Here is some good information on the new home buyer tax credit.

Here is some good information on the new home buyer tax credit.

 

First Time Home Buyer Tax Credit

·         A First Time Home Buyer is defined as someone who has not owned a Primary Residence in the past 3 years

·         Once you marry a homeowner you automatically become a homeowner regardless of who is on the title and the loan (IRS rules, not my rules)

·         The buyer must have an accepted purchase contract by April 30, 2010 and fund/record by June 30, 2010 to qualify.

·         In Arizona, there is no way to use this money upfront for down payment or closing costs unfortunately

·         The Tax Credit is the lesser of 10% of the purchase price or $8000

·         The Tax Credit is “real money” that you get as part of your tax refund

·         This credit does not need to be repaid if you live in the home for 3 years

·         The credit begins to “phase out” for Singles with income above $125k/year and Married above $250k/year

·         The max purchase price of the home is $800k.

·         If Mom and Dad (that own a home) Co-Sign for their child to help him qualify, the child can still take the Tax Credit.  Perfect for an FHA loan!

·         This Tax Credit is a Tax Related issue and therefore you should consult a tax professional for advice.  Two good websites for info are www.federalhousingtaxcredit.com and http://www.irs.gov/newsroom/article/0,,id=206294,00.html  (IRS site still needs to be updated for the move-up buyer tax credit).

·         To claim the credit the buyer must include IRS tax form 5405 along with a Final Stamped HUD-1 Settlement Statement issued by the title company after a successful close.

 

”Move-Up Buyer” Tax Credit

·         A “Move-up Buyer” is defined as a home owner who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date.

·         The buyer must have an accepted purchase contract by April 30, 2010 and fund/record by June 30, 2010 to qualify.

·         In Arizona, there is no way to use this money upfront for down payment or closing costs unfortunately

·         The Tax Credit is the lesser of 10% of the purchase price or $6500

·         The Tax Credit is “real money” that you get as part of your tax refund

·         This credit does not need to be repaid if you live in the home for 3 years

·         The credit begins to “phase out” for Singles with income above $125k/year and Married above $250k/year

·         The max purchase price of the home is $800k.

·         This Tax Credit is a Tax Related issue and therefore you should consult a tax professional for advice.  Two good websites for info are www.federalhousingtaxcredit.com and http://www.irs.gov/newsroom/article/0,,id=206294,00.html  (IRS site still needs to be updated for the move-up buyer tax credit).

·         To claim the credit the buyer must include IRS tax form 5405 along with a Final Stamped HUD-1 Settlement Statement issued by the title company after a successful close.

·         Loan underwriting guidelines still state that a move-up buyer needs to qualify with both mortgage payments unless the primary residence that the borrower is vacating has 25%/30% (FHA/Conventional) equity along with a rental contract and proof of security deposit. 

 

 

Take Care,

 

YOU COULD BE A JAILBIRD IF...

I was sent an email the other day with the following. Please read all the way through. This in not scare tacticts just scary.

 

JAIL FOR NO INSURANCE UNDER PELOSI BILL

The nonpartisan Joint Committee on Taxation reported that the House version of the health care bill specifies that those who don't buy health insurance and do not pay the fine of about 2.5% of their income for failing to do so can face a penalty of up to five years in prison!

The bill describes the penalties as follows:

* Section 7203 - misdemeanor willful failure to pay is punishable by a fine of up to $25,000 and/or imprisonment of up to one year.

* Section 7201 - felony willful evasion is punishable by a fine of up to $250,000 and/or imprisonment of up to five years." [page 3]

That anyone should face prison for not buying health insurance is simply incredible.

And how much will the stay-out-of-jail insurance cost?  The Joint Committee noted that "according to a recent analysis by the Congressional Budget Office, the lowest-cost family non-group plan under HR 3862 (the Pelosi bill) would cost $15,000 by 2016."

Obama's bill only provides subsidies to help pay this enormous sum after families making about $45,000 have paid 8% of their income for insurance and after those earning a household income of about $65,000 have kicked in 12%. 

