First-Time Buyers Benefit from New Tax Credit, Low Mortgage Rates and Home Prices

28 02 2009


Maja Becirovic didn’t think she would own a home in 2009.

Becirovic, 27, and her husband had been living with her parents. But when she became pregnant with her second child, the Jacksonville couple knew they would need their own place.

She began searching for rentals, when it dawned on her — this is an ideal market for first-time buyers. The family is closing on a newly constructed home in Wynnfield Lakes in Jacksonville’s Southside.

“We wanted to save as much as we could in this economy,” she said. “But deals like this don’t come often, so we felt like we had to give it a try.”

Becirovic said she was inclined to pull the trigger because she was able to negotiate the price down 6 percent to $260,000. And Lennar, the builder, agreed to buy down the interest rate, paying the difference between the bank’s offer and what Becirovic was willing to pay. She said she got the 30-year loan at 3.9 percent, compared to the average 5.5 percent rate. She expects to move in March.

The housing market is still slow, but prices and interest rates are the lowest in decades and incentives continue to increase, making Jacksonville ideal for buyers similar to Becirovic, local agents said.

Home sales in Northeast Florida posted their second consecutive month of increase compared to a year ago, and the recent stimulus package, including an $8,000 tax credit for first-time home buyers, is likely to further the upward momentum, according to the Northeast Florida Association of Realtors.

Statewide, home prices have fallen about 20 percent in the past year. Statistics show the existing-home median sales price was $185,400 in the third quarter of 2008, compared to $233,200 in the third quarter of 2007, according to the association.

The Housing Affordability Index also rose nine points from December to January.

“We are seeing more and more interested buyers,” said Melanie Green, communications director for the realtors association. “Low mortgages make it easy and improve affordability, and for first-time buyers, the stimulus is the extra bang for the buck.”

Based on January’s pending sales, it appears the continuing low mortgage rates and improved affordability are attracting more first-time buyers, Green said.

These incentives, coupled with Obama’s federal tax credit, are expected to bring an additional 300,000 home buyers into the national market, according to the National Association of Realtors.

The big thing about the tax credit is that there’s no pay back,” said Will Vasana, of Watson Realty. “It’s great news for first-time buyers and will stimulate demand.”

In 2008, 41 percent of national home sales were from first-time buyers, and Vasana excepts those figures to increase in 2009, he said.

Mortgage rates are also at the lowest levels since the 1960s, multiplying the buyer’s financial power, he said. And every half of a percent counts. For example, on a $200,000 home, half of 1 percent could save the home-owner about $815 a year, Vasana said.

Green said credit has tightened, and lenders are being more careful.

“But there’s still plenty of credit available,” Green said. “People just need to be cautious and find something that fits their needs and isn’t over their head.”

Despite the incentives, some buyers are still weary of the sluggish economy.

“A lot of people are still worried about losing jobs and scared they won’t be able to make payments,” said Kari Jelsma, owner of Future Reality Group at Cecil Field.

Despite the hesitations, Jelsma said she has still seen an increase in interested buyers during the past six months, with the majority being first-time owners.

However, not all of these incentives for first-time home buyers are expected to last.

This is good news for an oversupplied market but bad news for buyers. As prices continue to fall, sales are beginning to pick up. And due to rising demand and cost of construction, Realtors are expecting home prices to rise again.

Housing supply is also starting to decline, dropping 22.6 percent in January compared to last year. “It can cost much less to buy than rent, especially now. But as more people buy, the market will begin to shift,” Vasana said.

Source: Josh salman, Florida Times-Union

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Stimulus Aid to Help US Military Families During Housing Crisis

26 02 2009


The orders came while Navy Lt. Adam Diaz was winding down a one-year stint in Baghdad: Report to the Navy Annex in Arlington for a new assignment in April. — Given the military lifestyle, the prospect of a move came as no surprise to Diaz, 31, who has spent his adult life in the Navy. The shock came when he spoke with his wife, Stephanie Diaz, about the value of the Jacksonville, Fla., home they bought in June 2006, near the height of the housing bubble. — “Hey, by the way,” she recalls telling him. “The house has been valued for about 50 grand less than when we bought it.”

