|
|
August 11th, 2010
 With the world’s largest bond fund PIMCO stating there’s a 25% chance of deflation, the Federal Reserve announces new measures to spur the U.S. economy.
The Federal Reserve met yesterday and the markets held their collective breath to see what actions the Fed would take.
Citing continued concerns about the economy, the Fed left rates where they were as expected.
All the signs and statements point to the Fed being more & more concerned about deflation and the resulting contraction of the economy. The Federal Reserve Press Release published after the meeting pointed out:
Bank lending has continued to contract.
and:
To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.
That last part is very good news for the housing industry.
The Fed reinvesting into more bonds means they’ll still be effectively subsidizing interest rates.
Don’t celebrate too soon though. The Fed also remarked:
Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.
These factors are all working against many potential buyers taking the plunge into home ownership along with the contracted lending policies of the banking system.
Deflation will also work against the housing market. You’ve probably already witnessed a deflationary mindset and didn’t recognize it. Many potential home buyers have waited to buy a home believing that prices will continue to fall. Think about a significant portion of consumers taking that attitude with cars, electronics, etc. The whole economy goes into a tailspin that’s not easy to get out of.
When can we expect to see a sustained recovery in the housing market?
Look to the employment numbers.
I don’t mean the unemployment numbers! Those are now skewed by the numbers of people that have given up on looking for a job.
When people start going back to work and getting raises, they’ll start buying houses.
In the mean time, those that can afford to buy will realize the best deals.
Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy
_______________________________________________________________
If you enjoyed my blog post,
I invite you to connect with me on the social networks below & subscribe to my blog!
   
“Referrals are Sending Someone You Care about, to Someone You Trust!”
So, forward this blog post to someone that’ll appreciate it!
_______________________________________________________________
Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
The most Certified Mortgage Expert in the Midwest
Contact him for The Lending Edge
P: 248-356-3739 • F: 866-215-3755 • dsygit@TheLendingEdge.com • www.TheLendingEdge.com
Tags: Birmingham, Bloomfield, Detroit, Expert, Federal Reserve, Interest Rates, Michigan, Mortgage, Rochester, Royal Oak, Troy
Posted in First Time Buyer, Government, Housing, Mortgage Backed Securities, Rates, Real Estate Sales, Recovery | No Comments »
July 13th, 2010
What are Michigan homeowners and homebuyers waiting for?
Check out this chart, compliments of my friendly neighborhood First American Title rep, Julia Halpin:)
Gadzooks & zounds! These historically low mortgage rates are record setters.
What more could a Michigan homeowner looking to refinance or a Michigan homebuyer looking to buy ask for?
How about appraisals coming in higher & a job to qualify to buy!
These historically low mortgage rates are a sign that our economy is not doing all that well:(
But, if your home can appraise or you do have a job, it’s a fantastic time to get a mortgage!
So, give our team a call.
MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY
_______________________________________________________________
If you enjoyed my blog post,
I invite you to connect with me on the social networks below & subscribe to my blog!
“Referrals are Sending Someone You Care about, to Someone You Trust!”
So, forward this blog post to someone that’ll appreciate it!
_______________________________________________________________
Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
The most Certified Mortgage Expert in the Midwest
Contact him for The Lending Edge
P: 248-356-3739 • F: 866-215-3755 • dsygit@TheLendingEdge.com • www.TheLendingEdge.com
Posted in Affordability, Purchase, Rates, Recovery, Refinance | No Comments »
July 10th, 2010
 Well Congress finally got their act together on something.
Both the House & Senate approved a bill to allow homebuyers with purchase contracts dated by April 30, 2010 to close on their transactions until September 30, 2010. The bill is now on its way to President Obama to be signed into law.
Why the extra time?
According to the National Association of Realtors, approximately 180,000 homebuyers would lose out on the credit as they can’t close by the current June 30th deadline.
NAR blames backed up lenders, delays in Flood Insurance and the Rural Development programs and new construction issues as the primary reasons homebuyers can’t close.
