Daily Mortgage Gazette

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Congress left town for their spring recess without completing work on two critical programs essential to recovering real estate markets – the National Flood Insurance Program and the Section 502 Rural Housing program (USDA).

Flood Insurance: The National Flood Insurance Program (NFIP) is vitally important to the recovering real estate market. Its authority was allowed to expire on March 28th. Until Congress extends NFIP, no new or renewal flood policies can be issued. Thousands of property buyers will not be able to purchase a home or commercial property without the flood insurance coverage provided by NFIP. Consequently, many real estate transactions will grind to a halt.

Rural Housing Service Mortgage Insurance (USDA): Section 502 rural housing single family mortgage insurance provides housing financing for America’s rural families. These loans are funded by private lenders and simply insured by the Rural Housing Service. As private mortgage markets have dried up, without these guaranteed loans, many rural families are left out in the cold. With funding expected to run out at the end of April, lenders have already stopped accepting new loan applications.

The real estate market cannot afford another setback. Urge Congress to renew both NFIP and the Rural Housing 502 program today.

Subject:
Renew Critical Housing Programs: NFIP and RHS

Dear [ Decision Maker ],

Congress left for recess, leaving two critical housing programs unauthorized or unfunded. On March 28, authority for the National Flood Insurance Program (NFIP) expired, and lenders have stopped accepting applications for the Section 502 rural housing program, which is expected to exhaust its commitment authority by the end of the month.

Until Congress returns and extends these programs, worthy homebuyers will be left without access to mortgages. Given the many challenges financial and real estate markets are facing, now is not the time to create another, but avoidable, obstacle to real estate transactions. Please do not let this continue.

As a Realtor, I can personally attest to these programs’ importance. Since the NFIP expired, my clients are no longer able to purchase a home or commercial property in many parts of my community. They cannot buy the NFIP insurance needed to obtain a mortgage for those properties. In addition, those families and businesses with existing mortgages are not able to renew their required coverage.

Rural families in every state in the nation rely on the Section 502 single family guarantee program to allow them to repair, renovate and purchase homes, as well as prepare sites with water and sewage facilities.

Today, property owners in every state depend on these programs. Each day the Congress fails to act, thousands of real estate transactions will be delayed and homebuyers and homeowners will be left in the lurch.

Upon your return, Congress must swiftly take the necessary steps to ensure the continuation of these critical and essential insurance programs.

Sincerely,
[Your name]
[Your address]

TAKE ACTION ON THIS ISSUE BY SENDING A MESSAGE TO YOUR CONGRESSMEN AND/OR SENATORS. TO DO SO, VISIT THE LINK PROVIDED BELOW:

http://takeaction.realtoractioncenter.com/campaign/nhip_rhs?utm_source=site&utm_medium=post&utm_content=other&utm_campaign=unfinished

California’s first time home buyer and new home tax credit for 2010 that passed legislature and signed by Governor Arnold Schwarzenegger last week has raised questions, home buyers spirits and tax payers blood pressure.

Low blood pressure is important to me, therefore, I will concentrate on maintaining high spirits for you potential homeowners by answering the main questions and introduce some specific scenarios that many of you will relate to.

In March 2009, the initial $100 million tax credit for new homes only was launched. By July 3, 2009 the state had roughly 12000 applications, of which about 10,700 were allocated their credit. The new tax credit for 2010 launching on May 1, 2010 for $200 million will be split evenly; $100 million for new home sales and $100 million for first time home buyers. Should a first time home buyer want to buy a new home, their credit will fall under the new home allocation. At the current pace of resales in California, the first time home buyer allocation could be exhausted within 1 maybe 2 months, whereas the new home credit should last equal to that of 2009, about 4 months. Can you say FRENZY?

FAQ for California Tax Credit
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New Home Tax Credit Highlights
◦$100 million allocation for brand new home purchases
◦Any taxpayer can apply
◦Move up buyers, first time home buyers eligible
◦Detached or Attached single family residence; does not include rentals, 2nd homes or vacation homes
◦Ability to reserve tax credit for home not yet completed
◦Must be primary residence for at least 2 years or tax will need to be refunded
◦Homes must close escrow after May 1st, 2010 but before December 31, 2010
◦If credit lasts this long – you may obtain a contract by December 31, 2010 and close by August 1, 2011
◦Seller must submit Certification of home never been occupied
First Time Home Buyer Credit Highlights
◦$100 million allocation for existing homes; if FTHB buys a new home the credit is taken from the new home allocation
◦Standard sales, short sales, foreclosures are eligible
◦Escrow close date is considered purchase date – those that enter a purchase contract prior to April 30th, 2010 and close after May 1st, 2010 could be eligible for both the Federal refundable credit and the state credit
◦“First Time Home Buyer” = never purchased or no ownership in a principal residence during the preceding 3 year period ending on the date of purchase of the new principal residence
◦Must be primary residence for at least 2 years or tax will need to be refunded
◦Certification from taxpayer that they are a first time home buyer
Scenario #1
My wife and I are in the process of purchasing a new home jointly with my parents (50, 50). The new home is about $450,000 and the closing date of this new home will be in September 2010. There will be 4 persons on the title: me, my wife and both of my parents. However, only my wife, my kid and I will be living in the new home as our primary residence.

