Today, Republican Congressman…Representatives Jim Jordan (R-OH), Darrell Issa (R-CA), and Patrick T. McHenry (R-NC), announced the introduction of H.R. 430, a bill to repeal the Home Affordable Modification Program (HAMP).

Why? because it’s a colossal flop!

According to the Treasury Department:

“Despite record levels of new foreclosures, 2.9 million in 2010 and a projected 3 million in 2011, as of December 21, 2010, there were only 522,000 homes still in the program undergoing permanent modification. More than 792,000 trial modifications have been cancelled, and 152,000 trial modifications have yet to be upgraded to permanent status.”

Only $1Billion of the $75 Billion earmarked has successfully been used to complete modification programs for homeowners.

Here is the overview of the bill from the Committee of Oversight and Government Reform:

WASHINGTON D.C. – Heeding a damning report from Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Neil Barofsky, Representatives Jim Jordan (R-OH), Darrell Issa (R-CA), and Patrick T. McHenry (R-NC), announced the introduction of H.R. 430, a bill to repeal the Home Affordable Modification Program (HAMP). Issa, Chairman of the House Committee on Oversight and Government Reform, invited Barofsky to testify at the committee’s first hearing on Tuesday. SIGTARP’s report singled out HAMP from among several TARP-funded programs, saying the program’s failure “has had the most devastating consequences” for “distressed homeowners on Main Street.” HAMP is intended to offer homeowners facing foreclosure help “by reducing monthly payments to sustainable levels,” according to the Treasury Department.

“HAMP is a colossal failure,” said Jordan, sponsor of the bill and chair of the Oversight subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending. “In many cases, it has hurt the very people it promised to help. It’s one more example of why government interference in the private sector doesn’t work and that’s why it should be repealed.”

According to the Treasury Department, HAMP was intended to “help up to 3 to 4 million at-risk homeowners avoid foreclosure.” Despite record levels of new foreclosures, 2.9 million in 2010 and a projected 3 million in 2011, as of December 21, 2010, there were only 522,000 homes still in the program undergoing permanent modification. More than 792,000 trial modifications have been cancelled, and 152,000 trial modifications have yet to be upgraded to permanent status. The Government Accountability Office (GAO), the Congressional Oversight Panel (COP), and SIGTARP have all pointed out the destructive impact that a failed trial modification has on a homeowner’s financial well-being.

“Our review and reports by SIGTARP, GAO and COP, all found this program is failing and that Treasury has gone out of its way to hide, rather than address problems,” said Issa, an original co-sponsor of the bill. “It’s unacceptable that Treasury continues this misguided effort that appears more focused on saving face than helping troubled homeowners.”

“The number of homeowners kicked out of HAMP – and arguably left worse off by participating in the program– exceeds the number actually helped by hundreds of thousands,” added McHenry, who chairs the Oversight subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs and is an original co-sponsor of the bill. “Because the administration won’t listen to bipartisan calls to fix this program, the only option left is to end it.”

The bill will be referred to the Committee on Financial Services, on which Rep. McHenry serves. The text of the legislation can be viewed athttp://oversight.house.gov/images/stories/Legislation/JORDAN_005_xml.pdf.

The numbers are telling us some crazy things…

It seems that Americans are placing themselves in a unique conundrum.  With housing prices continuing to drop, many Americans are turning to loan mods and short sales to reduce their liabilities.

As many are aware, during these processes the homeowner can stop paying their monthly mortgage payments without real concerns of  foreclosure activity. Well, that means is more “discretionary” income to spend on the items that would not have been purchased if the mortgage was being paid.

There are obvious concerns for this type of spending.  It is something of a “false-positive”.  What do I mean by that?  The individuals are obviously living above their means.  The hammer will soon drop and when the loan modification fails and the short sale goes through…these former homeowners will have to pay rent causing a slump in Consumer Spending.

This concerns us as we see this everyday with the folks we assist.  We meet with them to discuss their options of short selling their home.  The homeowners are not paying their mortgage and not saving the money.  They are panicked when we discuss the reality of renting and that their will need to be a good credit score and 2 to 3 months of rental payments in hand ready to turn over to their new landlord.

The expressions on their faces says it all!

