FHA Waives 90-Flip Rule
| HUD No. 10-011 Lemar Wooley (202) 708-0685 |
FOR RELEASE Friday January 15, 2010 |
Measure to help bring stability to home values and accelerate sale of vacant properties
WASHINGTON - 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 announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.
"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization."
With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.
"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.
In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.
The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."
The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:
- All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
- In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
- The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website.
HUD is the nation's housing agency committed to sustaining homeownership; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at www.hud.gov and espanol.hud.gov.
Posted at 12:50PM Jan 22, 2010 by Olaf Kilthau in General | Comments[0]
You can't file for your $8,000 homebuyer tax credit
NEW YORK (CNNMoney.com) -- Did you purchase a home after Nov. 6? Don't expect your $8,000 homebuyer tax credit any time soon.
UPDATED: IRS releases new form, begins accepting claims again
All they had to do was file an amendment to their 2008 tax returns (the ones they filed last spring) and claim the promised refund of 10% of the purchase price -- up to $8,000. "I closed on a Friday and I filed an amendment to my taxes on Monday," said Valatisha Jacinto, who purchased her Waco, Texas, home last March. But that all changed on Nov. 6. One CNNMoney.com reader wrote: "I bought a new home to get the $8,000 tax credit like many others. However the IRS has NOT ALLOWED ANYONE TO FILE since November 6th!! It has been over 2 MONTHS!!" He's right. Nov. 6 marked the date that the rules changed because an extended -- and expanded -- version of the homebuyer tax credit went into effect. And that put filing for the credit on hold.
What I did with my $8,000 tax credit
Originally, the credit was just good for first-time buyers and was slated to end on Nov. 30. But Congress extended the credit to include contracts signed by April 30 and closed by June 30. It also made a refund of up to $6,500 available to existing homeowners looking to buy something new.
And that marked the start of a new IRS paperwork wrangle.
Those homeowners who closed their sale before Nov. 6 use Form 5405 to claim the credit right away. But those closing after that date are in limbo because no form yet exists for them to file. The IRS had been expected to come out with a revised form by early January, but it has yet to release anything.
Robert Dietz, an economist with the National Association of Home Builders who has been monitoring the situation, said the delay may be caused because numerous parties, including the Treasury Department, have to agree on how to process all the new documentation that the expanded tax credit requires. Whereas before, all you did was file a form saying you'd bought a house -- no proof required. Now, for example, existing homeowners buying new places must provide proof that they owned and resided in their previous homes for at least five of the past eight years. They may just be making sure all their i's are dotted and their t's are crossed before they release it," Dietz said.
No e-filing for homebuyers
Even after the new form is ready, new filers will still face delays. Anyone who wants to claim their first-time homebuyer tax on their 2009 taxes (the ones being filed now through April 15) can't do it it electronically. That's right: Back to paper filing. Part of that change is because the IRS has become more concerned about fraud as it discovers more people claimed the tax credit without actually purchasing property. In October, a tax preparer, James Otto Price III, was the first person convicted of this crime. He falsely claimed the credit for 15 clients. "Because of the scams, the IRS started sending back the amended returns and asking for proof," said Mary Mellem of David & Mary Mellem, EAs & Ashwaubenon Tax Professionals. The IRS, she said, now requires a signed copy of the settlement statement ( HUD-1), plus a signed mortgage statement with the new address and a copy of either the taxpayer's drivers license, bank statement or pay stub, showing the new address. That paperwork slows the process. The system has no way of sending along the documents they're requiring," said Mellem. "Taxpayers must file a paper return instead." The IRS points out that taxpayers can still use the electronic forms available on its Web site; they just have to print them out, attach the proof and mail everything in. And that can take quite a while. "Taxpayers are looking at another three months before they get their returns," said Mellem.
Since Congress passed the tax credit last February as part of the stimulus program, more than 1.4 million buyers have scrambled to take advantage of it, according to the IRS.
