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Senators Agree to Extend Homebuyer Tax Credit

Monday, November 2nd, 2009

Senators agree to extend homebuyer tax credit

By STEPHEN OHLEMACHER
Associated Press Writer

Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.

The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November. The Commerce Department said Wednesday that new home sales fell 3.6 percent in September, and some industry representatives blamed uncertainty about the tax credit.

Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.

The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.

Senators were still negotiating the expansion of a separate tax credit that lets money-losing businesses get refunds for taxes paid in previous years, providing them with an immediate source of cash.

Senators in both political parties were hoping to add both tax provisions to a bill that would give people running out of unemployment insurance benefits up to 20 more weeks of federal aid. The Senate could vote on the overall bill as early as Thursday, but lawmakers were still haggling over several unrelated amendments Wednesday evening.

Popular bills like the one to extend unemployment benefits often attract amendments that would have a difficult time passing on their own.

Republicans were demanding that they be given a chance to offer amendments to restrict federal aid to the beleaguered community activist group ACORN and on requiring that people receiving unemployment insurance be processed through E-Verify, an Internet-based system that employers use to check on the immigration status of new hires.

Majority Democrats have refused to add the amendments.

If the Senate passes the bill, it would go to the House, which passed a similar bill extending unemployment benefits last month. House leaders have also said they support extending the tax credit for homebuyers.

Sen. Chris Dodd, D-Conn., has been negotiating for several weeks with Sen. Johnny Isakson, R-Ga., to craft an extended tax credit for homebuyers that would pass the Senate.

Lawmakers didn’t release a cost estimate for extending the tax credit, though similar proposals were projected to cost about $10 billion.

Industry representatives said uncertainty about the tax credit is hurting new home sales. September’s decline was the first since March.

It takes 45 days to 60 days to close on a house, making it unlikely a sale made today would be consummated by the end of November, said Lucien Salvant, spokesman for the National Association of Realtors.

“Buyers right now have an incentive to hold off, not knowing whether the credit will be extended,” Salvant said.

About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.

The tax credit for money-losing businesses is a favorite among Republican lawmakers. Businesses could get tax refunds by using losses from 2008 and 2009 to offset taxable profits made in the previous five years. Under current law, they can only offset profits from the previous two years.

The provision would help a variety of industries, including retailers, manufacturers and home builders, though it’s expensive.

“It’s clearly a way to put cash in the hands of some major economic players,” said Clint Stretch, a tax policy expert at Deloitte Tax.

A similar proposal that was ultimately dropped from the economic stimulus package enacted in February would have cost nearly $20 billion over 10 years. Lawmakers are working to reduce the price tag.

Because people are so strapped for cash, this is a good way to get refunds when businesses need them for operating expenses, said Rachelle Bernstein, vice president and tax counsel for the National Retail Federation.

Tags: 2009 tax credit, home buyers tax credit, tax credit extended
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CIT Files for Chapter 11 BK Protection

Monday, November 2nd, 2009

WASHINGTON (AP) — After struggling for months to avert bankruptcy, lender CIT Group has filed for Chapter 11 protection in an attempt to restructure its debt while trying to keep badly needed loans flowing to thousands of mid-sized and small businesses.

Related Quotes

Symbol	Price	Change
CIT	0.29	-0.43

CIT made the filing in New York bankruptcy court Sunday, after a debt-exchange offer to bondholders failed. CIT said in a statement that its bondholders overwhelmingly opted for a prepackaged reorganization plan which will reduce total debt by $10 billion while allowing the company to continue to do business.

The Chapter 11 filing is one of the biggest in U.S. corporate history, following Lehman Brothers, Washington Mutual, WorldCom and General Motors. CIT’s bankruptcy filing shows $71 billion in finance and leasing assets against total debt of $64.9 billion.

A prepackaged bankruptcy, which has the support of major bondholders, speeds up the process of restructuring CIT’s debt and could allow it to exit court protection by the end of the year. In addition to reducing its debt, CIT said the plan cuts cash needs over the next three years, which should help it return to profitability more quickly.

“The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy,” said Jeffrey M. Peek, chairman and CEO. Peek has said he plans to step down at the end of the year.

CIT’s move will wipe out current holders of its common and preferred stock. That means the U.S. government will likely lose the $2.3 billion it sunk into CIT last year in return for preferred shares to prop up the ailing company. The government could have lost billions more, however, had it not declined to hand over more aid to the company earlier this year.