2010….real estate recovery or more of the same?

This week we will be sharing with you what a few on the nations most influential leaders think will happen this year with housing.

First up, Mr. Robert J. Shiller…co-creator of the respected S&P/ Case Shiller Home Price Index.

Homeowners with the best credit are the next big risk for the U.S. housing market.

An increase in mortgage defaults among prime borrowers in 2009 is likely to accelerate this year, slowing the real estate recovery even as Americans become more optimistic about the economy, said Robert Shiller and Karl Case, the economists who created the S&P/Case-Shiller Home Price Index.

here will be continuing foreclosures, and not just subprime, it will be prime mortgages,” Shiller, a professor at Yale University, said in an interview. “This is creating a huge shadow inventory of homes that are still owned, but they’re going to be on the market in the next year or so.”

The number of prime mortgages overdue by at least 60 days more than doubled in the third quarter from a year earlier to 838,000, according to a Dec. 21 report from the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Unemployed homeowners struggling to pay their bills will default on their home loans and increase foreclosures, Shiller and Wellesley College’s Case said.

Employers have cut more than 7.2 million jobs in the last two years, the biggest employment loss since the Great Depression. Measured annually, the U.S. jobless rate probably will average 10 percent in 2010, according to the median estimates of economists surveyed by Bloomberg. That would be the highest rate in government records dating to 1948, after rising to a 26-year high of 9.3 percent last year.

Prime Foreclosures

“Unemployment is not respecting income boundaries,” said Case in an interview. “It’s affecting rich people, poor people and middle-income people and they all have mortgages.” The U.S. may begin to see some signs of a housing recovery this year, he said.

The foreclosure inventory of prime adjustable-rate loans rose to 10 percent in the third quarter, more than doubling from a year earlier, while prime fixed-rate loans more than doubled to 1.95 percent, said Jay Brinkmann, chief economist of the Mortgage Bankers Association in Washington. The surge in prime ARM foreclosures is coming at a time when rates are resetting lower, reducing monthly payments, he said.

“If you have a prime adjustable-rate mortgage resetting in 2010, you probably are going to see your rate go down,” Brinkmann said. “Still, prime ARMs are defaulting at a higher rate because these borrowers were the risk-takers who chose the initially lower payments so they could stretch to get into a house.”

Recovery Signs

While an increase in prime foreclosures will slow the housing recovery that began in September, it won’t be enough to knock it entirely off track, Case said. Home resales in November rose to the highest level in almost three years, the third consecutive monthly gain, and the supply of new homes for sale is at the lowest level in almost four decades.

“That’s taking some of the pressure off,” Case said. “Hopefully in 2010 we’ll see some recovery.”

Foreclosures are declining for the type of subprime mortgages that sparked the global financial meltdown in 2008. New foreclosure starts among subprime ARMs fell to 4.92 percent in the third quarter from 6.47 percent a year earlier after the bulk of loans were either modified by lenders or the properties repossessed and sold, according to the MBA.

“What makes the rising default rates on prime loans so insidious is these are not folks who took out some crazy new type of mortgage,” said Brad Hunter, chief economist at MetroStudy real estate research in West Palm Beach, Florida. “These are people who probably took out what would ordinarily be a responsible mortgage.”

Obama’s Challenges

The increase in unemployment and the lackluster housing market have been at the center of the worst economic contraction since the 1930s and remain a challenge for President Barack Obama as he enters his second year in office. While property resales have started to rise nationally, foreclosures and price declines continue, even after the government spent $230 billion in fiscal 2009 to support homeownership, according to a tally by the Congressional Budget Office in Washington.

Loan servicers offered lower monthly payments for 680,000 delinquent borrowers, 274,000 under the federal Home Affordable Modification Program and 406,000 under other plans, according to a Dec. 21 report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Borrowers defaulted again on 61 percent of loans modified more than 12 months earlier, the report said.

Confidence Needed

Confidence is the key ingredient to a sustainable economic recovery, Shiller and Nobel Laureate George A. Akerlof said in their 2009 book “Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism.” The book expands on a John Maynard Keynes macroeconomic theory by the same name that says emotion, rather than logic, drives consumer decisions that lead to economic change.