Posted at 12:26PM Jan 22, 2010 by Olaf Kilthau in General | Comments[0]
HOME BUYER TAX CREDIT
IRS to outline changes in the home buyer tax credit program Revisions include expanded income limits, a cap on home prices, additional documentation requirements and prohibitions against claims by dependents. By Kenneth R. Harney
December 6, 2009
Reporting from Washington
If you’re thinking about applying for the new $6,500 home buyer federal tax credit or the extended $8,000 version, the Internal Revenue Service has just issued its first formal guidelines for you.
Tops on the agency's list of advice: Cool it for a couple of weeks. Even if you qualify for one of the credits, don't send in any requests to the IRS quite yet. Wait until later this month when the agency publishes its revised Form 5405 with the key instructions needed to get you a check from the government.
The forthcoming version of the form will incorporate the major changes to the tax credit program made by Congress in legislation signed by President Obama on Nov. 6. These include expanded income limits, a cap on home prices, additional documentation requirements and prohibitions against claims by dependents.
In a tax bulletin issued just before Thanksgiving, the IRS emphasized that all home purchasers after Nov. 6 "must use this new version [of Form 5405] to claim the credit." Put another way: If you send in the old version -- the one you can currently download from the agency's website, www.irs.gov -- your request for the credit will probably go nowhere.
The legislation -- known as the Worker, Homeownership and Business Assistance Act of 2009 -- extended the $8,000 first-time home purchaser credit until April 30 for signed contracts and June 30 for closings. The law also created a new tax credit for people who have owned a principal residence for a consecutive five of the previous eight years, and who purchase a replacement principal residence with a signed contract no later than April 30, followed by a closing no later than June 30.
Qualified repeat buyers can obtain credits up to $6,500. For both the first-time and repeat buyer program, the credit is equal to 10% of the purchase price of the house, up to a maximum of either $6,500 or $8,000.
The new IRS bulletin also outlined the agency's guidance on other important features of the amended credit program:
* Members of the armed forces, as well as diplomatic and intelligence personnel serving in foreign countries, will get an extra year to buy a principal residence and still qualify for a credit. They will have until April 30, 2011, to enter into a contract to purchase a house, and until June 30, 2011, to close on it.
* Anyone who buys a house after Nov. 6 -- even those who had intended to get in the door before the previous Nov. 30 expiration date for the $8,000 credit -- will now need to comply with several new rules. First, the house cannot cost more than $800,000. Second, no one under age 18 can claim the credit no matter what the circumstances. And finally, anyone who is counted as a dependent on another taxpayer's federal filings is ineligible for a home purchase tax credit.
* The expanded income limits for purchasers after Nov. 6 range to $125,000 in "modified adjusted gross income" for single taxpayers and to $225,000 for those who file jointly. Singles with incomes between $125,000 and $145,000 may be eligible for reduced credit amounts, as are joint filers with incomes from $225,000 to $245,000. Anyone with an income above these amounts cannot qualify for either of the credits. Under the pre-Nov. 6 rules, taxpayers applying for the $8,000 credit were limited to incomes of $75,000 (single filer) to $150,000 (joint filer).
The IRS continues to offer detailed consumer information resources on the credits, including questions and answers on a variety of home purchase scenarios.
For example, some taxpayers seeking the extended $8,000 credit are uncertain about co-purchase and co-signing situations, especially involving parents and adult children. When a home-owning parent co-signs for a mortgage with a son or daughter, and both names appear on the note, can the son or daughter qualify for the first-time purchaser credit?
The IRS says the parent clearly does not qualify for any portion of the credit since he or she already owns a principal residence. But if the son or daughter has not owned a house during the three years preceding the current purchase, and qualifies on income, he or she can be allocated the entire $8,000 credit.
Similarly, when unmarried individuals co-purchase a house, and only one of them is eligible for the credit, the full $8,000 can be allocated to the eligible buyer.
kenharney@earthlink.net
Distributed by the Washington Post Writers Group.