Treasury Department spokesman Andrew Williams said the government will be closely monitoring the bankruptcy proceedings, but acknowledged that “recovery to preferred and common equityholders will be minimal.”

Common stockholders set to lose their investment include FMR LLC of Boston with a 9.9 percent stake in CIT and San Diego-based Brandes Investment Partners LP with a 9.7 percent equity position, according to CIT’s filing.

CIT has been trying to fend off disaster for several months and narrowly avoided collapse in July. It has struggled to find funding as sources it previously relied on, such as short-term debt, evaporated during the credit crisis.

The company received $4.5 billion in credit from its own lenders and bondholders last week, reportedly made a deal with Goldman Sachs to lower debt payments, and negotiated a $1 billion line of credit from billionaire investor and bondholder Carl Icahn. But the company failed to convince bondholders to support a debt-exchange offer, a step that would have trimmed at least $5.7 billion from its debt burden and given CIT more time to pay off what it owes.

Analysts warned that the bankruptcy could add to the uncertainty around loans for the nation’s small businesses, especially retailers, which make up a significant portion of CIT’s clients and are already struggling with tight credit markets.

CIT is the financier for about 2,000 vendors that supply merchandise to more than 300,000 stores, many of which are gearing up for the critical holiday shopping season. They rely on the lender to cover costs ranging from paying for orders to making payroll. Any disruption caused by bankruptcy could wreak havoc on their operations, Joe Alouf, a partner with Eaglepoint Advisors, a crisis management company that is partly owned by Kurt Salmon Associates.

“CIT is the 600-pound gorilla in the industry,” Alouf said.

But CIT has already pulled back sharply on its lending to businesses as it tried to preserve cash. According to its most recent quarterly earnings report, the company originated just $4.4 billion worth of new business during the first six months of 2009 compared to $11.3 billion in the first half of 2008.

CIT said Sunday the bankruptcy filing is only for the holding company, and won’t affect its operating subsidiaries, such as Utah-based CIT Bank. CIT has filed a number of first-day motions to allow it to continue operations, including requests to keep paying wages and other employee benefits and to pay its vendors and certain other creditors in full.

The company has retained Evercore Partners and FTI Consulting as its financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP as legal counsel in connection with the restructuring plan and Chapter 11 cases.

Houlihan Lokey Howard & Zukin Capital Inc. serves as financial adviser, and Paul, Weiss, Rifkind, Wharton & Garrison LLP serves as legal counsel to the bondholders’ committee.

AP Retail Writer Anne D’Innocenzio in New York contributed to this report.

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Tags: bankruptcy, cit
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Homebuyer Tax Credit Extension Crucial, Say Local Real Estate Professionals

Sunday, November 1st, 2009

Contact a Texas Mortgage Company so that you can take advantage of the First Time Home Buyer Tax Credit of $8,000.

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By Adam Van Brimmer, RIS Media

RISMEDIA, November 2, 2009—(MCT)—Local real estate professionals hear a clock ticking, and they’re sure it’s wired to the economy. The federal government’s first-time homebuyer tax credit is scheduled to expire Nov. 30. The credit, part of the Obama administration-backed economic stimulus package, rewards Americans for buying a home by cutting them a check for 10% of the purchase price up to $8,000.

Housing industry insiders fear the tax credit’s expiration will hurt the residential market’s recovery. Analysts attribute close to 20% of home sales nationally this year to buyers eligible for the tax credit, and the National Association of Realtors claims first-time buyers account for 50% of all sales.

While Congress is moving toward extending, expanding or replacing the tax credit, the Senate is expected to vote soon on a bill co-sponsored by Georgia Republican Johnny Isakson that would extend the deadline five months to April 30, 2010, and make the credit available to all new homebuyers, not just to first-timers. The new legislation would extend the $8,000 credit for first-time buyers and create a $6,500 credit for others so long as they have owned a home for at least five consecutive years since 2001.

“I think it is critical that the credit continue in some form,” said Molly Bridges, president of the Savannah Board of Realtors. “Traditionally, the market slows down at the holidays, and it’s important to keep the momentum going. We don’t want a pause.”

The housing credit’s impact is particularly pronounced in the Savannah area. The number of first-time buyers locally is unavailable, but pricing and loan trends indicate they could make up more than 40% of the market. Homes priced under $200,000 have outsold those priced above that number by almost a 2-to-1 margin this year, with homes priced for $100,000 to $149,999- “starter homes”- outpacing all others. And almost half of the houses financed locally this year were done with loans backed by the Federal Housing Administration or the Veterans Administration, which cater to first-time buyers.

