentsGreat information in Q & A article by: Don Taylor, Ph.D., CFA, CFP, On Wednesday May 26, 2010.
Dear Dr. Don,
I read your answer to another reader about additional principal being added to mortgage payments and how it shortens the life of the loan. It all made sense. If I plan to sell my house before paying off the mortgage — I got a great deal buying it last year and plan to sell once things pick back up — does having paid additional principal benefit me at all when I sell the house?
– Sean Seller
Dear Sean,
Making additional principal payments not only saves on interest expense, it reduces the loan balance. That means that when you sell this house, you’ll have more equity to use in buying the next house, or to use for other life goals.
While making additional principal payments improves your equity position, it doesn’t influence the profit or loss on the sale of your home. Reducing the loan-to-value means there’s less leverage, and a lower mortgage interest deduction on your income tax return. My rule of thumb is to make additional principal payments when you expect the after-tax return on investments to be less than the effective rate on the mortgage.
Bankrate’s Mortgage tax deduction calculator will help you calculate the effective rate on your mortgage.
Keep in mind that a quick flip can by costly when it comes to taxes. Assuming this home is a personal residence, you’d want to consider the tax impact of selling before meeting the standards for the capital gains exclusion. The Bankrate feature “Capital gains home-sale tax break a boon for owners” provides additional detail on the exclusion, as does IRS Publication 523, “Selling Your Home.”
What you should know about “Home Buying”
By · Comments• When purchasing a home, buyers are strongly advised to request a home inspection prior to closing. However, consumers should note that the primary job of a home inspector is to conduct a visual examination of the physical condition of the house and certain systems within it. Since the examination is visual, home inspectors are not required to remove carpets to ensure the floors aren’t warped, for example, and may not walk on the roof to check for defects. Home buyers should interview home inspectors ahead of time to find out what they will and will not cover as part of the inspection.
• While a new home may seem to be free of any defects, many real estate professionals still advise home buyers to hire a home inspector. According to one home inspector, nearly 15 percent of new homes have serious structural problems. Additionally, newly constructed homes can be more difficult to inspect than existing homes. A new home doesn’t have any history. For example, because the plumbing has not consistently been used in a new home, small drip leaks may not be easily detectable. A home inspection can alert buyers to defects, if any are present.
Source: SmartMoney Magazine
http://www.smartmoney.com/spending/rip-offs/10-things-home-inspectors-wont-tell-you/
“California Homes Prices” up by 21 percent!
By · CommentsHome sales decreased 8.1 percent in April in California compared with the same period a year ago, while the median price of an existing home rose 21 percent, according to C.A.R.’s April sales and price report.
“It’s likely that the state tax credit that went into effect May 1 created an incentive for many buyers to postpone closing escrow so they could take advantage of both the state and federal tax credits that were available,” said C.A.R. President Steve Goddard. “We should see the pace of closed sales edge up in May and June as these tax-incentivized transactions close.
The median price of an existing, single-family detached home in California during April 2010 was $306,230, a 21 percent increase from the revised $253,110 median for April 2009, C.A.R. reported. The April 2010 median price increased 1.5 percent compared with March’s $301,790 median price.
“The strong demand for distressed properties continued unabated last month, and overall, inventory remains constrained in most segments of the market,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Listings in April increased compared with a month earlier, typical for this time of year, as more sellers entered the market. At the $300,000 and below price point, the number of homes for sale is at a 3.3-month supply, well below the historical average of seven months.”
Homeowner Optimism Rises
By · CommentsU.S. homeowners have mixed opinions about the state of their own homes’ values, according to the Zillow Q1 Homeowner Confidence Survey. Nationwide, homeowners are overly optimistic, with half believing that their home’s value declined in the past year when in reality, 65 percent of U.S. homes declined in value, the study finds.
