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The $7,500 First-Time Home Buyer Tax Credit

August 28th, 2008 8:18 AM

What is the First-Time Home Buyer Tax Credit?

The Tax Credit is part of the Housing and Economic Recovery Act of 2008, signed into law on July 30, 2008.

The intent of the tax credit is two fold:

• To provide a financial resource for home buyers in the year that they purchase a home

• To provide a stimulus to the housing market and the economy, helping to stabilize home prices and increase home sales

The law provides a tax credit equal to ten percent of the qualified home purchase price. The credit is capped at $7,500.

The credit is essentially an interest-free loan. Home buyers are required to repay the credit to the government, without interest, over 15 years in equal installments or when they sell the house.

Who is Eligible?

• First-time home buyers, defined as a buyer who has not owned a principal residence in the previous three years

• U.S. citizens who file tax returns

• Eligible properties include any single family home that will be used as a principal residence (including condos and co-ops)

• To qualify, buyers must close on the sale of the home between April 9, 2008 and June 30, 2009

Income Limits

• The full $7,500 credit is available for individuals with modified adjusted gross income (per IRS definition) of no more than $75,000 ($150,000 forcouples filing jointly)

• A partial credit is available for individuals with modified adjusted gross income between $75,000 and $95,000 (between $150,000 and $170,000 for couples filing jointly)

Is the Tax Credit “Refundable?”

• Yes. The credit reduces the income tax liability for the year of purchase

• The credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit

Payback Provisions

Home buyers claiming a $7,500 credit would repay the credit at $500 per year via their tax returns. They do not have to begin repayments until two years after the credit was claimed

• If the home owner sells the home, the remaining credit would be due from the profit of the home sale

• If there is insufficient profit from the sale, the remaining credit payback would be forgiven

Posted by Ariel Segall on August 28th, 2008 8:18 AMPost a Comment (0)

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Mortgage Servicers Set Monthly, Quarterly Records for Helping Homeowners Avoid Foreclosure

August 28th, 2008 8:11 AM

The HOPE NOW Alliance, a national alliance of mortgage

servicing companies, investors and non-profit counseling

agencies formed to help at-risk homeowners facing foreclosure

or difficult adjustable-rate mortgages, announced that

mortgage servicers helped a record number of homeowners

avoid foreclosure in June 2008 and the second quarter of 2008.

The HOPE NOW Alliance estimated that on an industrywide

basis:

• The total number of foreclosures prevented since July

2007 has risen to approximately 1.9 million.

• In June, more than 181,000 workouts were completed

and in the second quarter 2008, servicers completed

more than 522,000 workouts – which include loan

modifications and repayment plans.

• So far, HOPE NOW has sent almost 1.9 million letters

to consumers who may be at risk of losing their homes.

• About 18% of homeowners receiving the HOPE NOWcoordinated

letters have contacted their servicer, 6 times

more than the routine 2-3% response rate servicers

receive when they send their own mailings.

Posted by Ariel Segall on August 28th, 2008 8:11 AMPost a Comment (0)

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President Signs Housing and Economic Recovery Act of 2008 Into Law

August 28th, 2008 8:10 AM

Heralded as the most sweeping housing reform since the

“New Deal,” the Housing and Economic Recovery Act of

2008 includes the creation of a strong regulator for Fannie

Mae and Freddie Mac, changes in conforming and Federal

Housing Administration (FHA) loan limits, a comprehensive

modernization plan for FHA, and the HOPE for Homeowners

plan, which may help as many as 400,000 distressed homeowners

by refinancing them into government-backed loans.

To qualify for the HOPE for Homeowners plan, eligible borrowers

must have spent more than 31% of their monthly

income on their mortgages as of March 1, 2008. The troubled

loan must have been originated no later than Jan. 1, 2008, and

be secured by the borrower’s primary residence. Additionally,

the borrowers must also be able to verify their income.

Another part of the plan is the first-time homebuyer credit

for qualifying homebuyers for purchases on or after April 9,

2008 and before April 1, 2009. The refundable tax credit is

equal to 10% of the purchase price of a residence and not to

exceed $8,000. It requires taxpayers who receive the credit to

repay it over 15 years in equal installments by imposing a

surcharge on the taxpayer’s annual income tax.

While questions remain about when major provisions of the

bill will actually be implemented, the HOPE for Homeowners

program is scheduled to start Oct. 1, 2008 and be available

through September 2011. Lenders’ participation in the program

is voluntary.