Here’s NAR’s 180,000 list broken down by state:
Alabama, 2,590; Alaska, 830; Arizona, 5,440; Arkansas, 2,090; California, 17,700; Colorado, 3,390; Connecticut, 1,770; Delaware, 400; District of Columbia, 300; Florida, 14,830; Georgia, 6,270; Hawaii, 710; Idaho, 1,270; Illinois, 7,030; Indiana, 3,560; Iowa, 2, 030; Kansas, 1,840; Kentucky, 2,540; Louisiana,1,800; Maine, 840; Maryland, 2,630; Massachusetts, 3,930; Michigan, 6,470; Minnesota, 3,760; Mississippi, 1,530; Missouri, 3,600; Montana, 760; Nebraska, 1,110; Nevada, 3,800; New Hampshire, 690; New Jersey, 4,300; New Mexico, 1,160; New York, 9,190; North Carolina, 4,890; North Dakota, 460; Ohio, 8,510; Oklahoma, 2,760; Oregon, 2,090; Pennsylvania, 5,830; Rhode Island, 500; South Carolina, 2,460; South Dakota, 500; Tennessee, 3,910; Texas, 15,340; Utah, 1,130; Vermont, 400; Virginia, 3,890; Washington, 3,190; West Virginia, 940; Wisconsin, 2,690; and Wyoming, 390.
What about all the buyers that have contracts on short sales?
Short sale can easily take 4 months or longer to close. So, if a homebuyer entered into a purchase contract in April, there’s a very low chance they would be able to close by the current June 30th deadline.
A good portion of short sales will be lucky to be able to close by the soon-to-be extended deadline of September 30th.
Now if only Congress could get its act together on the Flood Insurance issue…
MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY
_______________________________________________________________
If you enjoyed my blog post,
I invite you to connect with me on the social networks below & subscribe to my blog!
“Referrals are Sending Someone You Care about, to Someone You Trust!”
So, forward this blog post to someone that’ll appreciate it!
_______________________________________________________________
Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
The most Certified Mortgage Expert in the Midwest
Contact him for The Lending Edge
P: 248-356-3739 • F: 866-215-3755 • dsygit@TheLendingEdge.com • www.TheLendingEdge.com
Tags: Credit, Expert, extension, Michigan, Mortgage, tax
Posted in First Time Buyer, Housing Tax Credit, Purchase, Real Estate Sales, Recovery, Tax Credit | 1 Comment »
April 16th, 2010
Homeowners doing a Short Sale or Deed-In-Lieu instead of Walking-Away (Foreclosure) got some great news from FNMA recently as the agency announced shorter waiting periods to qualify for a new mortgage.
MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK,  TROY
In an attempt to encourage Michigan Homeowners to work with their lenders on Short Sales or Deed-in-Lieu‘s instead of just letting their homes go to Foreclosure, FNMA just announced some changes to their policy in regards to these homeowners qualifying for their next mortgage.
Previously, Deed-in-Lieu’s were treated the same as Foreclosures - giving a Michigan Homeowner little incentive to work out anything with their lender.
There was also a lot of confusion regarding when a homebuyer could qualify for a new mortgage after a Short Sale.
FNMA’s announcement SEL-2010-05 clarifies their policies.
A summary of the new guidelines:
- Putting 20% Down – minimum wait period of 2 years
- Putting 10% Down, minimum wait period of 4 years
- Putting less than 10% Down, minimum wait period of 7 years
There are still exceptions for extenuating circumstances (out of homebuyer’s control), but the minimum regardless of reason is 2 years.
FNMA has also clarified what constitutes acceptable re-established credit after a Foreclosure, Deed-In-Lieu, Preforeclosure, Short Sale or Bankruptcy. The homebuyer’s credit can only be re-established through credit tradelines reported through the credit bureaus. Nontraditional credit - utility bills, car insurance, etc, that is not reported through the credit bureaus will no longer be acceptable.
What’s this mean for Michigan Homeowners considering a Short Sale, Deed-in-Lieu, Foreclosure and/or Bankruptcy?
- Will your lender even work with you or will they ignore you and give you the run around pushing you into Foreclosure, despite the financial incentives the government is giving lenders?