The housing crisis is hitting military families particularly hard, according to real estate agents and service member advocacy groups. Many who bought during the boom and must now relocate because of fresh orders are faced with selling their homes at a big loss. They are finding few buyers, or even renters, particularly in the hardest-hit markets. That is leaving some families facing options including renting at a loss, separation from their loved ones or, in some cases, foreclosure.

The issue has caught the attention of Congress, which included language in the economic stimulus package to compensate service members who sell their home at a loss or have been foreclosed upon because they were forced to move after a base closure, reassignment or a combat wound required them to be relocated near a health facility. The program also covers surviving spouses of those killed in combat.

Under the new provision, the government will cover 95 percent of a loss if a service member is forced to sell. The government can also choose to acquire the title of a home by paying off the balance of a service member’s mortgage or paying the owner up to 90 percent of the home’s previous value. No dollar ceiling has been set.

The $555 million undertaking expands the Defense Department’s Homeowners Assistance Program, which helps military and federal personnel whose homes have lost value because of a base closure. The new measure would likely help the Diazes, and would expand the homeowner assistance program to as many as 17,000 claims, according to the office of Sen. Tim Johnson (D-S.D.), who sponsored the measure.

The program does not cover all military members facing a loss because of a home sale.

In an attempt to limit the number of claims, the program applies only to a service member’s primary residence, and only to homes purchased before July 1, 2006, roughly the time the market began its free-fall. The Army Corps of Engineers said it has not determined what proportion of families will be eligible.

The prospect of foreclosure is particularly daunting for career service members, as credit checks are required to gain security clearances. The increased financial stress comes at a time when many active service members have been deployed to Afghanistan and Iraq, military advocates said.

“We have an all-volunteer force, and we are asking them to deploy overseas to fight the global war on terror,” said Michael Hayden, deputy director of government relations for the Military Officers Association of America, one of the largest military advocacy groups in the country. “And yet we are also in the midst of all this crisis, and the one thing we shouldn’t have to burden our service members with is trying to manage their mortgages.”

That argument resonated with legislators who sought to help people such as the Diazes, who thought that buying their four-bedroom, two-bathroom house in a new Jacksonville subdivision for $252,000 made sense. With the real estate market booming, Diaz figured they would at least be able to break even when they moved.

Today the home is worth about $50,000 less, according to information the couple found on home valuation Web site Zillow.com. A nearly identical house across the street sold for about $185,000, the couple said. They still owe about $217,000 on their mortgage, so selling now would mean taking a loss. Renting would probably leave them $400 to $500 short of covering their monthly mortgage payments.

During the years of easy credit, use of the Department of Veterans Affairs’ guaranteed home loan program fell considerably. Mike Frueh, an assistant director of the program, said higher-risk products such as adjustable-rate mortgages and no-down-payment loans became popular with military members.

Thus the origination of government-backed mortgages for veterans and active-duty members plummeted 73 percent from fiscal year 2003 to 2007, before ticking up again in 2008. During those housing boom years, the VA program offered fixed rates for 30 years and did not change its underwriting practices, which required financial evaluations and credit checks, Frueh said.

Last fall, new legislation allowed service members who were struggling with subprime loans or other types of mortgages to refinance into a VA loan.

R. Joe Gladden, a retired Navy captain and Gainesville real estate agent who caters to military clients, said subprime or other high-risk loans were not necessarily the problem for military members. Gladden and Susan Wallace, a Chantilly mortgage broker who works with him, said generally military families make good clients because they maintain excellent credit and are decisive when it comes time to buy.

Wallace said that many of her military clients asked for adjustable-rate mortgages and no-down-payment loans because their investment was often intended to be temporary. “If you were a military person and moved to the D.C. area, but you are moving again in three to five years, it made sense,” Wallace said.

Both now are inundated with calls and e-mails with tales of woe from families who are stuck in homes that have fallen in value. On his business Web site, Gladden has sponsored a forum for people to post such stories.

