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Banks Willing To Rent Tenants Back Their Foreclosed Home

fanniemae_3In a surprise move, Fannie Mae announced it will begin allowing homeowners facing foreclosure to rent back their homes for up to one year.   This program allows homeowners to pay market value for rent, a sum typically lower than the price they are currently paying for their mortgage.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, Vice President of Fannie Mae. “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

Many see this as a calculated bet from Fannie Mae, that home prices will be higher another year into the economic recovery.  The question that remains is, will it work?  Big banks got into this crisis by over leveraging themselves during the subprime mortgage days.  This move sees them once again putting all their eggs in one basket and betting on a rise in home values.

Fannie Mae will not have to list the homes as “for sale” so on their books they will show a revenue increase and will not have to write off the loss.  This will also make the ever growing shadow inventory even more complicated to dissect.  Many economists guess the number of homes that are currently foreclosed on but have not yet been listed on the market at over 7 million.  The move by Fannie Mae will significantly increase the shadow inventory, but it will be difficult to know by how much, given that the house will not technically be foreclosed on until the lease runs out.

If the bet pays off, it could be a win/win.  The homeowner will have cheap rent for at least one year, while Fannie Mae will take less of a loss when they do finally sell the house.  If however the shadow inventory starts making news and home prices decline even further, tax payers will be left with the bill. Again.

The “New” Homebuyers Tax Credit Explained

tax-credit-pic1If you were one of the many Americans, holding your breath in hopes that the New Homebuyer tax credit would be extended, your wait it over. Many had predicted that the highly successful tax credit would be extended, but last week congress made it official and changed the deadline to April 30, 2010. This means that you must have purchased a home by April 30, 2010 and must close on that purchase by June 30, 2010.

Besides the extension their are other major changes that should not be overlooked.

Expansion of the tax credit – The homebuyer credit is no longer limited to first-time homebuyers. Homebuyers who have owned a home for 5 of the last 8 years will qualify for a tax credit of as much $6,500. The 5 years of ownership must be consecutive years and the home must be the buyer’s principal residence. The credit is available for purchases made after Nov. 6, 2009 and before May 1, 2010.

Higher Income Limits – Prior to these changes the tax credit phase-out range was a Modified Adjusted Gross Income (MAGI) of $75,000 – $95,000 (for single taxpayers) and $150,000 – $170,000 (for married taxpayers). Under the new legislation, the MAGI ranges change to $125,000 – $145,000 (for single taxpayers) and $225,000 – $245,000 (for married taxpayers).

Home purchased for more than $800,000 after Nov. 6, 2009 do not qualify for either the $8,000 or the $6,500 tax credits. Also, homes purchased from in-laws after Nov. 6, 2009 do not qualify for either credit.

Dependents of taxpayers under the age of 18 do not qualify for the tax credits.

Will The $8000 Tax Credit Be Extended?

By now most Americans are aware of the 8,000 dollar tax credit offered by the federal government for first time home buyers.  This is a dollar for dollar credit that will be payed out on your tax return the following year.  So if you are a first time home buyer and close on your house before Dec. 1st, 2009 Uncle Sam will write you a check for 8,000 dollars.

As the deadline grows near we are sure to see a spike in the amount of first time home buyers entering the market.  The question many will be asking themselves is “will the tax credit be extended?”  The answer like many things involving the federal government is… maybe.

If you are a first time buyer thinking of jumping into the market there is much to consider.  The safe move is to purchase now.  If you are in the market and there is nothing keeping you from buying at this very moment, this may be the best option.  Buying now will guarantee your 8,000 credit next year, while eliminating the anxiety you may feel while waiting to see if congress will act.

While the safe bet is to buy now, not everyone is in the perfect position to buy at this moment.  There are many reasons one might wish to push their luck and hope congress extends the tax credit.  If you are in a lease that is not set to expire, or if you are having a hard time qualifying for a loan based on the length of time you have been at a job, or  residence, waiting may be in your best interest.

If you find yourself in the latter group hoping the tax credit is extended there is some good news.  Many experts feel there is a better than average chance the credits will be extended.  Why will congress extend this tax credit?  The same reason that congress does almost anything these days, the Economy.

The NAR(National Association of Realtors) has reported that the average home sale generates 63,000 dollars in ripple effect spending, or money spent buying a home not including the sale of the home itself.  Ripple effect spending includes moving fees, realtor fees, title fees, furniture, lawn chairs, etc.  They also estimate that up to 350,000 homes have been sold because of the tax credit.  that’s a lot of zero’s to be adding to the slumping economy.

If you plan on waiting it out and rolling the dice, the odds may very well be in your favor.  However do not expect your wait to be worry free.  If congress does pass an extension to the tax credit, they will more than likely wait till the last minute to get as many people as possible to act early.  So if your in a position to act now your blood pressure may well thank you, and if your plan is to wait it out may the force be with you!