With my parents who are not going to live in the new home, on the title, will this affect my being qualified for the full amount of $10,000 California 2010 new home tax credit?

$450,000 purchase price
4 people on title, parents will not live in home
Husband/wife will occupy as primary residence = Qualified for credit

$450,000 x 50% ownership = $225,000 qualified purchase price
$225,000 x 5% credit = $11,250, however $10k is the max

50% Ownership x $10,000 credit = $5000 credit amount

You and your wife would be eligible for a $1666.66/year credit for 3 years as long as you stay in the home as your primary for the first 2 years.

Scenario #2
My wife and I plan on purchasing a home between May 1 2010 and Dec 2010; However, she and her sister are co-owners of a rental condo. Do we still qualify for first time homebuyer credit for CA?

As long as the residence that is held by your wife and her sister has not been a principal residence for her in the preceding 3 years up until the date you purchase the new home, she will be okay. So basically that condo has to be a rental or claimed as such on the tax returns.

Scenario #3
I am in the process of closing our escrow on April 19th for an existing home (not new) and I am a first time home buyer. Given that the tax credit is going to be effective from May 1st 2010, does it makes sense to push our closing date to May 1st ?

This is simply to take advantage of both credits, the Federal $8000 tax credit and the state. My suggestion if you choose to extend your escrow would be to speak with your tax professional to make sure you will be receiving a benefit from the tax credit.

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The California Tax Credit for new homes and first time home buyers is certainly a booster to those purchasing right now. This is a temporary boost folks. This should not be the only reason that you are out trying to purchase a home. If it is, well, you better hurry.

The Franchise Tax Board just released the update to the new credit on their site on March 30, 2010.

It’s strange how you have the Government allowing lenders to “modify” borrowers loans into payments that they can afford in an effort to boost the industry all the while to prevent foreclosures/short sales from occurring. Yet, less than 10% of all Loan Modifications actually get approved. WHY IS THAT? You won’t believe the sweetheart deal that Indymac Bank was given by the FDIC. It may make you very angry to realize the truth. Share this video with everyone that you know. Let everyone know where the REAL problems lie.

FHA home loans are federal assistance mortgages made by lenders, and backed by the government. The FHA doesn’t make loans to homeowners — it insures loans made to homeowners by federally-qualified lenders.

By all accounts, FHA home loans are surging in popularity.

• 2006, FHA insured 3.3% of all mortgages made
• Q2 2009, FHA insured 19.2% of all mortgages made

A major reason for the increase can be tied to guidelines.

As compared to its conforming mortgage cousins Fannie Mae and Freddie Mac, FHA home loans have lower downpayment requirements and looser credit standards. The FHA allows downpayments of 3.5 percent and Fannie Mae and Freddie Mac do not, as an example.

Another reason is that FHA home loans aren’t subject to credit score fees the way that conforming mortgages are. Through Fannie or Freddie, a home buyer with a 650 FICO and 20% down is subject to 3% in risk fees. Via the FHA, the fee is zero, making FHA the better “deal”.

The FHA published its 2010 loan limits. There’s no change from 2009.

The base 2010 FHA loan limits are:

• 1-unit : $271,050
• 2-unit : $347,000
• 3-unit : $419,400
• 4-unit : $521,250

We say “base” because these loan limits don’t apply to all areas equally. Higher-cost regions get higher loan limits, based on typical home values. Homes in Los Angeles County, for example, can be FHA-insured up to $729,750 in 2010, and there are special exceptions made for Alaska and Hawaii.

The official FHA announcement included a complete, county-by-county FHA loan limit list. The first spreadsheet shows each county at or above the $729,750 maximum; the second list is everyone else.

If your home’s county is on neither list, use the “base” numbers above.

Both mortgage rates and home affordability took a turn for the better Wednesday after the Federal Reserve released its December 15-16, 2009 meeting minutes.

The Fed Minutes is a follow-up piece to the post-FOMC meeting press release. But whereas the press release is succinct and to-the-point, the minutes are lengthy and often meandering.

As a comparison, December’s press release contained 535 words. December’s minutes had 6,260.

But these “extra words” aren’t superfluous. They’re actually very important to homeowners. Because the Federal Reserve’s internal debates help to shape Wall Street expectations, it doesn’t take much for those conversations to have a trickle-down effect on Main Street.

For example, after the December meeting, the Fed said that economic growth is steady, inflation is in check, and an orderly wind-down of mortgage market support was underway. A look at the minutes, though, showed some disconnect.

Some Fed members believe rising commodity prices could lead to stronger-than-expected, and others think that improvement is housing could be “undercut” by a pull-back in government stimulus.

Overall, the Fed appears optimistic about the economy, but not as optimistic as on December 16. Mortgage markets responded favorably to the minutes and mortgage pricing improved.

Although rates remain higher as compared to early-December, pricing has been on a good run this week. If you’re under contract for a home or just looking to refinance, now may be a good time to lock.