ConverseTXblog

More details of the Mortgage Forgiveness Debt Relief Act

For space limitations, I reduced the wording to the highlights, but I strongly urge you to read this full article by visiting http://www.hwahomewarranty.com/professionals/news/217077-you-need-to-know-the-details-of-the-mortgage-forgiveness-debt-relief-act Nov 4, 2008 by Chris Kaucnik, Director of Marketing for Home Warranty of America and Michael J. Greenen, CPA, CFP Brief Background Prior to December of 2007 if a homeowner lost his house due to a bank foreclosure, and the bank forgave any difference between the price it was sold for and what was owed, the homeowner would owe additional income tax on that portion. Yes, it's hard to believe, but true. Now, because of the unique stresses in the housing industry lately and on our whole economy, last December Congress stepped in to provide temporary relief in the form of forgiving this debt, but only for the 2007, 2008 and 2009 tax years. After that, the old rule applies again. To be eligible for this tax relief, the mortgage must be for your principal residence. It does NOT apply to vacation, investment or other properties. And no more than $2,000,000 of forgiven debt can be excluded from taxable income. Well, most of us would fall below that threshold anyway. Another very important detail in this temporary tax break is if part of the forgiven debt was a home equity loan and used for purposes other than to build, buy or substantially improve the property, that portion is STILL taxable. In other words, home equity loans used for vacations aren't included. Now, what happens in a short sale? In brief, this can occur when a borrower is behind on the mortgage payments and the lender agrees he can sell his house for less than what is owed on the mortgage. But all proceeds must be turned over to the bank. The portion of the mortgage the bank forgives, PLUS any commission expenses or other selling costs ARE taxable income if this debt is canceled. Yes, even the commission and selling expenses count. No free rides. But, again for taxable years 2007, 2008 and 2009 Congress has provided the same temporary relief in this short sale situation. Other Scenarios There are situations where the bank sees a homeowner with a great credit history, but who is having trouble making mortgage payments for a legitimate reason. If the bank agrees to reduce the mortgage by say 25%, this is again considered a cancellation of debt and would have been subject to income tax. But for the above stated tax periods, this new, temporary tax provision forgives this income. Why is there always a catch! If the homeowner does take advantage of debt cancellation by the lender, they are required, when they do eventually sell, to reduce the basis (original price of the home) equal to the amount forgiven. What does that mean? A homeowner can now receive a $250,000 (single) and $500,000 (married) capital gain exclusion on the sale of their primary residence. It is important to also note that this act extended mortgage insurance as an itemized deduction all the way through 2010. Yes, there's a restriction. The mortgage contract has to be entered into between December 31, 2006 and January 1, 2011.

Get the real estate info you need almost instantly!

I've been working on how to communicate more effectively and efficiently with my current clients and potential customers. Take a look at the top right of this web blog - we've now added the ability to instant message us from this blog for a faster response from my team or you can send an instant message directly to ScottJRealtor from AOL or Yahoo or MSN to my phone or text my Sprint cell number of 2103649434. We are committed to being available during all business hours and replies to you requests are handled as soon as possible.

Fannie Mae & Freddie Mac (F&F) - and us taxpayers

Everyone, and their brother, has heard the news that Fannie & Freddie have been placed “conservatorship”. Like it or not, the government agreed to pump billions of dollars into Fannie Mae and Freddie Mac and assume responsibility for trillions of dollars of their debt, while handing control of the companies to federal regulators and eliminating stockholder equity. Why? Everyone is hoping that it restores confidence in the mortgage markets. The seizure of F&F will cost taxpayers billions of dollars! What has it done already? * Ginnie Mae securities (backed by FHA & VA loans) are better by .75 in price * Fannie Mae securities are better by over 1 point in price * Treasury prices are worse by .75 in price. * The spread between conforming mortgage-backed securities and Treasury securities has dropped dramatically! For example, the 5-yr Treasury Note is worse in price by almost a point, but a 6% mortgage is better by .75 in price. * Fannie’s trading desk suspended operations, temporarily, but is now back in business. * The US Government announced that they will make a market in trading MBS securities. * The stock markets around the world are rallying on the news. * F&F must cease lobbying efforts. * Debt interest is expected to be paid. * Shareholder dividends are expected to cease. * Future F&F losses would be covered by the US Government, and in turn, the taxpayer. * The Treasury will both lend to F&F. * FHFA will gain management control of the two companies and the Treasury will acquire $1 billion in preferred shares in each company. * Many small banks had capital tied up in the preferred shares of Fannie and Freddie, depending on the dividends for reliable income, and the value of those shares to meet the capital levels required by regulators. Apparently either gone or under consideration. Bottom line, the government’s takeover should take out higher rates due to the risk that have been associated with Fannie and Freddie. Hopefully, we should all see more volume in new home sales and refinances. Talk to a lender you trust to see how it affects you personally. I've asked one of my preferred lenders, Jeff Hamilton President of United Lending, whom I trust to start sharing info via my blog so you should see articles appearing often related to the financing side of owning a home. Personally, I'm doing my homework before going to the polls in November! 

New Home/Remodeling County Inspection Program began 9/1/08

Many buyers don't know they should use a REALTOR on the purchase of their new home, below is a prime example of why they should work with someone who stays up to date on the latest requirements. My services are paid by the home builder not the buyer (the price doesn't go up for using a REALTOR, it may even go down). I know we have several subdivisions nearby where this new law will apply, if you have any questions, click on the links provided within the article or just call me. New Home/Remodeling County Inspection Program Law Takes Effect September 1, 2008 for Inspections designed to catch problems before homebuyers move in House Bill 1038, passed by the 2007 Legislature, created a County Inspection program for all homes built or remodeled if the work was performed in unincorporated areas or in cities that do not offer municipal inspections. In anticipation of the program’s Monday start date, the Texas Residential Construction Commission has been designing the program rules and signing up fee inspectors. The three new inspections include a foundation inspection before concrete is poured, a framing and mechanical systems assessment before wallboard is installed and a final inspection upon completion. The inspections must be performed by a fee inspector that is either a licensed engineer, a registered architect, a professional Texas Real Estate Commission inspector or a third party inspector certified by the Texas Residential Construction Commission. To access a list of builders/remodelers that have already registered with the commission, click here For more information about the county inspections program visit the commission’s website or contact them at 877-651-8722 (TRCC).

Home Warranty Info - Help in making a more informed decision

I don't know about you, but I hate paying for insurance (spending money today for what may/may not occur tomorrow).  Home Warranties are different.  Your most expensive investment can be even more expensive if you fail to plan for unexpected repairs and replacements on some of your home's most critical systems and appliances that can fail from normal wear & tear.  You have a variety of choices now in Home Warranty companies and coverage.  This is not meant to endorse any particular company, but to help you make a more informed decision on if a home warranty is worth your hard earned money.  Click on the highlighted company name to see their answers to Why A Home Warranty? First American or Frequently Asked Questions, American Home Shield , Fidelity National Home Warranty or if you prefer a video try Home Warranty of America. I hope this helps, let me know what you think.