Obama to visit Mesa and see foreclosure situation, $15,000 tax credit may still come back

obamaPresident Barack Obama will be making his first trip as President to Arizona this week to hear about the Phoenix Area foreclosure market up close and personal. The President is scheduled to tour an unspecified Mesa neighborhood that has been hit hard by the foreclosure crisis before heading to Dobson High School to deliver a speech on the subject.

One suggestion to help the foreclosure market proposed by U.S. Senator Johnny Isakson (R-GA.) was a $15,000 tax credit for all homebuyers who purchase a primary resideance over the next year. That tax credit was cut down to $8,000 and included in the stimulus bill signed by Obama today.

That does not mean the $15,000 credit is dead though. Isakson told a Georgia radion station today he intended to bring the bill back up next week after legislators returned from recess. The new version would not be an amendment, but a stand-alone bill and believed he had the votes to get it through both the Senate and the House. After placing a call into Isakson’s office they did verify the Senator is considering putting the bill in after recess, but has not done so yet.

If you support this idea to give the housing market the boost it needs contact Isakson’s office and encourage them to move forward with the measure.

Latest on the stimulus bill and house tax credit

The US House is voting on the final passage of the bill today and then the Senate will follow shortly after. It is expected the “Stimulus” bill will have little problem getting through either chamber.

One new detail on the housing portion of the bill that I had not previously reported about has come to light. The Senate had wanted the tax credit for first time home buyers to be for on purchases of homes for one year, but the final version is only on purchases of homes that close by August 31, 2009.

Latest update on the house tax credit in the “Stimulus Bill”

making-sausageAt our office meeting this morning there was a lot of talk about the on-again, off-again tax credit in the stimulus bill so I promised a couple of the agents there I would research it when I got back to the office and post an update. Here is the latest. Yesterday the AP was reporting the tax credit was completely removed from the final version of the bill, then word came last night that said it was not removed, but reduced.

After reading more about it online one thing because clear, the old making laws is like making sausage is true. I contacted one of my old political buddies who works on the Hill and he did some quick research for me. Here is what the latest version is to the best of his understanding. He told me they have not even seen the final version has not yet been distributed to Republicans so he is going off what he has heard. In other words don’t take this for gospel.

  • The current tax credit which is set to expire in July is for $7,500. The version that passed the Senate in the new bill was for $15,0000. The final version looks to be $8,000 or 10% of the home purchase price, whichever is less.
  • The current $7,500 tax credit has to be repaid, the Senate version would not need to be repaid if you lived in the home for two years and the new version appears to have not have to be repaid, but we are unsure at this time if there is a time restriction on that.
  • The current credit on the books is for first time home buyers, the Senate version was for any home buyer’s primary residency and the final version is back to first time home buyers. First time home buyer is anyone who has not owned a house in the last three years.
  • There will more than likely be an income cap of around $150,000, you will need to make under that to qualify.

Again this is not gospel, just the best information we have at this time. As new information is clarified we will bring it to you.

$15,000 tax credit becomes zero relief for housing industry

Just a couple days ago I blogged about the “Stimulus Package” provision to add a $15,000 tax credit for home buyers to the bill. The $15,000 credit would have been allowed to have been taken by the home buyer over a two year period. The credit also would not have been required to be repaid.

You can disregard that post. Today the committees killed that provision.

Latest stimulus package and what it may mean to home buyers

im-just-a-bill-optWe can have a long debate about the latest stimulus package and whether it is a good thing of a bad thing. There are plenty of opinions on both sides and I will bite my tongue for now. There is one part of the bill that passed the United State Senate last night that I wanted to share with you as a potential home buyer.

You may have heard by now about the potential $15,000 tax credit for home buyers. The amendment will replace the current $7,500 tax credit for first time home buyers that is currently planned to expire in July of 2009. I have read the amendment two times, and being a former state representative you would think I could read a bill by now, but it is still somewhat confusing. Here is how I read it to be different from the current $7,500 tax credit.

  • The $7,500 tax credit is for first time buyers while the $15,000 is for any buyer who will use the house as a primary residence.
  • The $7,500 needs to be paid back, interest free, over 15 years while the $15,000 does not need to be paid back if you live in the home for 2 years.
  • The $15,000 is a maximum and based on 10% of your purchase prise. So if you purchase a home at $100,000 you will get a $10,000 credit.
  • The new amount will start on the day the bill is signed and be in effect for one year. It will not be retroactive.

Also likely to come some time before the stimulus package is finalized is an amendment that could greatly lower interest rates to as low as 4%.

*I am not an expert on this subject, this is my best understanding of the amendment from my reading of it. Also this has only passed the Senate and will need to pass the House and most likely a conference committee between the two chambers and could be changed at any one of those steps.