- If you work with your lender to do a Deed-in-Lieu or Short Sale instead of Foreclosure, where will you live and how will you pay for that housing?
- You’ll have to weigh the new waiting time periods against how long you can stay in your home without making payments. Can you save enough to pay cash for a new home or for a down payment on a land contract to avoid having to worry about a new mortgage?
- Are your debts such that you’ll have to file Bankruptcy, which FNMA requires you to wait 4 years, so the 2 year incentive doens’t really matter?
I highly recommend struggling homeowners seek out the advice of Certified Mortgage Professionals, Attorneys & CPA’s in analyzing their options. Don’t let anyone tell you what to do! True professionals assist you in understanding your options so you, and only you, make the best decision for your future.
Here’s the chart FNMA published regarding their guidelines concerning this:
| Preforeclosure Event |
Current Waiting Period Requirements |
New Waiting Period Requirements |
| Deed-in-Lieu of Foreclosure |
4 years
Additional requirements apply after 4 years up to 7 years |
2 years – 80% maximum LTV ratios
4 years – 90% maximum LTV ratios 7 years – LTV ratios per Fannie Mae’s eligibility matrix |
| Preforeclosure Sale |
2 years |
| Short Sale |
No policy currently exists specific to short sales |
Exceptions to Waiting Period for
Extenuating Circumstances |
| Preforeclosure Event |
Current Waiting Period Requirements |
New Waiting Period Requirements |
| Deed-in-Lieu of Foreclosure |
2 yearsAdditional requirements apply after 2 years up to 7 years |
2 years – 90% maximum LTV ratios |
| Preforeclosure Sale |
No exceptions are permitted to the 2-year waiting period |
| Short Sale |
No policy currently exists specific to short sales |
To read the announcement yourself click here.
I would expect FHLMC to soon follow this with their own updates.
Contact me with questions or for assistance.
Posted in 1-TLE, Bankruptcy, Deed-in-Lieu, FNMA, Foreclosure, Recovery, Short Sale, Walk away | 1 Comment »
April 3rd, 2010
If you’re an upside down Michigan homeowner that’s current on your non-FHA mortgage and you owe more than 115% of your home’s current value, FHA may have a deal for you!
MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY
The government is getting more serious about bailing out the housing  industry with HUD’s latest announcement about the new FHA program.
It’s potentially good news for upside down Michigan homeowners, as to make a loan eligible for the program, the lender must write down the principal balance AND make sure the payment isn’t more than 31% of income.
The program is voluntary for lenders, but if the government can get enough lenders to actually participate this could finally be the program that stabilizes the housing market.
Here are some highlights of the program:
- Voluntary option for lenders and borrowers with mortgages NOT currently insured by FHA.
- Encourages lenders and borrowers to work together, when appropriate, to restructure debts.
- Loans must have a minimum writedown of 10% and all mortgages on a property total to less than 115% of the property’s current value.
- Eligible upside down Michigan homeowners are refinanced into new FHA-insured loans on standard FHA refinance terms for documentation, income ratios and complete underwriting.
- Terms of FHA refinancing:
- New FHA loan must be equal to no more than 97.75% of the current value of the property.
- Combined mortgage debt must be written down to a maximum of 115% of the current value of the home.
- Standard mortgage insurance premium structure will apply.
- Mandatory principal writedown as part of refinance.
- Minimum writedown by lender of at least 10% of the unpaid balance of the original loan.
- Reduced monthly mortgage payments to facilitate sustainable homeownership:
- Rate on refinanced loan will be set at prevailing FHA interest rate.
- Total monthly mortgage payment, including second mortgage, will not be greater than approximately 31% of gross monthly income.
- Total debt service including all forms of household debt will not be greater than approximately 50% of gross monthly income, except for some borrowers with especially strong credit histories.
- Existing lenders can retain their second mortgages on the property, but only up to a combined 115% of the current value of the home.
- If there is an existing mortgage that is not extinguished, lenders must agree to re-subordinate and extinguish any amount over 115% of the current value of the home.
- Homeowner Eligibility
- Homeowners must be current on their mortgage payments.