Copyright © 2009, The Los Angeles Times
Posted at 06:03PM Dec 10, 2009 by Olaf Kilthau in General | Comments[0]
New Federal Reserve Rules for "Subprime" loans
New rules coming soon Beginning Oct. 1, new rules adopted by the Federal Reserve will go into effect, requiring greater diligence on the part of mortgage lenders and brokers who issue high-cost loans for borrowers with less than favorable credit. The interest rates on these loans are at least 1.5 percentage points greater than the average prime mortgage rate. The regulations, which were finalized in July 2008, prohibit lenders from making a high-cost mortgage without verifying that a borrower could repay the loan in the conventional way, and not through a foreclosure sale. During the height of the market, subprime lenders often would offer loans without requiring borrowers to provide proof that they could make the monthly payments. In some cases, borrowers used stated income loans, which allowed some borrowers to fabricate annual income figures and buy homes without down payments. Although many believe the Federal Reserve’s new rules represent one of the more substantial efforts on the part of the federal government to combat such lending practices, some consumer advocates are concerned. According to a policy associate at the Center for Responsible Lending, the new regulations do not cover option ARMs, which enable borrowers to choose from several monthly payment options during the loan’s early years. To read the full story, please click here: http://www.nytimes.com/2009/09/27/realestate/27mort.html?ref=realestate
Posted at 08:50AM Oct 02, 2009 by Olaf Kilthau in General | Comments[0]
C.A.R. Financing Guide for CA Home Buyers
The CALIFORNIA ASSOCIATION OF REALTORS® has developed this guide as an introduction to the programs currently available to potential California home buyers from local, state, and federal agencies. With this guide, you’ll learn the basics of working with these programs and some practical tips to help you avoid the common pitfalls. For those areas not represented in this document, you are encouraged to check with your local city or county government for details on programs specific to your area.
Be sure to use this valuable information with your clients.
C.A.R. Financing Guide for California Home Buyers
Posted at 11:29PM Sep 27, 2009 by Olaf Kilthau in General | Comments[0]
Home Buyer Tax Credit Chart
Copyright ã 2009 CALIFORNIA ASSOCIATION OF REALTORS â (C.A.R.). Permission is granted to C.A.R. members only to reprint and use this material for non-commercial purposes provided credit is given to the C.A.R. Legal Department. Other reproduction or use is strictly prohibited without the express written permission of the C.A.R. Legal Department. All rights reserved.
For California homebuyers, tax time is now tax relief time too. Thanks to two recent laws, a California homebuyer may qualify for $18,000 in tax credits for buying his or her piece of the American dream. The two tax credits are a first-time homebuyer credit up to $8,000 under federal law, and a new home credit up to $10,000 under California law. For more information on the tax credit laws, C.A.R.’s Legal Department has a legal article entitled Housing Stimulus Laws of 2009 which is available for members only.
Here’s a quick summary of the two tax credit laws:
|
HOMEBUYER TAX CREDIT |
FEDERAL |
CALIFORNIA |
|
Amount of Tax Credit |
10% of purchase price not to exceed $8,000. |
5% of purchase price, not to exceed $10,000. Maximum tax credit for all taxpayers is $100 million to be allocated on a first-come, first‑served basis. |
|
Principal Residence |
Yes. Property purchased must be the taxpayer’s principal residence which is generally the home the taxpayer lives in most of the time (26 U.S.C. § 121). |
Yes. Property purchased must be a qualified principal residence and eligible for the homeowner’s exemption from property taxes (Cal. Tax & Rev. Code § 218). |
|
Type of Property |
House, condominium, townhome, manufactured home, apartment cooperative, houseboat, houstrailer, or other type of property located in the U.S. |
Single-family residence, whether detached or attached, condominium, cooperative project unit, houseboat, manufactured home, or mobilehome. |
|
First-time Homebuyer |
Yes. The buyer (and buyer’s spouse if any) must not have owned a principal residence during the three-year period before date of purchase. |
No. The buyer need not be a first-time homebuyer. |
|
Unoccupied Property |
No. Property may have been previously occupied or not. |
Yes. Property must have never been previously occupied as certified by the seller. |
|
Minimum Occupancy Requirement |
