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Home Buyer Tax Credit Gets New Life

Plan will remain until the end of April 2010.

Senate negotiators reached a tentative deal to extend a tax credit for first-time home buyers, but its passage remains uncertain.

The agreement would extend the existing credit for first-time home buyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years.

The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real-estate market a bigger boost while preventing real-estate investors from benefiting.

Many property experts have cited the credit as a reason for signs of recovery in the housing market in recent months. But that recovery was somewhat undercut by the September drop in new-home sales reported Wednesday.

The credit would be extended from its current expiration date of Dec. 1 to all contracts entered into by April 30, and closed before July 1. It is expected that income limits on people claiming the credit would be increased to $125,000 for singles and $250,000 for couples, from the current $75,000 and $150,000, aides said. The credit phases out for people making more than those amounts.

While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor. Senate Majority Leader Harry Reid (D., Nev.) hopes to add it to a bill currently on the Senate floor to extend federal unemployment insurance benefits. But agreement on that hasn’t been finalized.

While Senate Republicans are likely to support the measure, House Democrats have raised concerns that it carries a high cost to the government. The Internal Revenue Service is examining the program for alleged abuse.

Original article by Corey Boles and John D. McKinnon


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Home Buyer Tax Credit – Final Deal?

For those of you keeping score on the first time home buyer tax credit extension, here is the latest:

• The tax credit would be $8,000 for first-time home buyers and $6,500 for move-up buyers (from December 1, 2009 to April 30, 2010).

• Move-up buyers will be eligible, so long as the home they are leaving has been used as their principal residence for 5 years or more.

• The tax credit would sunset on April 30, 2010. However, there would a binding contract rule that will permit those with contracts as of April 30th to qualify for the credit so long as they complete the transaction within 60 days.

• The income limits for both first-time home buyers and move-up buyers would be $125,000 for single return and $225,000 joint return.

• Cost of the home may not exceed $800,000 to be eligible.

• For purchases made in 2010, taxpayers would be able to claim the credit on their 2009 income tax return. Home buyers would not have to repay the credit, provided the home remains their principal residence for 36 months after the purchase date.

• The amendment includes a military waiver provision, meaning the recapture provision would not apply in the case of a member of the Armed Forces, military intelligence or Foreign Service who is on qualified official extended duty. In addition, members of the military who have been deployed overseas for 90 days or more in 2008 or 2009 would have until April 30, 2011, to claim the home buyer tax credit.

• The amendment also includes anti-fraud language that provides math authority to the IRS to do greater oversight during the processing of the return rather than waiting for an audit situation. The amendment requires the taxpayer claiming the credit to be 18 or older as well as requiring a HUD-1 settlement statement to be attached when claiming the credit.

Original article by Diana Olick (CNBC Real Estate Reporter).

Source: Press Room US Dept of Treasury – Washington DC

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Hump Wednesday Funnies for Halloween

More scary real estate halloween comics posted by Erin Muller (ActiveRain).

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What exactly is an FHA loan and how does it work?

FHA Approves a Guarantee
The Federal Housing Administration (FHA) is not a mortgage lender but instead guarantees mortgage loans, making the borrower much more likely to get approved for the loan through a lender. FHA guarantees mortgage loans for borrowers who may not be able to get approved for a loan otherwise because of low income, low down payment or less-than-perfect credit. An FHA guarantee means that lenders will receive funds from FHA if the borrower defaults on the loan, and this makes the borrower more appealing to lenders who normally might not approve the borrower for a loan.

The Borrower Applies for a Loan
Not every mortgage lender accepts FHA loans. Since lenders aren’t required to issue FHA-guaranteed mortgages, some lenders choose to not offer mortgages to applicants with FHA guarantees. FHA mortgages have extensive regulations attached to them, making some lenders apprehensive to offer them. Borrowers must apply for mortgage loans and meet the credit and income qualifications set forth by the lender for FHA loans, although these standards are usually less stringent than for traditional mortgages. Borrowers must attain the guarantee before applying for the loan if they want to have an FHA loan.

The Borrower Obtains the Mortgage
After the FHA approves the guarantee and the lender approves the loan application, the borrower closes on the mortgage and owns the home. Whether the lender retains the mortgage for servicing, or packages and sells it to another servicer, is up to the regulations of the lender. Borrowers can turn to FHA for counseling and assistance if they fall behind on their payments or have problems with the loan, but the lender or servicer remains the main point of contact for the mortgage. It is possible to refinance an FHA loan and it is also possible to refinance a traditional mortgage into an FHA-guaranteed loan. If the borrower defaults on the loan and the home is foreclosed, FHA pays the balance to the lender and the borrower owes the remaining deficit to FHA.