The Joint Committee on Taxation noted that while the Senate Finance Committee version of the bill did not include criminal penalties, "The House Democrats' bill, however, contains no similar language protecting American citizens from civil and criminal tax penalties that could include a $250,000 fine and five years in jail."

Remember that simply buying catastrophic insurance, which may be all the young uninsured family needs, does not constitute having adequate insurance under the Obama bill.  It has to be total, all inclusive insurance for one to avoid the penalties in the legislation.  That is because Obama wants to use these premiums from the currently uninsured to subsidize his program.

So Ms. Pelosi is requiring Americans to pay these steep premiums, or a fine of 2.5% of their income for not doing so, or, potentially, go to prison!

Anyone who is familiar with the U.S. prison system can attest to the large number of people incarcerated for similar white collar offenses.  That the House bill would treat failure to carry health insurance or pay the fine as tax evasion or willful nonpayment is amazing!

And where is the constitutional basis for requiring everyone to buy insurance?  It is OK for a state to make drivers pay for automobile insurance.  Driving is not a right, it is a privilege, and the state may regulate it by demanding insurance.  Banks can require homeowners to buy insurance as a condition of their lending.  But how does the federal government get the right to require a family to buy health insurance or face a civil penalty and, failing that, to face either a criminal fine or jail?

The tough penalties in the House bill are designed to keep insurance companies from opposing the bill.  It was the relaxation of these penalties in the Senate Finance Committee version of the legislation that led the companies to reverse field and come out in opposition to the legislation.  The insurance companies want to see their coffers swell when tens of millions of new customers are required to buy insurance.  The more draconian the penalties for failing to pay them large sums of money to pad their bottom lines, the better.

The more you read this bill, the worse it gets.

Man Stroke Woman - Estate Agent

I know this is funny, but what sales skills...nice.

Tax Credit

By COREY BOLES and JOHN D. MCKINNON

WASHINGTON -- 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.

=

Time to Read Between the Lines

 

 

Last Week in Review

 

 

"THE DEVIL IS IN THE DETAILS..." Or so the famous saying goes. And when it comes to really understanding the various reports and events unfolding in the economy, it's important to take a look at the details - not just the headlines. Here's what you need to know. On the inflation front, the Producer Price Index, which measures wholesale inflation, unexpectedly fell due to a drop in energy prices. While that seems like good news on the surface, keep in mind that next month's number could climb higher again, as oil and natural gas have both been on a tear higher lately. In housing news, Housing Starts and Building Permits both came in a bit below expectations, but this may be a sign that builders are exercising some caution - particularly in the face of the $8,000 tax credit for first time homebuyers that is presently set to expire on November 30th. Existing Home Sales came in better than expected - and a whopping 45% of those homes were sold to first time homebuyers - rushing to move in on that credit. Recent studies have shown that many who qualify for this tax credit aren't even aware of it...so please let me know if you or someone you know needs more information - the clock is ticking! Additionally, the level of existing homes inventory shrunk to a 7.8 month supply, down from a recent high of 10.1 months in April. ----------------------- Chart: Existing Home Sales (Supply in Months) In other news, 3rd quarter earnings season continues, where companies report their status as of the end of September. While many companies are beating expectations, it's important to realize that many of those companies achieved better earnings by cost cutting and layoffs, not from increased sales. This is a big disconnect between Wall Street and "Main Street". Stocks are rocketing higher based on these "positive" reports, but the cost cutting and job cutting measures can only go so far...you can't simultaneously grow the ranks of unemployment - and then grow your business, hoping for increased sales to those same people who are without jobs. Last week's Jobless Claims numbers seem to confirm this as Initial Jobless Claims rose more than expected. In addition, the number of individuals continuing to receive unemployment benefits fell to the lowest level since March, but this is likely the result of people's unemployment benefits expiring, without them having been able to find jobs. Also worth noting is the news that ratings agency Moody's lead analyst, Steven Hess, said that the US needs to cut its deficit or it could lose its "AAA" rating in the next 3 to 4 years, which we have maintained since 1917! Think of all we've been through - two World Wars, the Depression, three Wall Street collapses and major terrorist attacks...yet our credit quality has maintained that AAA rating, allowing us to issue debt at the most favorable rates. Hess went on to say that if the US doesn't "get the deficit down in the next 3-4 years to a sustainable level, then the rating will be in jeopardy." And just like on a mortgage when the credit rating gets reduced, interest rates move higher. This will definitely be something we'll keep an eye on in the months ahead. After all the week's action, Bonds and home loan rates ended the week slightly worse than where they began. AS THE PRESIDENT HAS DECLARED H1N1 - "SWINE FLU" - TO BE A NATIONAL EMERGENCY - GETTING THE FACTS IS MORE IMPORTANT THAN EVER. DO YOU KNOW HOW TO TELL WHAT'S JUST A COLD...AND WHAT IS ACTUALLY SWINE FLU? READ THIS WEEK'S MORTGAGE MARKET VIEW - AND PASS ON THE DETAILS TO YOUR FRIENDS AND COWORKERS.