A drop in local building permit applications in September offered a glimpse of what a creditless future could look like. Permits tripled in Chatham County during the summer months as builders began construction on homes that could be completed in time to be bought and occupied ahead of the Nov. 30 tax credit deadline. Permit numbers dropped drastically in August and September, a trend the head of the local homebuilders association, Matthew Young, said reflected the industry’s wait-and-see approach to the post-tax credit market. “If they don’t extend” the credit, Young said, “they will wait and see what sales are like after that.”

Analysts opposed to a tax-credit extension question how many of the buyers the $8,000 handout actually coaxed into the market. An economist with the Brookings Institution, a nonprofit public policy organization, estimates 85% of those who have used the credit would have bought a home anyway, given low prices and mortgage rates. Of about 2 million buyers who would make use of the credit were it extended through 2010, 1.6 million would buy even without the credit, the economist estimates.

Local Realtors disagree. “I know personally of plenty of people who have bought just because of the tax credit,” Bridges said. “They were on the fence, worried about the economy and their jobs and not ready to jump in, but the credit pushed them over the edge and got them buying.” The revamped tax credit proposal would be a major infusion for the market, Bridges said. The new legislation would make the credit available to “move-up” buyers- current homeowners looking to sell their homes and buy more expensive residences- and to those with incomes as high as $125,000 a year. “The move-up folks would be more willing to sell their homes at lower prices,” Bridges said. “Everybody would benefit.”

That includes builders, said Fred Williams of Fred Williams Homebuilder Inc.

“Broadening the credit would definitely help,” Williams said. “The lower-price houses were the ones being built with the summer permits. If the credit expands, the builders would build bigger, more expensive homes.”

Tags: 8k tax credit, obama tax credit, tax credit extension
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Jumbo Mortgage Tax Breaks

Sunday, November 1st, 2009

Jumbo mortgage tax break?
By Kay Bell • Bankrate.com

Monday, Oct. 19

Here’s an interesting tax juxtaposition.

While inflation has been so low that personal exemptions and standard deduction amounts will be basically unchanged in 2010, the IRS has decided that homeowners with million-dollar mortgages can write off a bit more of their interest.

In an internal legal memo, the IRS has concluded that taxpayers can deduct interest on the first $1.1 million of a home mortgage. That’s $100,000 more than before.

Depending on their tax bracket and mortgage interest rate, affected homeowners could save $3,000 a year or more, tax lawyer Kaye Thomas told Forbes.com.

Even better for such heavily indebted homeowners, Thomas says they can take advantage of the new IRS position and file amended returns to reap the larger interest deduction break.

Diverging from court decisions: The new IRS position differs from two earlier U.S. Tax Court memorandum decisions that followed tax law as we’ve known of for years.

Typically, if you purchase a home with a mortgage of more than $1 million, you could deduct interest on only $1 million. If you took out another loan secured by the home and it met certain requirements, you could deduct up to $100,000 of that loan amount as home equity debt.

All told, the maximum combined limit for interest deduction purposes was $1.1 million.

That dollar cap still applies. But the IRS now says that homeowners who have first mortgages up to $1.1 million don’t have to worry about the differentiation between acquisition and home equity debt. If they take out an enormous loan to buy their mansion, they can deduct interest on $1.1 million of it.

The IRS memo from the Office of Chief Counsel says the change is consistent with how the term “acquisition indebtedness” is used in other tax provisions. “We believe that the position in this memorandum is the better interpretation,” says the agency’s lawyer.

Thomas told Forbes that the IRS has a point. If a taxpayer can deduct interest on an additional $100,000 of home equity debt, on top of a $1 million first mortgage, why shouldn’t the full $1.1 million be allowed for the original purchase?

That certainly sounds reasonable to the 137,670 residence owners who, according to mortgage data firm First American CoreLogic, have mortgage balances of more than $1 million.

But for the rest of us — or me, at least — it doesn’t quite compute.

Now I’m not a lawyer, so I’ll allow that the IRS legal minds probably can parse the tax code a bit more delicately than I can.

And I realize that in today’s go-go America, we’re all for shortcuts and multitasking.

But taxes have always struck me as a more orderly, albeit often incomprehensible, discipline. To my mind, acquisition debt and equity debt are different animals, and are addressed as such in the code, so the tax breaks for each should be separate, too.

