Mari Corso's Blog

According to the FAIR AND ACCURATE CREDIT TRANSACTION ACT of 2003 or FACT ACT, consumers have easier access to their credit reports as a way to spot possible identity theft and to allow dispute of inaccurate information. Prior to the passage of the FACT ACT, consumers had to pay to receive a copy of their report from each of the three national credit bureaus: Equifax, Experian, and TransUnion. FACT ACT allows consumers to request and obtain a FREE COPY of their credit report ONCE EVERY 12 MONTHS from each of the credit bureaus by contacting a centralized website, www.annualcreditreport.com or by calling 877-322-8228.

Be an informed consumer and get your Free credit report today. You never know what could be on your report in error if you haven't checked it lately.

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The 90 day holding period is being lifted and will be lifted for a period of 1 year.

This change will begin February 1, 2010.

Copied from: http://www.irs.gov/newsroom/article/0,,id=204671,00.html

New legislation, the Worker, Homeownership and Business Assistance Act of 2009, which was signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. The new law:

• Extends deadlines for purchasing and closing on a home.
• Authorizes the credit for long-time homeowners buying a replacement principal residence.
• Raises the income limitations for homeowners claiming the credit.  

Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.  

For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived  in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.

People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 6, 2009. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009.

Several new restrictions apply to homes purchased after Nov. 6, 2009.

• Purchasers must attach a properly executed settlement statement to their return.
• No credit is available if the purchase price of the home exceeds $800,000.
• The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
• A dependent is not eligible for the credit.
• The new law gives the IRS broader authority to deny first-time homebuyer credit claims, without having to first audit a taxpayer’s return. Known as math error authority, this authority applies, retroactively, to credits claimed on original and amended 2008 returns, as well as to claims yet to be filed.

Additionally, there are new benefits for members of the military and certain other federal employees:

• Members of the uniformed services, members of the Foreign Service and employees of the intelligence community serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit.
• In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community.

More information on these new benefits for the military, Foreign Service and intelligence community serving outside the U.S. is available.   

General Information

Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:

• Applies only to homes used as a taxpayer's principal residence.
• Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

The credit is claimed using Form 5405, which you file with your original or amended tax return.

For 2008 Home Purchases

The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year.

For 2009 Home Purchases

The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1. However, the new Worker, Homeownership and Business Assistance Act of 2009 has extended the deadline. Now, taxpayers who have a binding contract to purchase a home before May 1, 2010, are eligible for the credit. Buyers must close on the home before July 1, 2010. [Added Nov. 12, 2009]

For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.

First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return

Wall Street Journal Article

Congress voted today to extend the tax credit and President Obama plans on signing it into law Friday morning. The $8,000 credit will apply to all contracts, for homes up to $800,000, entered into before April 30, 2010, and closed by June 30. It creates a new $6,500 credit for property owners who have lived in their home for at least five consecutive years.

Income limits for eligible home buyers are expanded to $125,000 for single buyers and $225,000 for couples, from $75,000 and $150,000, respectively. To help guard against fraud, buyers are required to attach documentation of purchase to their tax return. (For more on the tax credit, see this tax credit Q&A from last week. And this analysis from Goldman.)

Economists from the National Association of Realtors, which has been pushing hard for the extension, estimate that the current tax credit has contributed approximately $22 billion to the general economy, and approximately 2 million people will take advantage of the tax credit this year. “This important incentive is helping to stabilize the housing market, stimulate the economy and create new jobs in communities all across our great nation,” said NAR President Charles McMillan in a release today, commending Congress for passing the legislation.

Others have argued that extending the tax credit only serves to keep home prices artificially high, among other issues.

Mortgage giant Fannie Mae announced that its new Payment Reduction Plan (PRP) provides forbearance for struggling borrowers who are ineligible for the Home Affordable Modification Program (HAMP). Through HAMP, the US Treasury Department provides capped incentives to servicers for the modification of eligible loans on the verge of foreclosure. The PRP will grant transitional support for borrowers who do not qualify for HAMP while more permanent mortgage solutions are determined, according to Brian Faith, a vice president at Fannie Mae.

