Friday, December 26, 2008

Fannie Mae Changes Policy To Help Investors

On December 16, Fannie Mae sent lenders the following bulletin:

Fannie Mae requires that established condominium projects consisting of attached units have an owner-occupancy ratio of at least 51 percent at the time the loan is originated (purchase or refinance) if the mortgage loan being delivered is secured by an investment property. Established projects where borrowers will occupy the unit or use the unit as a second home are not subject to any owner-occupancy ratios.

Due to current market conditions, many condominium projects are experiencing higher numbers of financial institution- owned REO units, which many lenders may be counting as non-owner-occupied under Fannie Mae’s current requirements.

Fannie Mae is clarifying its condominium project owner-occupancy ratio policy to include REO units that are for sale (not rented) as owner-occupied units in the owneroccupancy ratio.

When an investor applies to Fannie for loan, Fannie requires that at least 51% of the units in the complex are owner occupied. In the past, any vacant unit that had been foreclosed on and was bank-owned was considered non-owner occupied. Under this new policy, Fannie says it will now count bank-owned REO units that are listed for sale, but are not rented, as if they are owner-occupied when computing the 51 percent ratio.

This will help investors qualify for Fannie Mae loans and, hopefully, help stimulate sales of units that have been languishing on the market.

Monday, December 15, 2008

Meet Your New Landlord - Fannie Mae

Yesterday, Fannie Mae announced that it would allow existing tenants to remain in foreclosed properties owned by the company. In many states, when a home goes into foreclosure the tenant may be immediately evicted, even though they have a lease and their rent is paid on time.

Fannie Mae will now offer renters in foreclosed properties month-to-month leases until the property is resold. “While it may be sometimes tougher for us to sell a property when people are in it, we understand that lots of people are in tough situations right now,” said Chuck Greener, a Fannie Mae spokesman. “If a renter wants to stay in their home, we’ll make that happen. And if they want to move out, in many cases we’ll help them pay for the move.”

Thursday, December 11, 2008

Credit Cards Become More Expensive

Be very careful if you use your credit cards this holiday season. Towards the end of November, reports started surfacing that credit card companies were increasing their interest rates for anyone without a spotless payment history. It can not be a coincidence that this increase just happens to have coincided with the holiday buying season.

I'm not talking about small increases. Numerous companies have doubled their rates as well as increased fees, even as the Federal Government slashed the cost of funds to banks to a record low 1%. New "use" fees are appearing on bills, and minimum payment amounts are also creeping up. Even store credit cards are increasing rates. And some, like Home Depot, are lowering credit limits for buyers whose credit scores have dropped.

Like everyone else, banks and retailers are looking for ways to lower risk and increase their net. If you must use credit cards, make sure you review your latest bills for changes to fees and interest rates. If you don't check, you may find that $50 toy you charged is costing you a lot more than you thought.

Sunday, December 7, 2008

Tax Credit For First Time Homebuyers

As part of the Housing and Economic Recovery Act of 2008, a tax credit was designed for first time homebuyers. I have been getting a lot of questions asking exactly who is eligable. Below is an article from the IRS website that clearly explains who can receive this credit, and how it is repaid.

Tax Credit to Aid First-Time Homebuyers; Must Be Repaid Over 15 Years

IR-2008-106, Sept. 16, 2008

WASHINGTON — First-time homebuyers should begin planning now to take advantage of a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008.

Available for a limited time only, the credit:

Applies to home purchases after April 8, 2008, and before July 1, 2009.
Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
Is fully refundable, meaning that the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax that they owe.

However, the credit operates much like an interest-free loan, because it must be repaid over a 15-year period. So, for example, an eligible taxpayer who buys a home today and properly claims the maximum available credit of $7,500 on his or her 2008 federal income tax return must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on his or her 2010 return.

Eligible taxpayers will claim the credit on new IRS Form 5405. This form, along with further instructions on claiming the first-time homebuyer credit, will be included in 2008 tax forms and instructions and be available later this year on IRS.gov, the IRS Web site.

If you bought a home recently, or are considering buying one, the following questions and answers may help you determine whether you qualify for the credit.

Q. Which home purchases qualify for the first-time homebuyer credit?

A. Only the purchase of a main home located in the United States qualifies and only for a limited time. Vacation homes and rental property are not eligible. You must buy the home after April 8, 2008, and before July 1, 2009. For a home that you construct, the purchase date is the first date you occupy the home.

Taxpayers who owned a main home at any time during the three years prior to the date of purchase are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.

If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 (or amended 2008 return) or 2009 return.

Q. How much is the credit?

A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return. In most cases, the full credit will be available for homes costing $75,000 or more. Whatever the size of the credit a taxpayer receives, the credit must be repaid over a 15-year period.