 

Forecast for the Week

 

 

Another record sized round of Treasury auctions are on tap this week - and the massive amounts of supply that continue to flood the market can cause home loan rates to move higher, if there is ultimately not enough demand to sop up all the supply. Additionally, there are several economic reports which could be market movers. Tuesday brings both the Consumer Confidence and Durable Goods Reports, the latter of which gives us an update on consumer and business consumption and buying behavior via data on items that are non-disposable, such as cars, furniture, appliances, games, cameras, business equipment, etc. On Wednesday, there will be more news on the housing front with the New Home Sales Report, while Thursday brings another Initial Jobless Claims Report. Thursday also brings a read on the economy with the Gross Domestic Product (GDP) Report, which is the broadest measure of economic activity. And the week could end with a bang, as Friday brings the Fed's favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) Index, found within the Personal Income Report. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds held their ground for most of the week but ultimately were unable to remain above a key technical support level. I'll be watching closely to see what happens in the week ahead - and as always, reach out to me if you or others in your network need more information or questions answered...I'm here to help. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Oct 23, 2009)

 

The Mortgage Market View...

 

 

H1N1: Information is the Best Defense! Despite predictions from researchers at Purdue University that the H1N1 outbreak will peak this week, the reality is that it won't be going away any time soon. Let's not forget that the news is filled with shortages of the vaccine, as the number of H1N1 cases continues to surge across the country. And federal officials have warned that a second, larger outbreak could occur in early January. The reality is that the best way to stop the spread of H1N1 is to know the symptoms and to take steps to protect yourself-and others-from it. The following information can help. What are the symptoms of H1N1... and how are they different from the common cold? Symptom Cold H1N1 Flu Fever Fever is rare with a cold. Fever is usually present with the flu in up to 80% of all flu cases. A temperature of 100°F or higher for 3 to 4 days is associated with the flu. Coughing A hacking, productive (mucus- producing) cough is often present with a cold. A non-productive (non-mucus producing) cough is usually present with the flu (sometimes referred to as dry cough). Aches Slight body aches and pains can be part of a cold. Severe aches and pains are common with the flu. Stuffy Nose Stuffy nose is commonly present with a cold and typically resolves spontaneously within a week. Stuffy nose is not commonly present with the flu. Chills Chills are uncommon with a cold. 60% of people who have the flu experience chills. Tiredness Tiredness is fairly mild with a cold. Tiredness is moderate to severe with the flu. Sneezing Sneezing is commonly present with a cold. Sneezing is not common with the flu. Sudden Symptoms Cold symptoms tend to develop over a few days. The flu has a rapid onset within 3-6 hours. The flu hits hard and includes sudden symptoms like high fever, aches and pains. Headache A headache is fairly uncommon with a cold. A headache is very common with the flu, present in 80% of flu cases. Sore Throat Sore throat is commonly present with a cold. Sore throat is not commonly present with the flu. Chest Discomfort Chest discomfort is mild to moderate with a cold. Chest discomfort is often severe with the flu. If you think you have the H1N1 flu, you should take a few common-sense steps to protect your friends, family members, and coworkers. For instance, if you feel sick, stay home until you feel better and have gone at least 24 hours without relying on medicine to break your fever. In addition, wash your hands, linens, dishes, and so on thoroughly. And cover your mouth and nose with a tissue when you cough or sneeze--and then throw the tissue away immediately. Finally, if you have to share a small space with other people, consider wearing a facemask to help make sure you don't spread the flu to the people around you. Follow these steps and monitor your symptoms to help stop the spread of H1N1...and remain happy and healthy!

