Thursday, February 9, 2012
Now some homeowners will receive a monthly stimulus that can help reduce their debt and increase thier equity in their home again. It is a start to the housing market crises, BUT it does not fix much for everyone that has a home across America. The reason why is that first, not all states participated. Oklahoma did not sign this agreement and none of the Government backed loans like FHA, Fannie Mae or Freddie Mac are included in the program, which means that it could be less than 1/3 of all home loans that would qualify for the program.
Here is a money break down on how it would be allocated:
Money breakdown Under the terms of the agreement, the servicers are required to collectively dedicate $20 billion toward various forms of financial relief to borrowers. At least $10 billion will go toward reducing the principal on loans for borrowers who, as of the date of the settlement, are either delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth.
At least $3 billion will go toward refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth. Borrowers who meet basic criteria will be eligible for the refinancing, which will reduce interest rates for borrowers who are currently paying much higher rates or whose adjustable rate mortgages are due to soon rise to much higher rates.
Up to $7 billion will go towards other forms of relief, including forbearance of principal for unemployed borrowers, anti-blight programs, short sales and transitional assistance, benefits for service members who are forced to sell their home at a loss as a result of a Permanent Change in Station order, and other programs.
Because servicers will receive only partial credit for every dollar spent on some of the required activities, the settlement will provide direct benefits to borrowers in excess of $20 billion.
The Office of the Comptroller of the Currency also said on Thursday that Bank of America, Citigroup, JPMorgan and Wells Fargo have agreed to pay a penalty of $394 million as part of a settlement they reached in April 2011 with regulators over foreclosure abuses. The banks can meet the terms of the penalty through payments they make as part of the larger settlement with the state attorneys general and the Justice Department the OCC said. (Reuters and the Associated Press contributed to this article)
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Wednesday, February 8, 2012
Tuesday, February 7, 2012
Short Sellers motivated by " IRS Tax Consequences" to close escrow by Dec. 31
With short sales accounting for over half of all listings (approx.) most agents have experienced a certain frustration because of some homeowner's/ seller's "hidden agendas".
Many homeowners simply use the short sale process to stay in the home for as long as possible. That's understandable...losing a home is traumatic.
The impact for you.. as an agent (both selling and listing) is spending time, money and emotional energy trying to close the sale...when the seller has no intention of following thru with the sale.
(Note...it's almost as frustrating ...for your loan officer).
These listings /sellers can usually be identified by the terms and comments in the MLS.
a) No lockbox or sign
b) Shown by appointment only
c) A Ridiculously high purchase price
Note...if the seller is considering bankruptcy (and assuming they qualify) the transaction probably will not "close" because the home owner can also discharge the debt with the BK filing.
Now you may have a "hammer" to close these transactions!
The Mortgage Tax Relief Act ...eliminating mortgage debt forgivenessexpires Dec. 31, 2012.
But home owners will be "motivated to act " well before the date because of the short sale and foreclosures' lengthy process.
Currently the tax-relief act allows homeowners to exclude from income (for the sake of tax purposes) primary mortgage debt (1st trust deed) forgiven by their lender.(i.e short sale, short refi , foreclosure or deed in lieu)
Impacted home owners are most easily identified by simply pulling a title report and comparing the amount of the original loan (1st TD) vs the current 1st TD.
If the balance is higher...you may have a motivated seller. Here's why:
After Dec 31., if a lender cancels a home owner's debt, the IRS requires the debt be treated (reported) as "general income"...because the duty to repay it no longer exists.
For example: if a homeowner owes $250,000 and the lender forgives $50,000 of that debt, that $50,000 is considered income.
If the homeowner's combined federal and state marginal tax rate is 36%, the seller would owe $18,000 in taxes. A BIG DETERENT TO JERKING YOU AROUND ANS SABOTAGING THE SALE AT THE VERY LAST POSSIBLE MOMENT!
Note ....when a homeowner refinances their current mortgage to a LOWER loan balance, there is no tax on the difference between what a homeowner owes on the old loan and what a home owners owes on the new loan amount.( becasue the basis is higher)
However the refinanced loan amount is now a "recourse debt" which may subject the borrower to a future lawsuit for a "deficiency judgment".
Here are a few of the other important rules the homeowner needs to know:
• The debt-relief law applies only to debt incurred to buy, build or improve a personal residence. (S ave your receipts in case of an audit).
It does not apply to a HELOC used to pay off debts or used as "walking around money".
• The act does not apply to vacation homes or investment properties.
• The max. amount a homeowner can treat as indebtedness is $2 million, or $1 million if married but filing separately.
The expiration of the act will motivate many home owners to seriously consider selling...OR..if not ...save you gas, time and emotional grief!
Well, that's all folks, I hope you enjoyed learning something new today about real estate tax law!!! Sincerely, Stacie MacDonald - Your Short Sale expert!