The mortgage principal and interest payments will be reduced by up to 30% for borrowers qualified for PRP, which replaces Fannie’s HomeSaver Forbearance program. PRP reduces the payments by 30% rather than the previous 50% under HomeSaver Forbearance, because permanent solutions are closer to 30%, Faith said. Faith added that non-owner-occupied properties became eligible under PRP, and owners will receive new options and support for their investment properties and second homes – even though they do not fit under the HAMP umbrella.

Incentive payments under the PRP were restructured to support the implementation of a more permanent foreclosure prevention solution earlier in the life cycle of the loan, Faith said.

House Passes Legislation Extending FTHB Tax Credit for Active Military

Overview

First-time homebuyers may be able to take advantage of a tax credit for homes purchased in 2008 or 2009. The credit:

• Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.
• Applies only to homes used as a taxpayer's principal residence.
• Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

The credit is claimed using Form 5405.

For 2009 Home Purchases

The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1.

For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.

First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. News release 2009-27 has more information on these options.

Questions and Answers:

Go to http://www.irs.gov/newsroom/article/0,,id=204671,00.html

Obama's Home Affordable Refinance Program (HARP)

As part of the Making Home Affordable Program, Fannie Mae is offering refinances of existing Fannie Mae loans. The goal of the refinance initiative, as announced by the President, is "to provide access to low-cost refinancing for responsible homeowners suffering from falling home prices." The expectation is that refinancing a Fannie Mae loan will put responsible borrowers in a better position by reducing their monthly principal and interest payments or moving them from a more risky loan structure (such as interest-only or short-term ARM) to a more stable product.

Home Affordable Refinance provides two options for Fannie Mae lenders to provide Fannie Mae to Fannie Mae refinance solutions to eligible borrowers: 1) Refi Plus™, which requires manual underwriting, and 2) DU Refi Plus™ for loans underwritten through Desktop Underwriter® (DU®).

Who is Fannie Mae and what do they do?

Fannie Mae is a government-chartered company with a mission to provide a stable source of funding to the U.S. housing and mortgage markets. The company purchases and securitizes mortgage loans to ensure that money is consistently available to financial institutions that lend money to home buyers.

Highlights

• Refinancing for loans with LTVs up to 125 percent
• Expanded opportunities for Fannie Mae to Fannie Mae refinances through Refi Plus, which requires manual underwriting, and DU Refi Plus for loans underwritten through Desktop Underwriter (DU)
• A solution for borrowers with LTVs above 80 percent who currently may not be able to refinance because of existing MI coverage requirements

What does this mean for you? 

It is possible for you to refinance your mortgage with 125% loan to value, no appraisal and low FICO scores! This program makes it possible to refiance above 95%.

To find out if your mortgage is owned by Fannie Mae click the link below: http://loanlookup.fanniemae.com/loanlookup/    

If you have questions I am happy to help, just give me a call or send an email.

For more information about HARP: https://www.efanniemae.com/sf/mha/mharefi/

A new U.S. Treasury Department incentive program could spur an increase in short sales.

By Mark Jarasek, Senior Editor, Electronic Media
October 2, 2009
HousingZone

In their market intelligence elecronic newsletter released Friday, Oct. 2, a U.S. Treasury spokeswoman is sourced as saying that Treasury officials will soon announce a $2,500 subsidy ($1,000 to the servicer and $1,500 to the seller) to encourage short sales as a way to clear the excess inventory. The fees are designed to help compensate the servicer for the extra effort, and to incent the seller to be cooperative and leave the home in good condition. 

"Presumably, the Treasury is trying to help facilitate a transaction that will result in less loss to the lender than in the case of a foreclosure," according to the John Burns report.

The residential real estate consuting firm observes that to date, short sales haven't been particularly effective for a variety of reasons, including:

1. Banks have been slow to approve the high bid, particularly when it is below the last appraisal in the banks' file.

2. Realtors typically don't want to deal with all the extra work involved in a short sale.

3. Buyers typically don't want to deal with the length of time involved in a short sale, which can take 4 to 5 months because of the bank bureaucracy.

"Nonetheless, we expect short sales to increase if the Treasury department is offering incentives to encourage them, and as banks and Realtors figure out how to work together," according to the report. "Short sales have developed a bad reputation as frustrated buyers have had limited success. We'll see if the Treasury can change this, but we are skeptical," the report says.