 

The Week's Economic Indicator Calendar

 

 

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of October 26 - October 30 Date ET Economic Report For Estimate Actual Prior Impact Tue. October 27 10:00 Consumer Confidence Oct 54.0   53.1 Moderate Wed. October 28 08:30 Durable Goods Orders Sept 0.7%   -2.4% Moderate Wed. October 28 10:00 New Home Sales Sept 440K   429K Moderate Wed. October 28 10:30 Crude Inventories 10/23 NA   1.31M Moderate Thu. October 29 08:30 Jobless Claims (Initial) 10/24 525K   531K Moderate Thu. October 29 08:30 Gross Domestic Product (GDP) Q3 3.1%   -0.7% Moderate Thu. October 29 08:30 GDP Chain Deflator Q3 1.3%   0.0% HIGH Fri. October 30 10:00 Consumer Sentiment Index (UoM) Oct 70.0   69.4 Moderate Fri. October 30 09:45 Chicago PMI Oct 48.5   46.1 HIGH Fri. October 30 08:30 Personal Consumption Expenditures and Core PCE YOY NA   1.3% HIGH Fri. October 30 08:30 Personal Consumption Expenditures and Core PCE Sept 0.2%   0.1% HIGH Fri. October 30 08:30 Personal Spending Sept -0.4%   1.3% Moderate Fri. October 30 08:30 Personal Income Sept 0.0%   0.2% Moderate Fri. October 30 10:00 Employment Cost Index (ECI) Q3 0.5%   0.4% HIGH

 

 

Is The FDIC Killing Short Sales? PLEASE READ-MICHAEL DOUGHERTY

Interesting perspective from someone who knows.

 

Is The FDIC Killing Short Sales?

As some of you already know, I blogged recently about being interviewed recently by our local NBC news affiliate. 

Basically, IndyMac Bank (now OneWest Bank), is holding one of my clients hostage, demanding a $75k promissory note, or they will proceed to foreclosure.  For the life of me, I couldn't figure out why they were doing this.  The BPO came in at the contract price of $275k, with a net to IndyMac of $241k.  What advantage could there possibly be for them to proceed to foreclosure?

Yesterday, I figured it out.  You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009.  Guess who the investors are behind OneWest?  George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire). 

Now, listen to the deal they got from the FDIC....

Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts).  They purchased all current HELOCS at 58% of Par Value!!!

Next, in order to "sweeten the pot", the FDIC stepped in and guaranteed the following:  For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss.  The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan.  Let's use my clients situation as an example:

Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200

OneWest pays $334,600 for the loan

We have an all cash offer of $241,000, net to OneWest.

So, let's do the math, shall we?  The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer.  In this case, $485,200-$241,000, or $244,200.  Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called "net loss".  So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).

Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360.  Remember, OneWest paid $334,600 for the loan.  So, OneWest puts $101,760 in their pocket, thanks to the FDIC.  Folks, that is over $100k of our hard-earned tax dollars!

So, you ask...Why does this program hurt short sales?  Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES!  The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure?  And we wonder why nobody can get a Loan Modification?  Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k?  And, to add injury to insult, they have held this loan for 6 months!  Not a bad ROI, huh?