Yes, some home equity debt is considered acquisition debt if it meets certain standards. But that’s usually after the house has been acquired. This new IRS decision circumvents the necessity of that next step.

If the IRS wants the mortgage interest limit on acquisition debt to be $1.1 million instead of $1 million, then it should make its case to Capitol Hill and have the lawmakers change the tax code.

The combination via IRS memo of two-for-one tax breaks is a convenient money-saving advantage for buyers of high-dollar residences that strikes me as violating the spirit, if not the letter of the law.

Estate tax article: Last week in my post about the dream of estate tax simplification, I cited an article by David Cay Johnston that was available only to subscribers of Tax Analysts. I got a note from Mr. Johnston that the publication also offers a version available to nonsubscribers. Enjoy!

Reposted by the best Texas Jumbo mortgage lender with the lowest rates

Tags: jumbo loan texas, jumbo mortgage, taxes
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5 Buyer Mistakes in a Short Sale

Friday, October 30th, 2009

Get Pre-Approved for a Houston Mortgage

By Lora Shinn

With hundreds of thousands of homes in foreclosure or on short sale lists, there’s never been a better time to score a sweet deal. But discount-priced foreclosures and short sales can come with a raft of expensive problems.

Just ask Adam Melson of Philadelphia. Melson had looked at more than two dozen houses and he jumped at the chance to purchase a short sale home that seemed like a decent buy in a good neighborhood.

But $40,000 in renovations later, he feels differently.Melson’s home inspector had said the short sale house was fine — just a little termite damage in the basement. But when Melson tore up the linoleum to repair a soft spot in the kitchen floor, he found the damage went layers deep.

“The boards supporting the kitchen floor were entirely eaten by termites,” he says. “I also learned at this time that the kitchen sink did not drain anywhere. It drained openly under the house.”

Melson ended up replacing an entire wall of his house. That was before his roof started leaking and he discovered thick, smelly mold behind the entire shower unit. “With several other things I wasn’t expecting, I wound up hauling over 10,000 pounds of my house to the dump in rented box trucks,” he says.

There’s a flood of properties on the market with lots of motivated sellers, says Jim Randel, real estate investor and author of “The Skinny on the Housing Crisis.”

“The only people who are selling in a declining market are those who have to sell,” he says.

Although they have to sell, you don’t have to buy. Know what you’re getting into before you buy a short sale or foreclosure property and be mindful of these five common mistakes:

1. Ignoring property problems

Foreclosure property owners didn’t want to leave.“They’ll often take that frustration out on the property,” says J. Scott Steinhorn, a real estate investor with Lish Properties LLC in Cobb County, Ga., with experience in foreclosures and short sales.

“I’ve seen a couple foreclosure properties where the previous owners clearly took a sledgehammer to the nice hardwood floors, the tiled showers and the cabinets, just to be spiteful,” he says.

Empty foreclosure properties may suffer from issues that arise from neglect — leaks, mold, termites, thieves, squatters and filth — because the property sat vacant for weeks, months or years before purchase.

Yet in many states, banks are typically exempt from providing the disclosure statement typically required of a traditional seller. The statement outlines the condition of the property. “The buyer of a foreclosure is essentially starting from scratch when it comes to determining the property issues,” Steinhorn says.

For example, a bank won’t reveal whether the house is constructed from defective materials — materials later resulting in class-action lawsuits, Steinhorn says. Most claims by homeowners in these lawsuits are subject to strict deadlines. You won’t know whether the previous homeowner missed the deadline for court-ordered remediation or if the faux stucco is bad.

Short sellers will fill out the disclosure form. But while short sellers are motivated to sell and repair their credit, they could have skimped on essential maintenance of the roof, furnace, air conditioner and hot water heater.

“If a house is between 15 to 30 years old, there’s a very good chance it needs some expensive maintenance,” Steinhorn says.

Also, it’s unlikely the cash-strapped seller has given the home a cosmetic facelift for years, Steinhorn says. So the buyer might have to update a bathroom featuring orange shag carpet, a wooden toilet seat and gold-foil wallpaper.

2. Skipping the home inspection

Clear your calendar and make time to tag along on your home inspection. “Most of what we do is education,” says Kathleen Kuhn, president of New Jersey-based HouseMaster, one of the largest home-inspection franchisers in North America.Melson wishes he’d been more aggressive in asking questions during his inspection. “This is the time where the house is open for all criticism and inquiries,” he says. “Maybe I was a little young and anxious to be living on my own again. But if asking another five questions could have dropped the price of the home another $5,000, I would have asked about everything.”