- Homeowner must occupy the home as their primary residence and fully document their income.
- Homeowners must qualify under standard FHA borrower guidelines.
- Homeowners must have a FICO credit score of at least 500.
- Existing lenders’ choice to consent for an FHA refinancing of this type is voluntary given the principal writedown requirement. Thus, not all homeowners who meet above criteria will receive an FHA refinanced loan.
- As with any loan forgiveness, the short refinancing will be reflected on borrowers’ credit score.
HUD plans to use up to $14 billion in TARP funding to support the FHA refinance options. The funds will be used to payoff second liens, provide incentives to servicers and provide coverage for some share of potential losses resulting from the newly refinanced loans.
Here’s an example provided by HUD:
Example of a Typical FHA Refinance
- In 2006: Family A took out a 30-year fixed mortgage with a balance of $250,000 and an interest rate of 9.0%. Their monthly payment was about $2,000 per month.
- Today: Home prices have dropped and Family A’s home is worth $180,000.
- With a FHA Refinance: Family A’s loan balance will be reduced to $207,000 and their monthly payment will fall to about $1300 per month. This will reduce their principal balance by about $33,000 and reduce their monthly payments by about $700 per month, saving the family nearly $42,000 over the next 5 years.
When will this all be available to upside down Michigan homeowners? HUD says,
“FHA will move to implement this as quickly as possible and expect that lenders can begin making decisions by the fall. Specific guidelines will be posted in a FHA Mortgagee Letter in the near future.”
You can read HUD’s press release about the program here, be sure to click on the links at the bottom for even more info.
Additional FAQs can be found at the Making Home Affordable website.
Posted in 1-TLE, FHA, Government, Recovery, Refinance, Upside Down | 5 Comments »
March 25th, 2010
Bank of America announces a plan to reduce principal balances for SOME upside down homeowners. What’s really under the leaf they appear to be turning over?
MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY
The real story is that this is part of a settlement the bank reached with several state attorney generals 18 months ago over Countrywide high-risk loans. Seems Countrywide made some loans to people that really couldn’t afford them and Bank of America inherited the problem when they took Countrywide over.
So, before every upside down homeowner with a Bank of America mortgage gets too excited, they need to understand that it will only be applied in limited circumstances.
First, it will probably only apply to mortgages originally with Countrywide that Bank of America inherited.
Then the following must apply:
- Upside down homeowner must be at least 60 days delinquent on their mortgage
- Must owe more than 120% of their home’s current value
Upside down homeowners meeting the above qualifications will then have the qualifying principal portion deferred, interest free, for up to 5 years. As long as the homeowner makes their agreed upon payments during that time frame, the set aside principal will be forgiven. The maximum that can be deferred is 30% of the loan balance or the amount needed to bring an upside down homeowner “even”.
Sounds like they really want borrowers to stay in their homes and slow down foreclosures. It’s actually not a bad setup to encourage that.
This announcement has generated a lot of hopeful buzz in the mortgage industry and in political circles that this plan, if successful, maybe used as a model by the Obama adminsitration as the next plan of attack to stabilize the housing market.
Interesting to note that since the start of the Housing Crisis, most of the economic professors and experts have been saying that principal reductions would be needed to stabilize the market.
How many billions has the Obama administration thrown away already because they didn’t listen to the experts, but chose to play politics?
Posted in 1-TLE, Distressed Property, Loan Modifications, Recovery, Upside Down | No Comments »
February 22nd, 2010
Less than 2% of eligible homeowners have received a permanent loan modification, despite serious pressure from the Whitehouse.
MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY
Obviously, lenders are dragging their feet when it comes to approving loan modifications.
It’s gotten so bad, the federal government has taken to publishing a monthly report on lender progress on loan modifications. Numbers are slowly heading up, but not fast enough.
I was asked by Michigan state Senator John Pappageorge for some ideas on what the state government could do to alleviate the housing crisis for Michigan homeowners.
Below is a copy of the white paper I sent his office in January, 2010.
Is There a Better Course for Home Mortgage Debt Recourse?
