Housing and Economic Recovery Act of 2008
As part of the Housing and Economic Recovery Act of 2008, the U.S. Department of Housing and Urban Development (HUD) awarded $54.8 million in new federal funds to help stabilize neighborhoods affected by foreclosures in the Bay State.

The Massachusetts state government received $43.5 million, the city of Boston $4.23 million, Springfield $2.57 million, Worcester $2.39 million and Brockton received $2.15 million.

The funding will help state and local governments acquire and redevelop foreclosed properties in an effort to stabilize neighborhoods and home values.
On a similar note, HUD unveiled the HOPE for Homeowners Program (H4H) last week for borrowers having difficulty paying their mortgage. The program allows homeowners of single-family, owner-occupied units to refinance into an affordable FHA-insured, 30-year, fixed-rate mortgage. The program is effective from October 1, 2008 until September 30, 2011.

As a requirement, all liens must be extinguished for participation in the program. The mortgage loan limit is $550,440 and the loan-to-value (LTV) is capped at 90 percent. Lenders will pay an upfront mortgage insurance premium of 3 percent and the annual premium is 1.5 percent.

You can also access a list of frequently asked questions from buyers and sellers online at the National Association of REALTOR®'s website as well as recognition of the program from NAR President Richard Gaylord.
Source: GBREB 10/08

The Bill Will Help Homeowners and Borrowers
The Senate legislation responded to the criticisms that lenders have been slow and/or unwilling to work with homeowners and borrowers. It encouraged negotiation in short sales and consumer efforts to refinance or reconfigure existing mortgages: When the Treasury (or other federal agency that holds mortgages) acquires troubled existing mortgages from financial institutions, agencies are required to work with lenders and mortgage servicers to find ways to avoid foreclosures.

All federal agencies are required to work with servicers to facilitate loan modifications that will consider the net present value of the mortgage. Similar refinancing and foreclosure prevention requirements apply to mortgages involving owners of multi-family properties and owners of commercial properties. Policy goal is to assure that tenants don’t lose their residence or their place of business when an owner has problems with the mortgage. Changes to existing mortgages can include (but are not limited to) revisions in principal, interest rate and period for repayment.
Source: GBREB 10/08

Four Mortgage Lenders ordered to Cease & Desist in Massachusetts
The Massachusetts Division of Banks has issued cease and desist orders to four mortgage lenders/brokers for allegedly violating the state's reverse mortgage laws.

The orders on three lenders, First Call Mortgage Company Inc. of Andover, Sun West Mortgage Company Inc. of Cerritos, California, and Gold Reverse Inc. of Anaheim, California were in response to allegations that the companies were making loans to Massachusetts seniors without an approved plan that included counseling on the mortgage.

The Division's order against broker American Advisors Group was for engaging in unfair and deceptive marketing of the loans through a direct mail campaign where reverse mortgages were marketed as government benefits.

Reverse mortgages are loans that allow senior citizens to convert equity in their home into monthly income. The payments on the loan are not made until the individual dies, moves or enters into aged care.

Massachusetts Law prohibits a lender from making a reverse mortgage without an approved plan that includes mandatory counseling.
Source: Boston Business Journal, September 25, 2008

Interest-Free Loan for First-Time Buyers
The newly approved tax credit for first-time buyers is like having a 15 year, interest-free loan. The down payment and closing costs may actually be less than the credit the buyer receives.

The Housing and Economic Recovery Act of 2008 includes a tax credit for qualified purchases between April 8, 2008 and June 30, 2009. The credit is 10% of the purchase price not to exceed $7,500.

To be eligible for the credit, the taxpayer's adjusted gross income cannot exceed $75,000 if they file their tax as a single person or $150,000 if they are married filing jointly. Adjusted gross income is total annual income reduced by things like qualified retirement contributions, alimony, moving expenses, and a few others.

The taxpayer and spouse, if married, must not have had an ownership interest in a principal residence during the three years prior to the purchase of the home in which the credit is being claimed.