Ask for repair estimates when an inspector notes a problem, or do some research online later that night. “Every homeowner underestimates how much renovation costs,” Kuhn says.

Some buyers are even doing an inspection before making an offer, particularly in areas such as Florida and California where foreclosures and short sales are numerous. While most inspections are done after the initial offer, with the sale contingent upon mutual agreement of remedies, a preoffer inspection allows house shoppers to walk away and find a better buy.

You may wish to call in specialized inspectors to look for expensive problems such as termites, mold and structural damage, particularly if it’s a common problem in your area. “Mold gets more expensive to remediate the longer you wait, and it can severely impact your health and the property’s resalability,” Steinhorn says.

If you note sloping floors or cracks in walls around doors, windows and basement walls, bring in a structural engineer for a full report and repair recommendations.

Then do something not on the inspector’s list: Knock on neighbors’ doors. They may know something you don’t.

“The seller is not there to disclose the crime from last year or the loud music down the block,” says Brendon DeSimone, a San Francisco-based real estate agent.

3. Ignoring legal and insurance information

A typical disclosure statement would indicate if a house was in a flood plain or had any unpermitted renovation, Steinhorn says. Because bank-owned properties often sell as is without disclosure, buyers need to do a little extra research on the home’s status.If the property is in a flood zone, you may pay thousands yearly in additional insurance costs, and you may find it difficult to resell the property. You can read more about flood prevention and insurance at FloodSmart.gov.

Ensure that all renovations have been permitted and approved. “If not, and there is a problem, the city can cite you,” DeSimone says.

Check with the local planning department and make sure there aren’t any neighbors with plans to build an enormous house or to demolish an existing one, DeSimone suggests. “Any nearby plans or work would normally be known and disclosed by the seller, but not in the case of a foreclosure,” he says.

4. Leaving too little time

Short sale and foreclosure homebuyers need to be aware that the sale won’t necessarily close as quickly as it would for a traditional home. The short seller’s lender must grant approval of either foreclosure terms or a short sale price which is less than the short seller owes. Even so, troubled banks may be overwhelmed with foreclosures and slow to respond.“Banks are taking huge losses so they are going to do their best to get their money back, get the most amount of money or go after the seller to try to recoup something,” DeSimone says. “They aren’t just going to let the house go.”

Sometimes legal troubles can also influence closing. For more than six months, Steinhorn has waited on one bank-owned property while the bank repeatedly pushes back the close date due to unresolved liens.

Steinhorn isn’t moving into his investment property. But costs increase if you must extend your lease, find a storage facility or rent an apartment at the last minute.

5. Falling hard for a bad home

Don’t assume you’re getting a great deal in today’s real estate marketplace, Randel says. “Think of yourself as an investor,” he says. Consider the house’s condition, inspection, price and value dispassionately.He suggests that you ask yourself these common sense questions:

If you were to buy this property, could you afford to rent it out for as much as, or less than, your mortgage payment?
What if the home’s value drops another 20 percent, will you still feel satisfied with your purchase?
How much money will you have to pour into the property to make it habitable? If the problems are too costly, you might pass on this home purchase.

Kuhn says that sometimes HouseMaster inspectors provide bad news, but homebuyers just won’t listen. She says buyers declare, “This is our house and we love this house,” despite a broken sewer line, rats in the basement or a collapsed (and rotting) roof.

On the other hand, Kuhn says more buyers are taking off the rose-colored glasses and inspecting the house and neighborhood more thoroughly. A cooler, less-competitive market nixes bidding wars, home-inspection waivers and overextended budgets.

In short, this may be the right time for you to buy a home, especially if you know what you’re getting into.

Tags: buyer mistakes, foreclosure, short sale
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Revised Land Contract Guidelines

Friday, October 30th, 2009

A quick Friday fact from your Texas FHA Refinance Lender

DID YOU KNOW?

If a borrower will use the loan to complete payment on a land contract, contract for deed, or other similar type financing arrangement in which the borrower does not have title to the property, the new mortgage may be processed as either a purchase or a refinance transaction with maximum FHA-insured financing if the borrower receives no cash at closing. If all loan proceeds are used to pay the outstanding balance on the land contract and eligible repairs, renovations, etc., the appropriate LTV ratio is applied to the lesser of:

1. The appraised value; or

2. The total cost to acquire the property (the original purchase price, plus any documented costs the purchaser incurs for rehabilitation, repairs, renovation, or weatherization), plus allowable closing costs and, if treated as an FHA refinance, reasonable discount points.

