It seems our illustrious government representatives can’t find a common ground to on which to meet…what’s new?

With the recent defeat of HR 4213 on The Hill…it leaves an uncertain feeling in the mouths of buyers that are trying to take advantage of the $8,000.00 tax credit.

Why it didn’t pass…there’s simply too much “pork fat” tied to it…or other initiatives that clouded its intention. Along with this HR bill…there was tied another initiative that would cost Americans billions of dollars and of course, that was the area of concern for our Republican representatives.

Word is, a new bill will be sent up the flag pole to get this tax credit deadline extended…it may however, be retroactive.

God Bless America!

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.

Homeowners have been turning to Short Sales the past several years to help them avoid foreclosure, although it’s not been altogether easy it’s been working for most sellers that have gone down that path. This year brings promising changes for homeowners that need or want to get out of a home that has declined in value to the point of no return…..

As you know, there are many areas that have seen declines of 50%…and more!

April 5th has promised to bring a welcome change brought on by our treasury department. HAFA, an extension of HAMP, will mandate many changes for the lenders of these properties.

Yep, finally banks are going to be held accountable to do the right thing….Stop foreclosures and help get our housing market back on track!

A Short Sale accomplishes many positive results:

• It allows for a homeowner to move into the property and bypass a boarded up home for months dragging down surrounding home values.

• The seller of the property is able to unload an anchor of debt and get a fresh start.

• Depending on the financial and credit situation of the seller another home purchase is possible at the close of the Short Sale.

Here in So Cal there are many areas that are going to be feeling this decline for several more years, and we are not alone.  Most of America’s housing market has been hit with declining markets.   If your reading this thinking that a Short Sale might be an option, contact us for more detailed information how the Short Sale applies to you.

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