Let us look at the important characteristics of FHA Loans.

• FHA loans are especially positioned for first time home buyers since they come with the facility of a low down payment. They encourage low income group to purchase their own homes since FHA loans involves a significantly lower down payment compared to normal home loans.
• FHA Loans would consider the administrative and processing charges of a home loan to calculate the amount of FHA loan that an individual would be eligible for.
• FHA Loans help you save on significant interest costs towards servicing of home loans since these are cheaper to conventional loans. Hence your monthly outgo towards interest on home loan is reduced and you are comfortable managing and servicing he loan.
• The lending institutes are more than happy to process and disburse loans since they are backed by the guarantee of FHA.  An FHA Loan is your best bet in case you do not have a good credit score.
• FHA Loans are not only available for a home purchase but also towards renovation and home improvement

Sources: Tamsen Butler and Lokesh Nagpal.


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Big Market Rebound due to First Time Home Buyers?

Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 9.4 percent to a seasonally adjusted annual rate1 of 5.57 million units in September from a level of 5.09 million in August, and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.

Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.

Lawrence Yun, NAR chief economist, said favorable conditions matched with a tax credit are boosting home sales. “Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”

Even with the improvement, Yun said the market is underperforming. “Despite spectacular gains in the stock market, principally from the financial sector recovery, most of the 75 million home owning families have more wealth tied to their homes. Home values could soon turn consistently positive and help the broad base of middle-class families, but we are not there yet,” he said. “We’re getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy. Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history.”

Early information from a large annual consumer study to be released November 13, the 2009 National Association of Realtors® Profile of Home Buyers and Sellers, shows that first-time home buyers accounted for more than 45 percent of home sales during the past year. A separate practitioner survey shows that distressed homes accounted for 29 percent of transactions in September.

Original article by Walter Molony.


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4 Steps: How to stay up when…

Keeping a positive perspective can mean the difference between your business’ success and failure.

When business is slow, the potential consequences are frightening and vivid for entrepreneurs. Will you bring in enough this month to make payroll and cover the overhead? Will your business be able to pay you this month? On the upside, entrepreneurs don’t have to wait and wonder if they’ll be the next to get laid off. Rather, they have the ability and responsibility to go out and make business happen.

Whether you’re a home-based entrepreneur who is hearing no more frequently these days or the owner of a company employing thousands, by keeping a positive perspective, you’ll be more productive—and more successful. And if you’re an employee, maintaining a positive, entrepreneurial mindset will not only make you more effective and but also more valuable to your company.


How can you stay up when business is tough?

It’s largely a matter of focusing on what you can control—starting with your attitude.

In The Likeability Factor, Tim Sanders points out that those with a high “L-factor,” those who tend to smile at and engage others, are often more successful at work. They’re more likely to be promoted and less likely to be laid off than their grouchy counterparts.

Zig Ziglar puts it this way in Ziglar on Selling: “I don’t believe positive thinking will let you do ‘anything,’ but I know that positive thinking will let you do everything better than negative thinking will. Positive thinking will let you use the ability you have, while negative thinking prevents you from fully using your ability.”

So, start with attitude, and then use your attitude to focus on the actions you can take. It may require more effort to build and maintain momentum in the current economy, but as things continue to turn around, you’ll have the edge over the competition.


Here are 4 things to consider applying to your business:

* Focus on income-producing activities. When business is slow, reorganizing your desk drawers, sorting e-mail or other mind-numbing tasks can fill the hours. But a clean desk won’t pay the bills—unless you’re a professional organizer and it’s someone else’s office. There are usually only a few things in any business that really generate income. Make a list of your income-producing activities. Whether business is booming or times are tight, those activities should always be at the top of your—and your employees’—daily to-do list.

* Make your clients’ needs the priority. If you approach prospective clients with the underlying attitude for “I really need this sale,” they’ll feel it. They’ll perceive that your main objective isn’t to serve them, but to make money off of them. But, when they get the vibe that you’re going to do right by them and serve them with integrity, they’ll know they can trust you. In turn, they’ll be much more likely to give you their business.

* Don’t stop when you hit your yes quota. In Go for No, authors Richard Fenton and Andrea Waltz point out that when people hit or come close to reaching their goal, they start to slow down. Rather than striving for a certain number of yeses, they suggest striving for a high number of nos. In doing so, you’ll likely keep going, which will result in more clients and more sales.

* Work to create a positive environment—even if you’re not the boss. In Thank God It’s Monday, author Roxanne Emmerich notes that leadership is not a position; it’s an attitude. Regardless of your title, you can make a positive impact on your company. Her suggestion: List three things you would do if you were in charge. “Set about doing all you can to change those things—enrolling others to your ideas, getting necessary approvals, lining up a budget or coaching others around you to go ‘get it.’ And watch the magic happen.”