One who did was 30-year-old Christina Messer of Arlington. Her husband is stationed at Fort Myer as an honor guard. The couple bought a $438,000 condominium in a new low-rise complex in Arlington in the summer of 2007. They used a no-money-down loan, with interest-only payments for the first five years. They anticipated moving in a few years, and thus saw no point in paying down the balance, said Messer, who spoke on the condition that she be identified by her maiden name so as not to affect her husband’s career.

The problem now is that they cannot sell the home for the value of the mortgage, nor can they find a renter. Messer’s husband has orders to relocate to Texas in April. She fears they will face foreclosure or bankruptcy.

“We are talking to a few real estate agents about a possible short sale, but that is just like filing for a foreclosure,” she said, referring to a sale when a property is sold for less than the balance on the mortgage. “It stays on your credit record for the same amount of time and affects your credit very harshly — he could lose his rank.”

Because they bought their home in 2007, the couple would not be helped by the provisions in the stimulus measure.

The Diazes, meanwhile, watched the stimulus debate with deep interest and are hopeful the new program will help them. They spent Presidents’ Day weekend in Northern Virginia, looking at homes in Lorton and Woodbridge, as well as some Alexandria apartments.

“We are going to be looking at everything, just about everything, just because we are not sure,” Stephanie Diaz said. She said that once they are certain they are covered by the new plan, they will immediately put their house up for sale.

Source: Alejandro Lazo, Washington Post





Stimulus Aid to Help US Military Families During Housing Crisis

25 02 2009


The orders came while Navy Lt. Adam Diaz was winding down a one-year stint in Baghdad: Report to the Navy Annex in Arlington for a new assignment in April. — Given the military lifestyle, the prospect of a move came as no surprise to Diaz, 31, who has spent his adult life in the Navy. The shock came when he spoke with his wife, Stephanie Diaz, about the value of the Jacksonville, Fla., home they bought in June 2006, near the height of the housing bubble. — “Hey, by the way,” she recalls telling him. “The house has been valued for about 50 grand less than when we bought it.”

The housing crisis is hitting military families particularly hard, according to real estate agents and service member advocacy groups. Many who bought during the boom and must now relocate because of fresh orders are faced with selling their homes at a big loss. They are finding few buyers, or even renters, particularly in the hardest-hit markets. That is leaving some families facing options including renting at a loss, separation from their loved ones or, in some cases, foreclosure.

The issue has caught the attention of Congress, which included language in the economic stimulus package to compensate service members who sell their home at a loss or have been foreclosed upon because they were forced to move after a base closure, reassignment or a combat wound required them to be relocated near a health facility. The program also covers surviving spouses of those killed in combat.

Under the new provision, the government will cover 95 percent of a loss if a service member is forced to sell. The government can also choose to acquire the title of a home by paying off the balance of a service member’s mortgage or paying the owner up to 90 percent of the home’s previous value. No dollar ceiling has been set.

The $555 million undertaking expands the Defense Department’s Homeowners Assistance Program, which helps military and federal personnel whose homes have lost value because of a base closure. The new measure would likely help the Diazes, and would expand the homeowner assistance program to as many as 17,000 claims, according to the office of Sen. Tim Johnson (D-S.D.), who sponsored the measure.

The program does not cover all military members facing a loss because of a home sale.

In an attempt to limit the number of claims, the program applies only to a service member’s primary residence, and only to homes purchased before July 1, 2006, roughly the time the market began its free-fall. The Army Corps of Engineers said it has not determined what proportion of families will be eligible.

The prospect of foreclosure is particularly daunting for career service members, as credit checks are required to gain security clearances. The increased financial stress comes at a time when many active service members have been deployed to Afghanistan and Iraq, military advocates said.

“We have an all-volunteer force, and we are asking them to deploy overseas to fight the global war on terror,” said Michael Hayden, deputy director of government relations for the Military Officers Association of America, one of the largest military advocacy groups in the country. “And yet we are also in the midst of all this crisis, and the one thing we shouldn’t have to burden our service members with is trying to manage their mortgages.”