Equity in the property (original sales price minus the amount owed) may be used for the borrower’s entire cash investment. However, if the borrower receives more than $500 cash at closing, the loan is limited to 85 percent of the sum of the appraised value and allowable closing costs. Replenishment of the borrower’s own cash expended for repairs, improvements, renovation, etc., is not considered as “cash back,” provided the borrower can substantiate with canceled checks and paid receipts all out-of-pocket funds spent for those purposes.

NOTE: TO BE TREATED AS A REFINANCE, THE CONTRACT FOR DEED MUST BE SEASONED AT LEAST ONE YEAR.

IF OWNED LESS THAN A FULL 12 MONTHS, THE LOAN MUST BE TREATED AS A PURCHASE. THE SALES PRICE WILL BE THE AMOUNT LISTED ON THE LAND CONTRACT. MUST VERIFY BORROWER’S 3.5% OF OWN FUNDS INTO THE TRANSACTION. EQUITY, IF ANY, CAN BE USED TOWARDS THE REQUIRED DOWN PAYMENT. EQUITY DETERMINED BY DIFFERENCE IN SALES PRICE AND OUTSTANDING BALANCE.

Tags: fha, fha refinance, guidelines, land contract
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7 Steps to a Great Foreclosure Buy

Thursday, October 29th, 2009

Reposted by the best Houston Mortgage Lender

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By Tracey C. Velt • Bankrate.com

Foreclosure. It seems half the country is in it and the other half is trying to make a killing on it.

The number of foreclosed homes staggers the imagination and with more adjustable-rate loans about to reset, the end is nowhere in sight. The crisis, however, provides the opportunity to purchase a house that was all but impossible for many to afford in the boom years.

But there are many pitfalls and a hasty buyer can end up in a quagmire.

With investors flocking to capitalize on discounted properties, good deals usually go fast. It’s unrealistic to think you’re going to get a pristine property in a prime location for 50 percent less than area comparables. But 20 percent under the neighborhood market is very possible. If you’re a potential foreclosure buyer, the obvious place to start is price and condition. But there’s far more to it. Consider these seven top tips to get your best deal.

“This can happen two different ways,” says Sean O’Toole, founder and CEO of ForeclosureRadar.com.

“The underpriced properties get a ton of activity and go quickly, but you can really get a better deal on an overpriced property,” he says.

An overpriced property will generally get little interest and may sit on the market for a year or more. Therefore, when someone actually makes an offer, the bank may act on it quickly.

“For the homebuyer who’s up for the challenge, it can mean getting a property at less than market value,” says Aaron Lewis, broker/owner of The Lewis Team at Prudential California Realty in Turlock, Calif.

He offers this example: “If the home is listed at $170,000 and needs $10,000 worth of repairs, take a look at comparable properties in the area. If the house would be worth $200,000 with the repairs done, then you’re getting a $200,000 property for $180,000 and that’s a great deal.”

In addition, to move properties more quickly, says F.F. “Chappy” Adams, president of Illustrated Properties, in Palm Beach Gardens, Fla., “lenders are often making significant repairs, replacing major items or offering repair assistance.” That alone may make the home, once repaired, a good investment down the road.

“A good neighborhood supports your home value over time,” says Lewis. How do you determine that?

In addition to scouring the neighborhoods for well-kept yards, easy access to shopping and short work commute times, look at school scores, says Lewis. “A good school district will usually help housing hold its value over the years.”

Check out the number of foreclosures in the neighborhood as well. “If there are a lot of homes in one neighborhood that are in foreclosure, be wary,” says Jim Mazziotti, broker/owner of EXIT Realty Bend in Bend, Ore. “Values may still be declining there.”

“Some lenders are favoring cash transactions over finance purchases and taking deeper discounts to sell the property,” says Adams, whose company has a department that handles only bank-owned properties.

If cash is not an option for you, it’s important to get prequalified for a loan so you can react quickly once you find a home.

You can look for the best interest rate by searching Bankrate’s mortgage rate tables, then contact the lender to get pre-approved.

“Particularly for a cash buyer, this strategy makes a lot of sense.

“Make your offer at the end of a month, quarter or year,” says O’Toole. “Many times, banks will want to get deals closed and off the books.