Original article by Erin Casey.


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Home Buyer Tax Credit extension – What is the decision?

President Obama’s housing secretary tells a Senate committee that the administration wants to see cost data before backing any extension of the credit.

While momentum is building on Capitol Hill to extend the $8,000 first-time homebuyer credit, President Obama’s housing secretary said the administration has not decided whether to support its expansion.

Housing Secretary Shaun Donovan told the Senate Banking Committee that the administration wanted more time to better assess the cost of the credit, which expires on Nov. 30.

“Within a few weeks we’ll have sufficient data to get to a conclusion on this,” Donovan said. “It’s a question of understanding more fully the costs to the taxpayer.”

He said there is “clear evidence” the credit has had some positive benefits and that its expiration could have “some negative implications” for the housing market.

At the same time, Donovan said that the end of the credit would not be “catastrophic” because of other actions the government is taking to support the flagging housing market. Interest rates are being kept low and the Federal Housing Administration is playing a more prominent role in lending to homebuyers.

But lawmakers pushing to extend the credit are concerned the housing market is going “to die a sudden death” after Nov. 30, as Sen. Johnny Isakson, R-Ga., said Tuesday.

Isakson and other supporters believe that keeping the credit in place could further boost home sales, stabilize housing prices and generate jobs.

Isakson and Senate Banking Chairman Christopher Dodd, D-Conn., have co-sponsored an amendment that would extend the credit until the end of June 2010 and be available to single filers making up to $150,000 and joint filers making up to $300,000. Currently the credit is limited to homebuyers who haven’t owned a home for the past three years, who make half those amounts and who close on their purchases by Nov. 30.

Whether or not the credit is extended, forecasters are expecting further price declines in many markets due to rising foreclosure and unemployment rates in 2010. Supporters of extending the credit believe it could help mute those price declines.

Opponents say extending and expanding the credit would be a waste of money and only temporarily stave off further price declines.

When asked whether he thought the credit was spurring confidence or artificially inflating prices, Donovan told lawmakers he believes: “Given the decline we’ve been through, the likelihood that the credit is inflating the market beyond where it would be is very low.”

Source: CNNMoney.com


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What is Loss Mitigation?

Loss mitigation comes about when a homeowner is in danger of losing his property to foreclosure. When this happens, the bank or financial institute with whom the homeowner has the loan will sometimes bring in loss mitigation in order to modify the loan in such a way that both parties can continue working together and avoid foreclosure. Lending institutions are typically more willing to engage in loss mitigation the sooner the homeowner lets them know he is in danger of being unable to pay the mortgage.

Function
In engaging in loss mitigation, the lender is attempting to salvage the terms of the loan, in the hope that the homeowner will be able to return to the original terms of the deal in the near future. In the meantime, the loan may be modified in a variety of ways, including lowering the interest rates on the loan, reducing the balance or forgiving past fees and defaults.

Types
Loss mitigation does not always include simple readjustments of the terms of the loan agreement. Sometimes the lender and homeowner will agree to a short sale. This means the lender will accept a full payoff of the loan, even though it is not what the balance of the loan is truly worth. This way, the homeowner can turn around and sell the home for its full value. The bank may also engage in short refinance, where they knock a few thousand dollars off the balance so the homeowner can refinance with another institution.

Benefits
Loss mitigation typically benefits both the homeowner and the lending institution. The homeowner is able to avoid foreclosure and possibly bankruptcy, sparing himself an enormous black mark on his credit, as well as putting him in a difficult situation with his homestead. It benefits the lender by reducing the hit they would take if they went through with foreclosure, which can put a great deal of financial stress on a lending institution.

History
Loss mitigation is nothing new, but it’s only since 2006 that the field has experienced such growth. This, of course, is a product of the housing market decline, which saw many families being forced to the point of foreclosure when they lost their jobs, or simply because they misunderstood the terms of the original (often predatory) loan. Before that time, loss mitigation was used sparingly, and accounted for only a small section of a lending institution’s total workforce department.

Considerations
Loss mitigation is preferable to foreclosure (especially for the homeowner) in almost every situation, particularly in the housing crisis. With homes declining in value, and an uncertain future when it comes to a rebounding market, homeowners stand to lose tremendous amounts of equity in their mortgages. Without this equity, straight refinance is difficult to achieve, and negative equity can result. When this happens, we will see (and have seen) a situation where homeowners are willing to skip loss mitigation and allow the home to go into foreclosure.

Original article by Shawn Bryan.


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