That argument resonated with legislators who sought to help people such as the Diazes, who thought that buying their four-bedroom, two-bathroom house in a new Jacksonville subdivision for $252,000 made sense. With the real estate market booming, Diaz figured they would at least be able to break even when they moved.

Today the home is worth about $50,000 less, according to information the couple found on home valuation Web site Zillow.com. A nearly identical house across the street sold for about $185,000, the couple said. They still owe about $217,000 on their mortgage, so selling now would mean taking a loss. Renting would probably leave them $400 to $500 short of covering their monthly mortgage payments.

During the years of easy credit, use of the Department of Veterans Affairs’ guaranteed home loan program fell considerably. Mike Frueh, an assistant director of the program, said higher-risk products such as adjustable-rate mortgages and no-down-payment loans became popular with military members.

Thus the origination of government-backed mortgages for veterans and active-duty members plummeted 73 percent from fiscal year 2003 to 2007, before ticking up again in 2008. During those housing boom years, the VA program offered fixed rates for 30 years and did not change its underwriting practices, which required financial evaluations and credit checks, Frueh said.

Last fall, new legislation allowed service members who were struggling with subprime loans or other types of mortgages to refinance into a VA loan.

R. Joe Gladden, a retired Navy captain and Gainesville real estate agent who caters to military clients, said subprime or other high-risk loans were not necessarily the problem for military members. Gladden and Susan Wallace, a Chantilly mortgage broker who works with him, said generally military families make good clients because they maintain excellent credit and are decisive when it comes time to buy.

Wallace said that many of her military clients asked for adjustable-rate mortgages and no-down-payment loans because their investment was often intended to be temporary. “If you were a military person and moved to the D.C. area, but you are moving again in three to five years, it made sense,” Wallace said.

Both now are inundated with calls and e-mails with tales of woe from families who are stuck in homes that have fallen in value. On his business Web site, Gladden has sponsored a forum for people to post such stories.

One who did was 30-year-old Christina Messer of Arlington. Her husband is stationed at Fort Myer as an honor guard. The couple bought a $438,000 condominium in a new low-rise complex in Arlington in the summer of 2007. They used a no-money-down loan, with interest-only payments for the first five years. They anticipated moving in a few years, and thus saw no point in paying down the balance, said Messer, who spoke on the condition that she be identified by her maiden name so as not to affect her husband’s career.

The problem now is that they cannot sell the home for the value of the mortgage, nor can they find a renter. Messer’s husband has orders to relocate to Texas in April. She fears they will face foreclosure or bankruptcy.

“We are talking to a few real estate agents about a possible short sale, but that is just like filing for a foreclosure,” she said, referring to a sale when a property is sold for less than the balance on the mortgage. “It stays on your credit record for the same amount of time and affects your credit very harshly — he could lose his rank.”

Because they bought their home in 2007, the couple would not be helped by the provisions in the stimulus measure.

The Diazes, meanwhile, watched the stimulus debate with deep interest and are hopeful the new program will help them. They spent Presidents’ Day weekend in Northern Virginia, looking at homes in Lorton and Woodbridge, as well as some Alexandria apartments.

“We are going to be looking at everything, just about everything, just because we are not sure,” Stephanie Diaz said. She said that once they are certain they are covered by the new plan, they will immediately put their house up for sale.

Source: Alejandro Lazo, Washington Post





The 2009 Economic Stimulus Plan Benefits Home Owners and Buyers

20 02 2009

I’ve been getting a lot of phone calls this week about the new tax credit. With the new economic stimulus bill, first-time homebuyers can claim a credit worth $8,000 – or 10% of the home’s value, whichever is less – on their 2008 or 2009 taxes if they buy before December 2009.

A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill – the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns – was less than that amount. But there has been a lot of confusion over this provision.

CNNMoney.com posted this on their site:

Q: I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?