Must be the buyer’s principal residence for 36 months after purchase, otherwise credit must be repaid. |
Must be the buyer’s principal residence for 2 years after purchase, otherwise credit must be repaid. |
|
Income Restriction |
Yes. Tax credit begins to phase out if modified adjusted gross income is over $75,000 (or $150,000 for joint filers). No tax credit at all if modified adjusted gross income is over $95,000 (or $170,000 for joint filers). |
No. |
|
Date of Purchase |
January 1, 2009 to November 30, 2009, inclusive. (Note: A repayable $7,500 tax credit is available for purchases from April 9, 2008 to December 31, 2008.) |
March 1, 2009 to February 28, 2010, unless $100 million funding runs out. |
|
Refundable |
Yes. Any amount of the tax credit not used to reduce the tax owed may be added to the taxpayer’s tax refund check. |
No. |
|
Repayment |
The buyer need not repay the tax credit if the buyer owns and occupies the property for at least 36 months after the purchase. |
The buyer need not repay the tax credit if the buyer owns and occupies the property for at least two years immediately following the purchase. |
|
Multiple Buyers |
The $8,000 tax credit may be allocated between eligible taxpayers in any reasonable manner. Click here for an explanation with examples: Federal Homebuyers Tax Credit Allocation Unmarried Persons. |
The $10,000 tax credit may be allocated between eligible taxpayers based on their percentage of ownership. |
|
Maximum Credit for All Taxpayers |
N/A |
$100 million. |
|
When to Claim |
Full tax credit may be claimed on 2008 or 2009 tax returns. |
1/3 of total tax credit may be claimed each year for 3 successive years (e.g. $3,333 for 2009, $3,333 for 2010, and $3,333 for 2011). |
|
Tax Agency |
Internal Revenue Service (IRS). |
Franchise Tax Board (FTB). |
|
How to File |
First-Time Homebuyer Credit (IRS Form 5405) to be filed with 2008 or 2009 tax returns |
Specific procedure for claiming credit includes completing an Application for New Home Credit (FTB Form 3528-A). |
|
When to File Form |
Form 5405 must be filed with 2008 or 2009 tax returns. |
FTB Form 3528-A must be faxed by escrow to the FTB within one week after close of escrow and filed with the buyer’s 2009 or 2010 tax returns. |
|
Exceptions |
Acquisitions by gift or inheritance, acquisitions from related persons as defined, and buyers who are nonresident aliens. |
Credit allowed is not a business credit under Cal. Tax & Rev. Code § 17039.2. |
|
Legal Authority |
26 U.S.C. section 36. |
Cal. Rev. & Tax Code section 17059 (as amended by Senate Bill 15). |
|
Date of Enactment |
February 17, 2009. |
February 20, 2009. |
|
More Information |
IRS Web site at http://www.irs.gov/newsroom/article/0,,id= |
FTB Web site at http://www.ftb.ca.gov/ individuals/ New_Home_Credit.shtml which includes a tally of the $100 million original funding that is still available. |
Readers who require specific advice should consult an attorney.
The information contained herein is believed accurate as of September 15, 2009. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney.
Posted at 11:21PM Sep 27, 2009 by Olaf Kilthau in General | Comments[0]
2008-2009 State of the California Housing Market - Highlights
Outlook and Forecast
Sales of existing detached homes hit bottom in the last quarter of 2007, and have since gradually climbed back. Following two years of steep declines exceeding 20 percent, annual sales in the California housing market are expected to increase 12 percent to 395,600 in sales in 2008, with a further 12.5 percent increase projected in 2009. The increase in sales is largely attributed to the growth in the absorption of distressed properties with huge mark-downs in prices.
Home prices have shown significant and unprecedented downward movement over the past year. The pile-up in foreclosures, real-estate owned properties (REOs), and short sales will continue to put downward pressure on home prices until mortgage problems begin to subside in the second half of 2009. The market will continue to experience large year-to-year decreases in the coming months, and the statewide median price is expected to decline 31.7 percent to $381,000 for 2008, the first decline since 1996. The price will further decline by 6.0 percent in 2009 to $358,000.
This year’s State of the California Housing Market report examines the developments in the housing market and real estate finance over the past year, places recent events into a historical context, and looks ahead to 2009. The annual report also provides detailed statistics on consumer demographics, data on home buying and selling behaviors, analyses on current housing market conditions, and insights on the direction of the market.