To address the worse housing crisis in America since the Great Depression, the Michigan legislature instituted a 90 day foreclosure moratorium, effective July 6, 2009 (PA 29, 30 & 31).
The intent of the legislation was to encourage mortgage lenders to more aggressively offer loan modifications to Michigan homeowners, in line with the federal Home Affordable Modification Program (HAMP).
Although it’s too early to evaluate the effectiveness of this piece of legislation, statistics from the federal government show mortgage lenders are not embracing the HAMP program.
Every month, the federal government publishes a report on the Making Home Affordable program. The report details performance statistics on HAMP participating mortgage lenders. The statistics are demoralizing:
- Less than 35% of eligible homeowners have been offered a trial loan modification
- Only 27% of eligible homeowners have been approved for a trial modification
- Just 24% of eligible homeowners are in an active trial modification’
- A dismal 2% of eligible homeowners have been granted a permanent loan modification
Mortgage lenders claim they are doing their best and attempt to shift blame to homeowners not sending in their information. A quick Google search on loan modifications brings up too many instances of complaints against lenders to give any real credibility to these lender claims. In fact, Wells Fargo, to their credit, has a company sponsored blog that lists numerous customer complaints about their poor service on loan modifications: http://blog.wellsfargo.com/wachovia/2009/04/explaining_the_making_home_aff.html.
When a homeowner doesn’t get approved for a loan modification they qualify for, the end result is typically foreclosure. Not only is this an emotionally traumatic experience for a homeowner’s family, it also doesn’t end their potential nightmare.
Michigan currently allows mortgage lenders recourse against homeowners that default on their mortgage debt. To pursue homeowner debt after a foreclosure, a home must be worth less than the debt liens against it and the foreclosing lender must bid fair market value to create a deficiency amount. With close to 50% of financed homes in Michigan being upside down, this is a growing practice by lenders. Michigan statutes currently allow a lender up to 6 years to collect this debt. So, about the time a family believes it has recovered from foreclosure nightmare, they stand a strong chance of having to deal with collection attempts.
If the Michigan legislature was to pass temporary statute to suspend mortgage debt recourse and the resulting deficiency judgments, more encouragement could be brought to bear on mortgage lenders to improve their performance in approving Michigan homeowners for loan modifications. This would go a long way to addressing falling home values in the state and the implications that has for city property tax revenues.
# # #
In addition to real estate lending, consulting and investing, Drew Sygit writes & speaks about the mortgage & real estate industries. He holds mortgage industry designations CMPS, CMC, CRMS, CMLO, CALO, has an MBA and is an approved industry instructor. He’s presented, spoken and/or written for HUD, Financial Planning Association, Financial Planners Association of Michigan, Michigan Association of CPA’s, Institute of Continuing Legal Education, Oakland Real Estate Investors Association, North Oakland County Board of Realtors and numerous industry publications. For speaking engagements and questions he can be reached at dsygit@TheLendingEdge.com. He also publishes his own blog: http://DrewsMortgageNews.com.
Posted in 1-TLE, Deficiency Judgment, Foreclosure, Loan Modifications, Michigan, Mortgage, Recovery, Upside Down, Walk away | No Comments »
January 10th, 2010
Well 2009 is in the books as a very challenging year for most.
Michigan Real Estate did not have a good year, unless you were selling foreclosures. Some of the 2009 negatives:
- Record foreclosures
- Falling property values
- Almost 50% of mortgaged properties have more owed on them than they’re worth.
- Loan modifications not getting done despite a new Michigan law (as of July 6) that more or less requires lenders to offer face-to-face modification meetings.
- City assessors not dropping taxable values in synch with the real estate market.
Most of those negatives will continue to haunt Michigan Real Estate in the new decade. There are some positive headwinds though:
- Mortgage rates are still low.
- The Homebuyer Tax Credit was extended and expanded to repeat buyers. (it expires at the end of April though)
- Property sales are recovering due to the above rate & tax credit environment, also due to the affordability of real estate.
- Job losses are finally slowing.
- New guidelines from the state of Michigan should lead to fairer property assessments this year.