The tax credit is repayable over a 15 year period at zero interest. Each year 6.7% of the tax credit is repaid until it is repaid or the home is sold whichever comes first. The first payment isn't due until two years after the home is purchased. If the home is sold prior to repaying the tax credit, the balance of the unpaid credit is due in that tax year.

A buyer purchasing a $200,000 home with a FHA mortgage would require a 3.5% down payment or $7,000. The buyer would also be responsible for their closing costs. The $7,500 tax credit effective at filing that year's income tax return would recover the $7,000 down payment plus $500 of the closing costs paid by the buyer. Obviously, they have to have the money for the down payment at the time of closing and won't get the tax credit until they file their tax return the next year.
Source: Pat Zaby Newletter, 9/2008

The Incentives for Selling Now
Many homeowners are reluctant to list their house for sale in the current market, or do not want to accept a Realtors recommended list price for the home. For those struggling to accept the moderation in home values over the past two years as well as those who need some convincing that now is a good time to sell, here's some information and counsel.

1. Home prices have softened in nearly all price ranges, thus sellers and prospective sellers should understand that not only is their home worth less than they might have hoped, but most likely so is the next home they may purchase. For example, the owner of a home previously worth $500,000 that has lost 5 percent of its value might have trouble accepting a $25,000 drop in price. However, if they ultimately purchase a larger home, say one that was once priced at $700,000 that also has lost 5 percent of its value, they will have realized a savings of $35,000, negating any perceived loss during the sale of their current home. For those looking to trade-up this is an especially important point.

2. Historically, home values nearly double every 10 years in the U.S. In greater Boston, median home prices have increased an average of 8 percent annually in the past decade, and despite the recent market correction, remain 20 percent higher than they were five years ago. In addition, the median condo price has increased 10 percent a year, on average, over the last decade, and is 27 percent higher than in 2002.

3. Finally, sellers should realize that many of today's home buyers are eager to become homeowners. They have been searching the market for an extended period of time and most have been pre-approved for a mortgage. Thus, homes that are priced right and well-maintained, inside and out, are selling quickly.
Source: GBAR 5/08

RS Releases Vacation Home Ruling
The Internal Revenue Service recently issued a Revenue Procedure ruling that spells out how vacation properties can qualify for 1031 exchanges, which involve the exchange of investment properties.

The guidance aims to clear up the debate about whether vacation homes are investment or personal use properties. The ruling states that the property must be held by the taxpayer for 24 months. The holding period is broken into 12-month blocks, and during each the property must be rented at the fair market rate for no less than 14 days.

Additionally, the owner can use the property for 14 days or 10 percent of the days rented, whichever is greater, plus a "reasonable" number of days devoted to maintenance tasks. Because it is a safe harbor ruling, experts say failing to comply with all the rules does not mean the exchange will be denied or an audit will automatically occur.

However, they underscore the importance of keeping good records of the property's rental history and the dates the property was occupied by the owner for maintenance.
Source: Realty Times, Gary Gorman (03/06/08)
© Copyright 2008 Information Inc.

Abandon & Foreclosed Property Law Passes In Boston
On Wednesday, February 27, 2008 the Boston City Council voted unanimously to approve a new law regulating the maintenance of abandoned and foreclosed properties.

This Ordinance applies not only to lenders, but also to "property managers" and "real estate brokers" that are involved in the "care, charge, or control" of real estate. If you are a property manager or real estate broker dealing with property in the City of Boston, this Ordinance likely applies to you.

The ordinance sponsored by Councilor Robert Consalvo(District 5-Hyde Park, Roslindale, Mattapan), was filed in response to public health and safety issues created by vacant and abandon homes in foreclosure. According to Councilor Consalvo, the City is spending thousands of dollars to secure and maintain vacant homes.
Source: GBREB 3/2008

Increased Loan Limits Take Effect in the Bay State

The federal government officially raised the Federal Housing Administration’s (FHA) loan limits for 1-4 family homes in Boston and surrounding counties last week. The FHA loan limit will increase from $362,790 to $523,750 – or 125 percent of the area’s median selling price in Essex, Middlesex, Norfolk, Plymouth and Suffolk Counties.