“I do see some signs of animal spirits, but it’s a mixture,” Shiller said last week of the housing market. In some areas of the U.S., such as California, home prices are going up at an “amazing” pace, he said. At the same time, “It would be entirely plausible that we would have a weak housing market for many years.”

Federal Tax Credit

In the same month, the group’s measure of home-purchase plans dropped to a 27-year low, despite federal efforts to stimulate housing demand with the tax credit and a $1.25 trillion Federal Reserve program to lower home-loan rates by purchasing mortgage bonds. The index measuring intentions of buying a home in the next six months fell to 1.9 percent from 2.1 percent in the prior month.

“At the moment a lot of potential buyers are deciding to wait and see,” said MBA’s Brinkmann. “If they do have a job, they may have seen 20 percent of their company laid off and they’re wondering if they’re next.”

Source: Bloomberg.

It’s official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

First-Time Homebuyer Tax Credit – Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.

What is a tax credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

What is the tax credit for first-time homebuyers (FTHBs)?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is eligible for the FTHB tax credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.

• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You do not use the home as your principal residence.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.

Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

http://timandjulieharris.com/2009/11/06/home-buyer-tax-credit-bill-passed-home-buyer-tax-credit-faq/

The approval is as follows:

1. $8,000.00 for 1st time buyers
2. added $6,500.00 for “Move-up” buyers
3. An increase in qualified incomes were doubled from $75,000.00 to $125,000.00 for a Single purchaser and from $150,000.00 to $225,000.00  for Couples.

The extension passed the Senate 98 to 0…a true bipartisan message.

The extension is expected to pass through the House with haste and be “rubber stamped” by President Obama by this weekend.

Bravo to the Dems and Elephants for getting on the same page.

Take Action on this opportunity.

Kris Darney

Breaking News*********Kim and I will be talking about this program this week on our coaching calls with Harris Real Estate University Sign up and Log in to the Thursday Call 10:00AM PST

As our subscribers know…Kim and I are always looking for the latest and greatest news on Short Sales.

I liken this news to the Sounds extreme I know but this is just the beginning.

A lender from California is offering an FHA 3.5% purchase program for current homeowners that are selling their property on short sale.

The program works like this… The short sale of the current home and timing the purchase of the next home run simultaneous.  The day after the “short sale” home sells, the closing of the “new” home takes place.

This can be a bit tricky with the unpredictable length of the short sale approval and placing an offer on a property on today’s market…however a huge win and step in the right direction for our Short Sale sellers.

And, the program is currently available in 45 states… (program not currently available in Alaska, Michigan, Missouri, Ohio and Wisconsin).

It doesn’t stop there.

If you have a client that sold their home on a short sale that wants to buy another home, as long as they meet some additional criteria…paying their rent on time for a year…they may also qualify for this program.

Your asking…what is the criteria?

Here it is:

(1)   Purchase price of new home cannot exceed original (short sell) home loan(s).

(2)   Minimum 640 FICO Credit Score throughout the Short Sell and New Home purchase process

(3)   Adhere to HUD County Limits on New Loans

(4)   No Mortgage “lates” last 12 months, nor through the new home purchase

(5)   There are no income limits

(6)   Non owner-occupant, co-borrowers are allowed

(7)   Competitive FHA lending rates available for this program

(8)   Must qualify with normal income ratios

(9)   3.5% minimum down payment on new home ~ Gifts are OK

This is great news for all homeowners that are strapped with a one of the formidable Countrywide Short Sales.

We learned of this about 6 weeks ago and we are excited to announce that it is hear…

Below is a link to the details:

Bank of America/Countrywide Streamlining Short Sale Process

The Short Sale Good News Train keeps on rolling.

Take Action,

Kris & Kim Darney

To our clients…you’ll be receiving an email soon.

As our subscribers know…Kim and I are always looking for the latest and greatest news on Short Sales.

I liken this news to “Mans First Steps on The Moon”…Sounds extreme, I know, but this is just the beginning.

A lender from California is offering an FHA 3.5% purchase program for current homeowners that are selling their property on short sale.

The program works like this…

• The short sale of the current home and timing the purchase of the next home run simultaneous.
• The day after the “short sale” home sells, the closing of the “new” home takes place.