So, consider making a November or December offer and highlight the fact that you can close by Dec. 31,” he says. You can get a lower price simply because it works for the bank’s timing.

Many times listing agents — who often get 20 or more properties from the bank to list at one time — simply don’t have the time or manpower to include every detail about every house in their online marketing.

“An REO (real estate-owned) broker may run out to the house, take a look around the inside and snap a few photos of the outside, but they may not mention in the online listing that the home has a beautiful backyard and upgraded landscaping,” says O’Toole. It pays to do more than simply check out the property online. If the property meets your criteria for size, number of bedrooms and neighborhood, go see it in person. And, says Adams, “Always have a licensed home inspector check out the home.”

With REO properties, go directly to the listing agent, who has the relationship with the bank asset manager, who approves or denies the sale. Or, find a real estate professional who works extensively in the foreclosure arena who will have more experience in bank-owned properties.

The bottom line: When it comes to buying a foreclosure, homebuyers need to throw emotion out the window and think like an investor.

“If you can purchase homes needing rehab work at significantly lower prices (than those homes that don’t need work), complete the work yourself and build instant equity, then you’re ahead of the game,” says Adams.

Tags: deals, fha, foreclosure, how to find good deals on homes
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New FHA Mortgagee Letter 2009-45

Wednesday, October 28th, 2009

New FHA Mortgagee Letter:

October 27, 2009

MORTGAGEE LETTER 2009-45

TO: ALL FHA-APPROVED MORTGAGEES, ALL HUD-APPROVED HOUSING COUNSELING AGENCIES

ATTENTION: Single Family Servicing Managers

SUBJECT: Introduction of HUD’s Web-Based Training Application: Electronic Class (EClass) on Loss Mitigation and Servicing System

The purpose of this Mortgagee Letter is to announce that the Department’s on-line, web-based training application, EClass, is now available. The EClass System will provide additional training on FHA’s Loss Mitigation Programs, including FHA’s Home Affordable Modification Program (FHA-HAMP), as well as continuing education on issues that have generated the most industry questions and requests for further training. It is our expectation that servicers will fully utilize the training to ensure that they are well-informed of FHA’s Loss Mitigation policies and procedures…

To read this mortgagee letter and any attachments in their entirety, please visit: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/ view the 2009 letters and click on the letter of your choice. An index of FHA Mortgagee Letters from previous years can be found on the same page.

AND

Southern California Foreclosure Counselor Forum:

November 13, 2009 – Costa Mesa, CA. Southern California Foreclosure Counselor Forum. A Peer to Peer Forum for HUD Approved Counseling Agencies. Sponsored by OCHOPC, HUD & NeighborWorks®. Learn about best practices, successful strategies & challenges in helping borrowers resolve delinquent mortgage situations, improve program results, loan modification programs & submission methods, an update from the National Foreclosure Mitigation & Counseling program (NFMC), & attend a roundtable discussion on mitigating the effects of being a foreclosure counselor & managing a foreclosure program. Registration required, no fee. More info at: http://www.hud.gov/offices/hsg/sfh/events/sca111309.pdf

Source: HUD

For more information on FHA loans, feel free to contact us.

Tags: california hud, fha mortgagee letter
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Checking if a property is USDA Eligible

Wednesday, October 28th, 2009

I just wanted to send out a quick note to advise everyone (Realtors, Buyers, Sellers) that when looking to go USDA, it is ALWAYS best to check with us at Texas Mortgage Lender to look up the address for you.

Sometimes even though the property might not be in an eligible county, by having a specific property in mind, we can look it up and give you an answer within a couple minutes.

Tags: usda financing, usda lender texas, usda loan texas
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Existing Homes Sales Benefit from Tax Credit

Friday, October 23rd, 2009

by Adam Quinones

The National Association of Realtors released Existing Home Sales data this morning.

Think about the materials that go into building and maintaining a home….WOOD, STEEL, PLASTICS, WIRING, PIPING, CONCRETE, GLASS, ELECTRICITY, FURNITURE, CARPETING ,ELECTRONICS, APPLIANCES….LABOR.

How about the commissions earned by Realtors and mortgage originators who help the borrowers close on their home? What about the home sellers? They are either moving into a bigger house, which implies they will be spending to furnish their bigger home, or downsizing, which would imply a lower payment and therefore more disposable income to spend.