- Taxpayers are getting fed up enough to take action with all the Wall Street bailouts that don’t seem to make it to Main Street.
What’s in store for the mortgage market in 2010?
- A new Good Faith Estimate went into effect January 1. Once everyone is used to it, it will actually make it easier for a borrower to understand. It’ll also be tougher for corrupt/incompetent lenders to bait-and-switch borrowers.
- Expect more delays in closing a mortgage as new rules also require any changes in fees or rates to be re-disclosed to a borrower at least 3 days prior to closing. Great news that are competition now has to do what we’ve always done!
- All mortgage originators have to be nationally registered by the end of July to weed out the undesirables.
- Expect appraisal issues to continue as FHA implements changes to put “firewall protection” between appraisers and loan originators.
- FHA also wants to implement pricing/rate adjustments tied to credit scores. This keeps getting pushed back, but it could happen this year.
- The Federal Reserve is scheduled to discontinue the purchase of Mortgage Backed Securities at the end of March. This could be significant as rates were at 6% before they started buying.
Overall I personally think that 2010 will be a turning or tipping point for Michigan Real Estate and the economy in general. The public is past the shock stage and has come to terms with our new realities. That doesn’t mean we’re all happy with the developments, but we’re not surprised by them anymore.
I hope that more taxpayers watch, understand and start to do something about the corruption and nepotism between Wall Street and Washington D.C.. The banking industry that pretty much caused this Great Recession we’re in through their greed, is buying votes in Congress to thwart any real policy changes to clip their wings. Making it more likely that this will happen again – although probably worse.
We’ve also got several changes going on at The Lending Edge Team for 2010:
- We’re now part of First Michigan Bank, a small community bank in Troy with a very competent support staff.
- We’ve switched our blog from Blogger to WordPress for more versatility.
- We’ve got a new website (www.TheLendingEdge.com), please check that out. It’s not totally done as we’ll be adding more & better content.
- We’ve also switched to a new, more robust database. Please be patient with us though as we’re still learning to use it, removing duplicate records and re-categorizing our contacts.
- We’ll also be launching a new e-newsletter once we get the database situated.
- Drew Sygit will be doing more webinars and speaking engagements in 2010. He was also recently voted onto the Board of Directors of the Financial Planners Association of Michigan (the only mortgage lender on the Board).
Despite all the challenges of 2009, remember to be positive and always look to the future. Positive energy attracts positive people & events!
Posted in 1-TLE, Appraisals, FHA, First Time Buyer, Foreclosure, Housing, Housing Tax Credit, Housing Values, Loan Modifications, Michigan, Mortgage, Property Tax, Rates, Real Estate Sales, Recovery, Upside Down | 13 Comments »
November 6th, 2009
President Obama signs bill into law that extends the $8,000 first-time buyer tax credit – and expands it.
MORTGAGE EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY
Well, it’s official. The home buyer tax credit legislation made it through the political process in Washington D.C. in seemingly record time. After just passing the Senate Wednesday, the House passed the bill today and Obama signed it soon after.
The bill also extended unemployment benefits for 14 weeks for most states, but for another 20 weeks for hard hit states like Michigan. This extension will also keep many from losing their homes to foreclosure, so shouldn’t be overlooked.
Now let’s take a look at the “new & improved” homebuyer tax credit.
Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (defined as not owning a home in the last 3 years) are eligible for up to 10% of the purchase price or a maximum of $8,000.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: The new tax credit program now gives those who already own a residence incentive to move to a new home. If they’ve owned a primary residence for 5 consecutive years out of the last 8, their eligible for up to a $6,500 tax credit.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
What are the New Deadlines?
In order to qualify for the credit, all sales contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.
How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.
This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.
According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.
Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:
- They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
- They do not use the home as your principal residence.
- They sell their home before the end of the year.
- They are a nonresident alien.
- They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
- Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
- They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.
Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.
If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.
Also, be sure not to try and buy a property in the name of a child as the IRS is also pursuing prosecution of an estimated 500 tax filers reported to have done this.