The short answer? Yes, Billings would get back the $8,000 plus what he’d overpaid. The long answer? It depends. Here are three scenarios:

Scenario 1: Your final tax liability is normally $6,000. You’ve had taxes withheld from every paycheck and at the end of the year you’ve paid Uncle Sam $6,000. Since you’ve already paid him all you owe, you get the entire $8,000 tax credit as a refund check.

Scenario 2: Your final tax liability is $6,000, but you’ve overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.

Scenario 3: Your final tax liability is $6,000, but you’ve underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as “first time” buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Applying for the credit will be easy – or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.

EXECUTIVE SUMMARY

There are four primary sections of the 2009 economic stimulus plan that could be very beneficial if you own or are buying a home.

1. Expansion of First-time Home Buyer Tax Credit

The tax credit available to first time home buyers was increased from $7,500 to $8,000 for homes purchased between January 1, 2009, and December 1, 2009. Also, the credit no longer needs to be paid back as long as you live in the home without selling it for at least 3 years. If you bought the home in 2008, the credit remains $7,500, and it still needs to be paid back over a 15 year time frame beginning in 2011 when you file your 2010 returns.

The $8,000.00 credit is available to those buyers who used MRB or BOND Programs. The income limitations remain the same ($75,000 for single tax payers claiming the full credit and $150,000 for married tax payers). First-time home buyers who owe less than $8,000 in taxes for the year are still eligible for the full $8,000 credit when they file their tax returns. In that case, the IRS will write you a check for the difference between $8,000 and your actual tax bill. In fact, the credit can be claimed on your 2008 tax returns that you file by April 15, 2009, even if you buy the home in 2009.

2. Expansion of Home Improvement Tax Credit

The tax credit for making energy efficient home improvements is now 30% of the cost of the improvements up to a maximum of $1,500. This means that if the improvements cost you $4,500, you would receive a tax refund of $1,500 when you file your tax returns. Eligible improvements include energy efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners and water heaters.

3. Higher Reverse Mortgage Loan Limits

The loan limits for FHA-insured reverse mortgages have been increased to $625,500 across the entire country – not just the higher cost areas. The previous limit was $417,000 across the country. This is especially important because the FHA program is virtually the only game in town as private and jumbo reverse mortgage programs have nearly all evaporated.

This coincides with another little-known change in the reverse mortgage arena: the availability of reverse mortgages on home purchase transactions. This is a fantastic opportunity for senior citizens to buy a new home and live mortgage payment-free without having to wait for their old home to sell. Seniors could also use this strategy to buy a new home and turn the old home into a rental or otherwise wait for market conditions to improve before trying to sell the old home.

4. The 2008 Loan Limits Restored

The economic stimulus plan restores the 2008 FHA loan limits. Keep in mind that the market in Jacksonville doesn’t carry a loan limit of $729,750 and we are still at $417,000 for Conventional and $304,750 for FHA loans.

I am providing this information to you as a real estate professional. I am not an investment, tax, or legal advisor, and this information does not constitute legal, tax or investment advice. I recommend that you consult with properly licensed legal, tax and investment advisors for specific advice pertaining to your individual situation.

Download First-Time Homebuyer Tax Credit Comparison Chart





Homeowner Affordability and Stability Plan

20 02 2009

The White House just released this information yesterday:

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.

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:

• Refinancing for up to 4 to 5 million responsible homeowners to make their mortgages more affordable.

• A $75 billion homeowner stability initiative to reach up to 3 to 4 million at-risk homeowners.

• Supporting low mortgage rates strengthening confidence in Fannie Mae and Freddie Mac.

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.

Download 2009 White House Housing Fact Sheet

Download 2009 White House Fact Sheet Housing Examples

Download 2009 White House Homeowner Affordability and Stability Plan Questions and Answers





The 2009 Economic Stimulus Plan Benefits Home Owners and Buyers

19 02 2009

I’ve been getting a lot of phone calls this week about the new tax credit. With the new economic stimulus bill, first-time homebuyers can claim a credit worth $8,000 – or 10% of the home’s value, whichever is less – on their 2008 or 2009 taxes if they buy before December 2009.