The loans are not restricted to lower-income applicants and borrowers who pay a small insurance premium will be eligible for an interest rate almost as low as the best qualified home buyers.
Fannie Mae and Freddie Mac conforming loan limits have also increased. Single-family mortgages priced up to $523,750 will be available at lower interest rates than in the recent past when jumbo loans above $417,000 carried a higher interest rate. Importantly, the new higher Fannie and Freddie conforming loan limits are temporary and only apply to loans made between July 1, 2007 and December 31, 2008.

Loan limits for 2 and 3 family homes have also been increased in the five county Metro Boston region to $670,500 and $810,450 respectively. The new loan limits apply to FHA and Fannie Mae and Freddie Mac conforming loans.
Source: GBAR 3/2008

More Housing Fixes Aimed at Rescuing Homeowners

With the ink still fresh on President Bush's $152 billion economic stimulus plan, Senate Democrats are pushing for new ways to address the troubled housing market.

One such strategy causing controversy would allow bankruptcy judges to alter the terms of certain mortgages, including interest rates, payback periods and principle balances. Currently, bankruptcy judges may restructure most loans (ie: credit cards and car payments) but not a consumer's mortgage debt.

The U.S. House Judiciary Committee passed a similar proposal (the Emergency Home Ownership and Mortgage Equity Protection Act), in September of last year, which the banking industry has lobbied hard against.

Other measures being considered are:
• Creating a tax break allowing companies with operating losses this or last year to apply them to past years for a refund;
• Allocation of $10 billion in bonding authority, which would allow housing-finance agencies to help people refinancing subprime loans and first-time home buyers; and
• Authorization of $4 billion in block grants to help localities with high foreclosure rates purchase and rehabilitate vacant properties.
Notably, this week the Massachusetts Attorney General’s Office obtained a temporary injunction against California-based Fremont General and Fremont Investment and Loan. The subprime lender has originated thousands of loans in the Bay state under risky lending practices, according to AG Martha Coakley. The injunction was granted by Judge Ralph D. Gants in Suffolk Superior Court.

Fremont must provide Coakley’s office with at least 30 days notice of all foreclosures the lender intends on initiating. Approximately 2,200 loans in Massachusetts are still owned and serviced by Fremont. The injunction will allow Coakley 45 days to object the foreclosure if deemed “presumptively unfair.”
Additionally, federal officials last week unveiled Project Lifeline – a new program that would allow homeowners who are 90 days or more behind on mortgage payments to delay the foreclosure process for 30 days. During this time homeowners and lenders would attempt to work out more affordable loan terms.

Six of the largest mortgage lenders have joined the initiative – Bank of America, Countrywide Financial, J.P. Morgan Chase & Co., Citigroup, Washington Mutual and Wells Fargo. All are part of Hope Now – a coalition of counselors, investors and lenders to help distressed homeowners.
Source: GBAR 2/08

New Roof Deck Law Passed In Boston

On December 12, 2007 the Boston City Council voted unanimously to approve a new law regulating access to roof decks on residential buildings. The ordinance sponsored by Councilor Michael Ross (District 8-Back Bay, Beacon Hill, Fenway, Kenmore, Mission Hill, West End, Allston) was done in response to an increase in accidents involving tenants on rooftops in the City of Boston. The Greater Boston Real Estate Board was the only real estate organization to participate at the public hearing and successfully amended the ordinance to insure that landlords who have taken steps to prevent unauthorized access to flat roofs would not be unfairly penalized. The City of Boston Inspectional Services Department is developing the permits necessary to comply with the law and has indicated they will be available within the next few weeks.
Source: GBREB 1/08

Top of Page