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]