A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill – the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns – was less than that amount. But there has been a lot of confusion over this provision.

CNNMoney.com posted this on their site:

Q: I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?

The short answer? Yes, Billings would get back the $8,000 plus what he’d overpaid. The long answer? It depends. Here are three scenarios:

Scenario 1: Your final tax liability is normally $6,000. You’ve had taxes withheld from every paycheck and at the end of the year you’ve paid Uncle Sam $6,000. Since you’ve already paid him all you owe, you get the entire $8,000 tax credit as a refund check.

Scenario 2: Your final tax liability is $6,000, but you’ve overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.

Scenario 3: Your final tax liability is $6,000, but you’ve underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as “first time” buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Applying for the credit will be easy – or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.

EXECUTIVE SUMMARY

There are four primary sections of the 2009 economic stimulus plan that could be very beneficial if you own or are buying a home.

1. Expansion of First-time Home Buyer Tax Credit

The tax credit available to first time home buyers was increased from $7,500 to $8,000 for homes purchased between January 1, 2009, and December 1, 2009. Also, the credit no longer needs to be paid back as long as you live in the home without selling it for at least 3 years. If you bought the home in 2008, the credit remains $7,500, and it still needs to be paid back over a 15 year time frame beginning in 2011 when you file your 2010 returns.

The $8,000.00 credit is available to those buyers who used MRB or BOND Programs. The income limitations remain the same ($75,000 for single tax payers claiming the full credit and $150,000 for married tax payers). First-time home buyers who owe less than $8,000 in taxes for the year are still eligible for the full $8,000 credit when they file their tax returns. In that case, the IRS will write you a check for the difference between $8,000 and your actual tax bill. In fact, the credit can be claimed on your 2008 tax returns that you file by April 15, 2009, even if you buy the home in 2009.

2. Expansion of Home Improvement Tax Credit

The tax credit for making energy efficient home improvements is now 30% of the cost of the improvements up to a maximum of $1,500. This means that if the improvements cost you $4,500, you would receive a tax refund of $1,500 when you file your tax returns. Eligible improvements include energy efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners and water heaters.

3. Higher Reverse Mortgage Loan Limits

The loan limits for FHA-insured reverse mortgages have been increased to $625,500 across the entire country – not just the higher cost areas. The previous limit was $417,000 across the country. This is especially important because the FHA program is virtually the only game in town as private and jumbo reverse mortgage programs have nearly all evaporated.

This coincides with another little-known change in the reverse mortgage arena: the availability of reverse mortgages on home purchase transactions. This is a fantastic opportunity for senior citizens to buy a new home and live mortgage payment-free without having to wait for their old home to sell. Seniors could also use this strategy to buy a new home and turn the old home into a rental or otherwise wait for market conditions to improve before trying to sell the old home.

4. The 2008 Loan Limits Restored

The economic stimulus plan restores the 2008 FHA loan limits. Keep in mind that the market in Jacksonville doesn’t carry a loan limit of $729,750 and we are still at $417,000 for Conventional and $304,750 for FHA loans.

I am providing this information to you as a real estate professional. I am not an investment, tax, or legal advisor, and this information does not constitute legal, tax or investment advice. I recommend that you consult with properly licensed legal, tax and investment advisors for specific advice pertaining to your individual situation.

Download First-Time Homebuyer Tax Credit Comparison Chart





Homeowner Affordability and Stability Plan

19 02 2009

The White House just released this information yesterday:

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.

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:

• Refinancing for up to 4 to 5 million responsible homeowners to make their mortgages more affordable.

• A $75 billion homeowner stability initiative to reach up to 3 to 4 million at-risk homeowners.

• Supporting low mortgage rates strengthening confidence in Fannie Mae and Freddie Mac.

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 l
enders 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.

Download 2009 White House Housing Fact Sheet

Download 2009 White House Fact Sheet Housing Examples

Download 2009 White House Homeowner Affordability and Stability Plan Questions and Answers








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