Posted by Ariel Segall on August 28th, 2008 8:10 AMPost a Comment (0)

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FHA Changes for Oct 1 2008

August 28th, 2008 8:08 AM

•Seller-funded DAP programs for FHA loans ends October 1, 2008

• Requires a 3.5% down payment and a maximum LTV that cannot exceed 100% (including mortgage insurance premium)

• Applies a 12-month moratorium on the risk-based pricing introduced on July 14, 2008

• Revises loan limit calculations for FHA and Conventional Conforming Loans, effective January 1, 2009

• FHA said the upfront premiums charged to most borrowers will be 1.75% of the loan amount, effective Oct. 1.

Posted by Ariel Segall on August 28th, 2008 8:08 AMPost a Comment (0)

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What is HOPE for Homeowners - The Housing and Economic Recovery Act of 2008

August 28th, 2008 8:07 AM

•It is a provision that creates a refinance program to help distressed borrowers. If the borrower is eligible and if the current lender agrees, the borrower may be eligible for a partial write-down of their mortgage debt and a new 30-year fixed rate loan for up to 90% of the current appraised value.

•This is a voluntary program. No servicers or originators are mandated to participate.

No financial rescue program for investors or lenders. Investors and/or lenders will have to take significant losses in order for borrowers to benefit from the loans refinanced with government insurance. However, these losses may be less than the losses associated with foreclosure.

No financial rescue program for borrowers. Borrowers will be required to share their new equity and future appreciation with FHA. These loans will also be subject to other fees such as the annual FHA mortgage insurance premium.

Posted by Ariel Segall on August 28th, 2008 8:07 AMPost a Comment (0)

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FHA Raises Its Premiums to Insure Repayment of Mortgages -- Wall Street Journal

August 28th, 2008 8:05 AM

Wall Street Journal, By James R. Hagerty

August 27, 2008

The Federal Housing Administration, a U.S. agency that is rapidly shouldering more of the risk on home loans, raised the premiums it charges for insuring that mortgages will be repaid.

In a posting on its Web site Tuesday, the FHA said the upfront premiums charged to most borrowers will be 1.75% of the loan amount, effective Oct. 1. That is up from the 1.5% that was in effect until July 14, when the FHA adopted a "risk-based" pricing system that created a range of charges depending on borrowers' credit scores and the amount of the down payment or equity they owned in the homes. In late July, Congress approved a housing bill that included a provision requiring the FHA to revert to a standard premium at least until Oct. 1, 2009.

Posted by Ariel Segall on August 28th, 2008 8:05 AMPost a Comment (0)

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Who is responsible for the current mortgage/real estate crisis?

July 10th, 2008 7:56 AM

This questions was posted today at LinkedIn for debate and I thought it would be really interesting to share with all of you and get you feedback by commenting on this blog.

Who is responsible for the current mortgage/real estate crisis?

A couple wishes to buy a home. Their income is approximately $125,000 per year.

Average home prices in their area are about $605,000. After their down payment they end up with a loan of $550,000. The lender will approve them for a loan but the payment is a tight squeeze. Technically they can "afford" the mortgage but they will need to be on a very tight budget to be able to pay their other bills and won't have much discretionary income. They fall in love with a house and think it is a great buy as there are similar homes in the area listed for more. The couple goes ahead and makes the purchase.

Fast forward a year or two and home prices have dropped significantly and the couple now finds that they really can't afford their mortgage after all. They are falling behind on the payments and face foreclosure. Who do we blame?

a) The Real Estate Agent. She knew that the home was probably a little more than the couple could comfortably afford and should have steered them toward lower priced homes or recommended they wait until prices come down a bit or have a larger down payment.

b) The Mortgage Broker. He is the expert in the home financing field and should have discouraged the couple from this much of a loan.

c) The Lender. They are the ones who set the guidelines and ultimately approve loans for people with high debt ratios and offer the creative financing options that allow people to qualify for loans that they can't really afford.

d) The Couple. They should have been more responsible and not rushed into homeownership because ultimately they are the ones who will lose their home and ruin their credit.

e) All of the above

f) None of the above

Posted by Ariel Segall on July 10th, 2008 7:56 AMPost a Comment (0)

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Short Sales Require Perfection - by Jason Kapit

July 9th, 2008 6:38 PM

Short Sale abbreviated definition – Selling your home for less than is owed with lender approval.

