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
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