Yes…this can be a bit tricky with the unpredictable length of the short sale approval and placing an offer on a property on today’s market…however a huge win and step in the right direction for our Short Sale sellers.

(Real Estate Agents) This part is for you…..!

Imagine…you could actually “quadruple end” a sale.

How does that work?

1. You list short sale #1.
2. You find the buyer for short sale #1.
3. You List short sale #2.
4. You Sell property #2 to the seller of the property #1.
5. Everyone Wins!

And, the program is currently available in 45 states… (program not currently available in Alaska, Michigan, Missouri, Ohio and Wisconsin).

Scenario:

• The Smiths bought their home in 2005 for $400,000 with 5% down. It’s now worth $200,000+, but they still owe $390,000. You negotiated to short sell it for $225,000. During the short sale process you got them approved for a new maximum loan of $376,000. Upon closing the short sell of their home, they closed on their new nicer, bigger home for $375,000 and didn’t have to move into a rental apartment for 2 to 3 years.

It doesn’t stop there… Past Short Sale Clients…

If you have sold a home on a short sale and want to buy another home, as long as you meet some additional criteria…paying your rent on time for a year…you may also qualify for this program.

Your asking…what is the criteria?

Here it is:

(1)   Purchase price of new home cannot exceed original (short sell) home loan(s).

(2)   Minimum 640 FICO Credit Score throughout the Short Sell and New Home purchase process

(3)   Adhere to HUD County Limits on New Loans

(4)   No Mortgage “lates” last 12 months, nor through the new home purchase

(5)   There are no income limits

(6)   Non owner-occupant, co-borrowers are allowed

(7)   Competitive FHA lending rates available for this program

(8)   Must qualify with normal income ratios

(9)   3.5% minimum down payment on new home ~ Gifts are OK

Houston….we have lift off!

Sellers…this is huge!

Agents…this is huge!

Best,

Kris

It appears that ywo Loan Modification Scam victims took their anger out on the perpertraitors…now they are facing Life in Prison!

It appears that these two Sothern California homeowners who had hired “Loan Mod Experts” felt that since nothing was happening with their modification that they would simply get their money back or beat it out of them.

Well that back fired and the 2 home owners along with 3 assailants are facing:

• False imprisonment
• Robbery
• Extortion
• Yada,Yada, Yada

Lesson Learned…

“Vengence is Mine…Sayeth the Lord”

As seen in Mortgage Ledger:

“One California couple facing foreclosure decided to violently take their desperation and frustration out on the very people they hired to help them save their home.

The case became publicly known as Los Angeles officials and community groups began a national public-awareness effort urging homeowners to beware of bogus loan-modification programs and to report suspicious activity to authorities.”

• Chico, CA 98% increase over last year
• Reno-Sparks, NV up 80%
• Prescott, AZ up 77%
• Jacksonville, FL & Rockford, Il up 64%
• Boise City-Nampa, Idaho & Salt Lake City, Ut also made the charts

“While cities in California, Florida, and Nevada continued to account for the 10 highest foreclosure rates among metro areas in the third quarter, five reported decreased year-over-year activity, according to RealtyTrac.

Meanwhile, new foreclosure hot spots emerged, including the Chico, CA metro, where foreclosure activity was up 98 percent year-over-year, and the Reno-Sparks metro, where activity was up 80 percent from a year ago, per RealtyTrac’s Q3 2009 Metropolitan Foreclosure Market Report.

The Prescott, Arizona metro saw a 77 percent increase in foreclosure filings, foreclosure activity in Jacksonville, Florida and Rockford, Illinois jumped 64 percent, and the Lansing-East Lansing, Michigan area saw a 41 percent increase.

“Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation’s foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave,” said James J. Saccacio, chief executive officer of RealtyTrac.

“While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A Option ARMs are spreading the foreclosure flood to more metro areas in 2009.”

Among the top 50 metro foreclosure rates, the biggest movers year-over-year included Boise City-Nampa, Idaho, and Provo-Orem and Salt Lake City, Utah.

The Las Vegas metro continues to post the nation’s highest foreclosure rate, with one in 20 housing units receiving a foreclosure notice during the quarter, up nine percent from the previous quarter and 54 percent from a year ago.”