The issues surrounding short sales have become almost mainstream today. Can’t afford your home? Avoid foreclosure via the short sale. Is it that easy? Not by a long shot.

Truth. The banks don’t have the staff to explain it and I am not even sure they could explain it if they did because short selling is essentially new to the banking system and although they have dealt with similar scenarios in the past, never before has there been the volume, UNTIL NOW.

The best way for me to explain why you need to be PERFECT if you are a seller who is considering a short sale is by scenario:

Suppose you have a mortgage or mortgages on your home totaling $800,000. Your home is worth $600,000. The following two questions need to be addressed before the banks will even consider allowance of a short sale.

[1] Is there a financial hardship? No hardship – no short sale. (i.e. “I am strapped for cash and I don’t want to sell my other 9 investments properties in this environment” won’t cut it)
[2] Are you current? This is tricky but if you are current on your loan(s), you may not qualify for the short sale scenario either, because without a solid argument, there is no hardship, YET.

Assuming, the answer to number one is ”yes” (you will have to prove it) and the answer to two is “no”, you may then , subject to lender approval, try and sell your home in this market but you better be PERFECT in execution, otherwise you may be doomed to foreclosure.

PERFECT in timing and pricing. The two are inter-related and if you can not adequately execute both, you will be in trouble.

[1] Timing. You don’t have much time. Sure there will be people out there that will beg to differ and argue that you can stall an inevitable foreclosure for months and even years…which may be the tactic of choice if you wish to continue the daily stress involved for months or even years. I think you would have to be a sadist but who am I to judge. Assuming you are not, the goal is to quickly put an end to this, which leads to pricing.

[2] Pricing. Sounds easy but it isn’t. Here’s why. There are two trains of thought on this. [1] Price as close as you can to recovering the full debt even when comparables dictate a lower selling price. Insane idea, never works. [1] Price it rock-bottom, essentially ringing the dinner bell for all vultures to come by for a quick pick-up. Also insane, works every time, but many times with dire consequences. Pricing too low is often a mistake made by a seller who is elated by the bank’s allowance of a short-sale scenario. Sellers misunderstand the effect of the short-sale as they often equate it to a do-over, even though a majority of the time it is not.

The short sale will allow the seller to avoid the ominous default and ultimate foreclosure which may undoubtedly wreck their credit but, IT WILL NOT AUTOMATICALLY RESET THE DEBT (shortage) OWED! For instance, if you owed $800,000 and the short sale of your home recovers $600,000, the shortage of $200,000 is still in question. More often than not, the shortage will be designated as a collectible balance. It is still a deficiency and a recorded judgment, much like the original mortgage. On some occasions, banks quash the entire debt and absorb the loss but with the amount of short sales occurring, lenders are in no position to write down these losses so long as they are not going to have to hold onto tangible assets.

Bottom Line: If you are even remotely thinking about selling your home via the short sale process, understand that it is a PROCESS that requires real guidance and precision to navigate successfully. For questions regarding your specific situation, my contact information is below.

Jason Kapit, Esq. is a Realtor with EWM

Posted by Ariel Segall on July 9th, 2008 6:38 PMPost a Comment (0)

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American Cities See Record Annual Foreclosure Rate Increases in Q2

July 7th, 2008 8:40 AM

ecord high foreclosure rates in the second quarter were reported in Los Angeles, Seattle, Miami and New York, according to a report issued by PropertyShark.com.

Los Angeles led the four cities with a 282.01% increase in the second quarter compared to last year's Q2. Los Angeles reported a record 14,505 new residential foreclosures according to the report issued by PropertyShark.com. The amount of newly scheduled trustee sales soared by 63% in comparison to the previous year.

"The foreclosure chart is unfortunately starting to look like a ski jump, with the current number of new trustee sales this quarter increasing at one of the highest rates we have seen over the last two years," said Property Shark Foreclosures Product team member, Adina Dumit.

To Read the Full Article, please visit this link :

http://www.mortgagenewsdaily.com/732008_Foreclosure_Rate.asp

Posted by Ariel Segall on July 7th, 2008 8:40 AMPost a Comment (1)

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What’s With Foreclosures in Weston, Florida?

July 7th, 2008 8:38 AM

Great BLOG about Foreclosures in Weston Florida .

Please visit this link :

http://blog.ewm.com/2008/07/06/whats-with-foreclosure-in-weston-florida/

Posted by Ariel Segall on July 7th, 2008 8:38 AMPost a Comment (0)

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