Q. Are there income limits?

A. Yes. The credit is reduced or eliminated for higher-income taxpayers.

The credit is phased out based on your modified adjusted gross income (MAGI). MAGI is your adjusted gross income plus various amounts excluded from income—for example, certain foreign income. For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000.

This means the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.

Q. Who cannot take the credit?

A. If any of the following describe you, you cannot take the credit, even if you buy a main home:

Your income exceeds the phase-out range. This means joint filers with MAGI of $170,000 and above and other taxpayers with MAGI of $95,000 and above.
You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
You stop using your home as your main home.
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.
Your home financing comes from tax-exempt mortgage revenue bonds.
You owned another main home at any time during the three years prior to the date of purchase. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another main home at any time from July 2, 2005, through July 1, 2008.

Q. How and when is the credit repaid?

A. The first-time homebuyer credit is similar to a 15-year interest-free loan. Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer’s income tax return for that year. For example, if you properly claim a $7,500 first-time homebuyer credit on your 2008 return, you will begin paying it back on your 2010 tax return. Normally, $500 will be due each year from 2010 to 2024.

You may need to adjust your withholding or make quarterly estimated tax payments to ensure you are not under-withheld.

However, some exceptions apply to the repayment rule. They include:

If you die, any remaining annual installments are not due. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the remaining repayment amount.

If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. This includes situations where the main home becomes a vacation home or is converted to business or rental property. There are special rules for involuntary conversions. Taxpayers are urged to consult a professional to determine the tax consequences of an involuntary conversion.

If you sell your home, all remaining annual installments become due on the return for the year of sale. The repayment is limited to the amount of gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain or if there is a loss on the sale, the remaining annual installments may be reduced or even eliminated. Taxpayers are urged to consult a professional to determine the tax consequences of a sale.

If you transfer your home to your spouse, or, as part of a divorce settlement, to your former spouse, that person is responsible for making all subsequent installment payments.

Thursday, December 4, 2008

Fraud Alert From the US Treasury

The U.S. Department of Treasury, Office of Inspector General (OIG), is investigating incidences whereby individuals are using fraudulent promissory notes and bonds to attempt to purchase vehicles and real estate. The OIG has been notified of numerous occurrences throughout the United States where fraudulent documents were used to attempt to purchase vehicles. Treasury OIG has also been made aware of incidents in Arizona and Colorado where similar fraudulent documents were used to attempt to purchase homes and an office building.

The fraudulent documents are not referenced as “U.S. Treasury” bonds or promissory notes. They are referenced as “personal promissory note” and “private offset bond;” however, they have the name of Henry Paulson, Secretary, U.S. Treasury, on the face of the documents.

Treasury OIG has learned that the only type of hard-copy bond issued by the U.S. Treasury that a citizen can purchase today is a savings bond. All other bonds are electronic and the buyer would not receive a hard-copy document. Finally, Paulson’s name should not appear on any document listed as a private bond or promissory note since these items are not backed or guaranteed by the U.S. Treasury.

If you have any information regarding this type of fraudulent activity, we request that you contact the U.S. Department of Treasury, Office of Inspector General (OIG), Office of Investigations Hotline, at 800/359-3898 or e-mail Hotline@oig.treas.gov. REALTORS® approached by a person giving these or similar circumstances should consider the potential for fraud. Should you suspect fraudulent activity, it is recommended that you contact the OIG Hotline and your local law enforcement agency immediately. Additional information regarding this and other similar fraud schemes can be found atthe following Department of Treasury Web site:http://www.treasurydirect.gov/instit/statreg/fraud/fraud_bogussightdraft.htm

Early Holiday Gifts From the US Treasury?

In a speech earlier this week, Treasury Secretary Henry Paulson said: "The most important thing we can do to mitigate foreclosures and progress through the housing correction is to reduce the cost of mortgage finance, so more families can afford to buy a home and so homeowners can refinance into more affordable mortgages." Today, rumors are flying around Washington that, perhaps as early as Monday, the Treasury will announce a plan that would lower mortgage rates to 4.5% for 30 year, fixed rate loans.

The hope is that, with rates historically low, more buyers will have the incentive to buy now. This would decrease the oversupply of housing stock and stabilize prices. Homeowners who are struggling with loan payments will be able to refinance to a more sustainable payment, thus stemming foreclosures. It would also address the criticism that the present bailout is only addressing the problems of financial institutions, not individuals.

No one is saying anything "officially". But it has been my experience that these sorts of leaks don't happen unless plans are already in the works. The specifics may be tweaked, but I expect to see some sort of announcement next week. Now that's what I call a nice holiday present!