What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE!  Imagine if they could make $100k, then get a deficiency judgement!  Talk about making some big bucks!

Can you say "GREED"?

The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC.  Some of them include:  Bank of America (go figure), CitiMortgage, Wells Fargo, etc. 

This entire agreement between the FDIC and OneWest can be found here, on the FDIC website.  It's all there, for the world to see!  They have it all layed out.  All of the formulas, worksheets, etc. 

Now, it's up to us to bring it to the attention of our elected officials and the media.  Enough is Enough!

UPDATE 9/18/09:  I JUST READ AN AWESOME ARTICLE ON THIS, THAT GOES INTO WAY MORE DETAIL THAN MY BLOG ABOVE.  TAKE THE TIME TO READ IT WHEN YOU GET A CHANCE! CLICK HERE TO READ IT.

Wait, it gets better...The FDIC just announced that it needs to start borrowing money from the U.S. Treasure in order to replenish it's deposit insurance fund (the same fund being used to pay all of these banks in the Loss Share Agreements).  Go Figure! 

Robert G. Hertzog

Phoenix Real Estate Consultant

Thanks Robert for sharing

 

Loads of Upgrades (556550)

Loads of Upgrades (556550)

Existing Home Sales Surge

There were few major surprises in the economic news this week, and little
change in the stock market. While there was a great deal of daily
volatility, mortgage rates ended the week nearly unchanged. A flood of
housing market data was released during the week, and most of it reflected
improvement in the sector. The biggest unexpected news came from the
September Existing Home Sales report, which jumped 9% from August to the
highest level since July 2007. Inventories of unsold existing homes dropped
sharply to a 7.8-month supply from a 9.3-month supply in August. This marked
the lowest inventory levels in two and one-half years. September Housing
Starts remained at depressed levels, which removes pressure on future
inventory levels. Building Permits, a leading indicator, also held at low
levels. In short, home sales improved, while inventory levels moved lower
with a relatively light supply of new homes in coming months. If there is a
note of caution, though, it's that much of the activity has been spurred by
exceptionally low mortgage rates and the first-time homebuyer tax credit,
and the future is uncertain on both fronts. The Fed is scaling back its
purchases of mortgage-backed securities, which might push mortgage rates
gradually higher, and lawmakers are currently debating whether to extend the
first-time homebuyer tax credit.
The Mortgage Bankers Association (MBA) also released its forecasts for this
year and next. According to the MBA projections, purchase originations will
decline slightly in 2009, but will then increase by 12% in 2010. Similarly,
the MBA forecasts that existing home sales will rise by 11% in 2010. The
chief economist of the MBA suggested that the timing of the economic
recovery and the level of mortgage rates are the biggest variables
influencing the results for 2010.

Also Notable:
* September Core PPI inflation rose at a tame 1.8% annual rate
* The Fed's Beige Book reported modest improvement in "many sectors" of the
economy
* The Treasury will auction a record $116 billion in 2-yr, 5-yr, and 7-yr
securities next week
* The Fed purchased $18 billion in agency MBS during the week ending 10/21

Average 30 yr fixed rate:
Last week:
+0.15%

This week:
+0.01%

Stocks (weekly):
Dow:
10,000
+50
NASDAQ:
2,160
+10

  
Week Ahead
The final week of October will be packed with important economic data. The
most highly anticipated will be Thursday's release of third quarter Gross
Domestic Product (GDP), the broadest measure of economic activity. Durable
Orders, another major indicator of economic activity, will come out on
Tuesday. The New Home Sales report is scheduled for Wednesday. Chicago PMI,
Personal Income, and Core PCE inflation will be released on Friday. Consumer
Confidence and Consumer Sentiment will round out the busy week. In addition,
the Treasury will auction a record $116 billion in 2-yr, 5-yr, and 7-yr
securities on Tuesday, Wednesday, and Thursday.