About 7 percent of homeowners, representing 5.3 million households, say they would be “very likely” to put their homes on the market in the next 12 months if they see signs that the housing market is improving. Another 8 percent say they would be “likely” to put their home on the market, and 14 percent say they would be “somewhat likely” to do so. These homes from “sidelined sellers” could significantly delay the timing of the housing market recovery, the survey concludes.
Homeowners in the South tend to be overly optimistic about their homes’ values even as home values in that region continue to decline. About one-third (34 percent) of homeowners in the South believe their home gained value over the past year when in reality 27 percent of homes actually gained value.
Homeowners in the West were the least optimistic even though home values in that region, especially in California and Colorado, stabilized over the past year. Nearly one-fifth of homeowners in the West (18 percent) believe their homes gained value over the past year when in reality 31 percent of homes in the West gained value.
Facing the possibility of foreclosure, California homeowners may be hit with more than just losing their homes. Due to a loophole in state law, they also can be sued by their lender. To prevent this, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) is sponsoring Senate Bill 1178 by State Sen. Ellen Corbett (D-San Leandro), which will extend anti-deficiency protection for consumers who have refinanced their original mortgage loans and now are facing foreclosure.
KEEP THIS IN MIND
• Currently, if a homeowner defaults on a mortgage used to purchase his or her home — known as a “purchase money mortgage” — the homeowner’s liability on the mortgage is limited to the property itself. Unfortunately, the original law did not extend the purchase money protection to loans that refinance the original purchase debt, even if the refinance only was to obtain a lower interest rate.
• Californians who refinance a property currently do not have protection if they default on a mortgage greater than the property’s value. Called a “deficiency” liability, under current California law, the lender can sue the former homeowner for the amount of the deficiency even after taking back the property.
• Recent years of low interest rates and aggressive marketing campaigns by lenders have induced tens of thousands to refinance mortgages. Few homeowners realized that by refinancing their mortgage, they were forfeiting their protections and now are personally liable.
• C.A.R. created a video detailing Senate Bill 1178. The video can be viewed here.
To read the full story, please click here:
http://losangeles.bizjournals.com/losangeles/stories/2010/05/17/daily8.html
Real Estate Recovery Optimism!
By · CommentsMega-investor Warren Buffett and a group of top corporate leaders are weighing in on a key issue that’s crucial to a sustained real estate recovery: How long will the good economic news we’ve been getting lately continue? Are we going to be let down later in the second half of the year, or is the current, slow-moving national economic growth pattern a long term trend? Buffet told his annual stockholders gathering in Omaha that, the economy is showing “significant” and persistent improvement for the first time since the financial crisis broke in 2008.
Other top business leaders polled by the Conference Board — and quoted last week by the Wall Street Journal – said they are now “confident that the U.S. will see sustained growth through 2010″ – with moderate gains in employment, consumer spending and consumer confidence.
That’s hugely important for housing of course – and offers a strong answer to economic doomsayers who predict a sharp drop in home sales and real estate activity following the expiration of the tax credits. The latest housing and mortgage numbers certainly look encouraging:
Pending home sales jumped by more than five percent in March and another 10 percent in April, according to the National Association of Realtors. That’s 21 percent higher than the previous year for the same months.
New applications for loans to purchase houses took another big jump — up 13 percent over the previous week, according to the Mortgage Bankers Association. MBA vice president for research, Michael Fratantoni, said that last week’s FHA and VA share of home purchase applications soared above 50 percent — the highest it’s been in more than two decades.
HAMP Modifications Jump Sharply!
By · CommentsThe number of permanently modified home mortgages rose by 30 percent in April to about 25 percent of the 1.2 million trial modifications started under the Treasury Department’s Home Affordable Modification program begun a year ago.
Treasury officials say many modifications were cancelled because of loan servicers’ failure to veloomeowners’ income. Beginning June 1, the program requires that all modifications be based on verified income statements.
“We expect a much lower rate of cancellations going forward as the percentage of verified income modification increases,” said Herbert Allison, assistant Treasury secretary for financial stability.
Source: Los Angeles Times, Jim Puzzanghera (05/18/2010)