Key Findings
· The steep decline in price largely resulted from the increase in the share of distressed sales across the state. According to the annual survey results, one-third of all home sales were distressed sales, with a 2 to 1 ratio between REOs and short sales.
· Many home sellers sold their properties at a loss, as the increase in repair costs/price adjustments cut into their equity gains. The number of sellers who sold their home with a loss almost doubled from 11.9 percent in 2007 to a record-setting 22.2 percent in 2008. This was well above 1.9 percent in 2006, and was almost triple the long-term average of 7.7 percent.
· Home buyers took advantage of falling home prices and buying bigger houses at a lower price per square foot compared to previous year. The size of a typical home bought in 2008 was 1,700 square feet, compared to 1,600 square feet in 2007. Buyers paid $267 per square foot for a typical home in 2008, as compared to $336 in 2007. The median price per square foot declined for the second year in a row since peaking in 2006, and was the lowest since 2003.
· FHA and VA loans have become widely used as a result of the changing environment in the financial market. FHA loans as a first mortgage accounted for just one percent of total mortgages for most of this decade. With higher loan limits in 2008, FHA loans jumped from 1.2 percent of all loans in 2007 to 18.8 percent. VA loans, meanwhile, increased from 0.3 percent in 2007 to 2.7 percent in 2008.
· The share of home buyers who had a zero down payment declined abruptly from 17.7 percent in 2007 to 3.4 percent in 2008, the lowest level in at least the last ten years. The decline was more obvious for first-time buyers than for repeat buyers.
· Consistent with the increasing trend of distressed sales, almost one of five (19.8 percent) sellers sold their property because the property was in foreclosure, short sales, or default, an increase of 6 percent from 2007. “Change in family status” was one of the most important reason to sell, increasing from 9.8 percent in 2007 to 19.1 percent in 2008. “Retirement or moving to a retirement community” followed with 11.5 percent, a decline from 15.3 percent in 2008. The desire for a better location, which was the number one reason to sell, dropped by more than half from 17.5 percent in 2007 to 8.1 percent.
· Three of five (56.6 percent) first-time buyers bought their property primarily because they were tired of renting. Other important reasons for buying properties include
o Desire for a larger house (9.2 percent)
o Desire for a better location (9.2 percent)
o Change in family status (7.9 percent)
o Investment and tax considerations (7.0 percent)
· The single most important reason to buy for repeat buyers was their “desire for a better/other location” (21.2 percent) and their “desire (for) a larger home” (19.5 percent). Other important reasons for buying properties include
o Investment and tax considerations (18.0 percent)
o Changed jobs (8.0 percent)
o Change in family status (7.3 percent)
o Tired of renting (7.1 percent)
Copied from California Association of Realtors website June 18, 2009
Posted at 05:10PM Jun 18, 2009 by Olaf Kilthau in General | Comments[0]
Financial Incentives and Uniform Process for Short Sales Announced
May 14, 2009 Good news from We’re gratified that the administration has recognized the need to streamline the short sale and deeds-in-lieu processes, and has provided viable options to homeowners who have fallen behind on their mortgages but owe more than their homes would sell for in today’s challenging market. We also appreciate the efforts of our colleagues at NAR for keeping this issue front and center in our nation’s capital. In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. The property also must be listed with a licensed real estate professional with experience in the neighborhood, and no foreclosure may take place during the marketing period, of at least 90 days, as specified in the Short Sale Agreement. The Short Sale Agreement also must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received. Servicers may not charge fees to borrowers/homeowners for participating in the program. Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement, plus any extensions. Copyright © 2009 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)
Incentives in the FAP program include $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; $1,500 for borrowers/homeowners to help with relocation expenses; and up to $1,000 toward the cost of paying junior lien holders to release their liens ($1 from the government for every $2 paid by the investors to the second lien holders). The FAP includes streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter to minimize complexity and increase use of the short sale option. Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements, based on an appraisal or one or more broker price opinions, issued no more than 120 days before the date of the short sale agreement.
Posted at 11:33AM May 24, 2009 by Olaf Kilthau in Real Estate | Comments[0]