Posted in 1-TLE, Affordability, First Time Buyer, Housing Tax Credit, Real Estate Sales, Recovery | No Comments »
November 1st, 2009
Contrary to what many have reported, it’s not a done deal yet.
MORTGAGE EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY
The most talked about real estate news of the past week seemed to be all about the First Time Homebuyer Tax Credit getting extended.
I’ve had numerous people contact me asking for the details and have had to tell all of them that nothing has passed yet.
Given the confusion and misinformation I thought I’d give an actual update on where the extension is.
The big news is that an unofficial voice vote passed the Senate last week, and Senate Majority Leader Harry Reid announced that he’s planning an official November 2nd vote on the extension in the Senate. Discussions with his counterparts in the House lead him to believe that the House will also pass the bill in the coming week.
This could put the bill on President Obama’s desk by the end of the week.
What could go wrong? Well, the vote was held up last week by demands for votes on several other amendments, one calling for an end to the Treasury’s TARP program by year end. An extension of unemployment benefits is also rumored to be causing issues. Popular bills like this one often have other amendments added to them that might not pass otherwise, so a lot of compromising goes on.
Some New Wrinkles
In its current form, the bill would extend the tax credit to the end of April 2010. There are several proposed differences from the current tax credit:
- To qualify, a sales contract would have to be signed by April 30th and the transaction closed by June 30.
- Income limits would be increased from $75k for single people & $150k for couples, to $125k and $225k respectively.
- Buyers who have lived in their current home for the last 5 years would be eligible for up to a $6500 tax credit (or 10% of the purchase price).
- The maximum allowed home purchase price would be capped at $800,000.
- Military personnel, deployed overseas for a minimum of 90 days in 2008 or 2009, would have until April 30, 2011 to claim the tax credit.
- To combat fraud, a HUD-1 Settlement Statement will have to be attached to the tax return to secure the credit.
Stabilizing the Housing Market
The Homebuyers Tax Credit is probably the best program passed by the government since the financial meltdown started. Other measures to stabilize the economy are increasingly under fire for racking up trillions in tax payer debt, while mostly benefiting the elite on Wall Street.
More than 1.25 million taxpayers have taken advantage of the tax credit to pursue the American dream of home ownership. This has used up approximately $8.5 billion of the $13.6 billion originally set aside for the program.
Reports show home sales have increased and inventory is down. Many buyers are finding it difficult to locate a home, being outbid and outhustled.
Concerns
Even this program has its problems and detractors though. Recently, the Treasury’s Inspector General for Tax Administration, J. Russell George, told Congress that at least 19,000 filing for the credit hadn’t bought a house when they filed. Another 74,000 appear to have owned a home in the last 3 years, making them ineligible for the program. 500 plus filers for the tax credit are under 18 years old!
The IRS is pursuing criminal cases against at least a 100 offenders and is reportedly trying to audit every return where the credit is claimed this year. They’ll also be auditing themselves as Mr. George is also on record stating that they are investigating at least 53 cases of IRS employees filing illegal or inappropriate claims for the tax credit.
Many detractors are claiming that the tax credit is subsidizing housing values and just pulling forward sales that would have happened anyways.
One potential problem that the media hasn’t focused on yet, is that the tax credit may be encouraging banks to sit on foreclosed homes. Many real estate experts have pointed out that the number of foreclosures has been outpacing the number of units entering the market for some time now. Instead of putting these homes on the market to be sold, banks could be sitting on them to drive down inventory and push up prices – using bailout funds to support this endeavor. Not a lot that can be done at the “street level” about this, but surely something for our representatives to look into
Don’t Procrastinate
Hopefully, the extension of the tax credit won’t turn more buyers into procrastinators who wait until the last minute to buy. Buyers should keep in mind that finding a home isn’t like shopping for Christmas items or even a car – where their are multiple copies of the desired item.
Homes are much more unique, rarely are even two homes remotely alike. Start your search now, as it could take awhile to find what you want. When you do find it, jump on it or someone else usually will.
Posted in 1-TLE, Affordability, First Time Buyer, Government, Housing Tax Credit, Purchase, Recovery, Tax Credit | 2 Comments »
|