The point is, when homes are selling, money moves around the economy more efficiently. The size of the housing market combined with the broad influences it has over the economy make the real estate sector a reliable leading indicator of economic activity. Real estate is one of the first sectors to contract when a recession is looming and one of the first to show signs of recovery when economic activity begins to improve.

A caveat regarding Existing Home Sales: because existing home sales data is only reported at the time of closing, when the deed is transferred to the new owner, this report is considered less “forward looking” than other housing indicators like Pending Home Sales, Housing Starts, and Building Permits. This is because it can take up to three months for a purchase transaction to close. This problem has been more relevant in recent months as lender turn times have slowed and other roadblocks like HVCC, new RESPA rules, and market volatility have delayed closings. Pending Home Sales data helps provide more timely market data because it reports on the number of contracts that have been signed, not actual closing, therefore giving economists and traders a more timely read on the health of housing.

READ HOW THE NAR COMPILES DATA AND GAIN A BETTER UNDERSTANDING OF SEASONAL INFLUENCES

Last month, the NAR reported that Existing Home Sales in August gave back a portion of their their strong July gains. Existing Home Sales, including single-family, townhomes, condominiums and co-ops, declined 2.7 percent to a seasonally adjusted annual rate of 5.10 million units in August from a pace of 5.24 million in July. This was 3.4 percent above the 4.93 million unit level in August 2008. In the previous four months, sales had risen a total of 15.2 percent.

This month the NAR reported the following:

From the NAR press release…

Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September from a level of 5.10 million in August, and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.

Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.

Total housing inventory at the end of September fell 7.5 percent to 3.63 million existing homes available for sale, which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0 percent below a year ago.

“The current housing supply is the lowest we’ve seen in two and a half years,” Yun said. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.

The national median existing-home price for all housing types was $174,900 in September, which is 8.5 percent lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.

Single-family home sales rose 9.4 percent to a seasonally adjusted annual rate of 4.89 million in September from a pace of 4.47 million in August, and are 7.7 percent above the 4.54 million-unit level in September 2008.

The median existing single-family home price was $174,900 in September, which is 8.1 percent below a year ago.

Existing condominium and co-op sales jumped 9.7 percent to a seasonally adjusted annual rate of 680,000 units in September from 620,000 in August, and are 9.7 percent above the 561,000-unit pace a year ago. The median existing condo price was $175,100 in September, down 11.7 percent from September 2008.

Regionally, existing-home sales in the Northeast increased 4.4 percent to an annual level of 950,000 in September, and are 11.8 percent higher than September 2008. The median price in the Northeast was $234,700, down 7.0 percent from a year ago.

Existing-home sales in the Midwest jumped 9.6 percent in September to a pace of 1.25 million and are 7.8 percent above a year ago. The median price in the Midwest was $147,600, which is 1.0 percent below September 2008.

In the South, existing-home sales rose 9.0 percent to an annual level of 2.06 million in September and are 10.8 percent higher than September 2008. The median price in the South was $153,500, down 7.6 percent from a year ago.

Existing-home sales in the West surged 13.0 percent to an annual rate of 1.30 million in September and are 5.7 percent above a year ago. The median price in the West was $219,000, which is 15.0 percent below September 2008.
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Overall, today’s release indicated continued progress in the stabilization of the housing market. However we are troubled by the forward looking statements Yun made regarding the variables that must continue to improve if housing it to undergo further stabilization and recovery.

“We’re getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy. Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history.”

Given our in-depth involvement in the primary mortgage market, we are not encouraged by Yun’s outlook. Specifically the comment on QUALIFIED BORROWERS. The continual contraction of the labor market and ongoing tightening of lender underwriting guidelines is already having a direct impact on Yun’s recovery assumptions, and we expect these issues to continue to impact the stabilization process.

On a regular basis we are contacted by consumers who complain of higher cost loans and loan denial due to an unexplained drop in their FICO score. We ask the same question each time we hear these outcrys: Did your credit card limits fall? The answer is almost always YES, my credit card limit was cut. Next we ask, have you missed a payment on your car loan or even a credit card? If the answer is yes…credit scores have been drastically effected, which has resulted in outright loan denial or a higher mortgage rate.

Adding to our relatively negative outlook is the soon to expire first time home buyer tax credit. Yun says the tax credit has played a role in the stabilization so far:

“Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”

We could go on and on about the industry, lender, and borrower specific problems limiting the housing recovery, however we believe the general big picture economic environment is providing enough roadblocks to recovery on its own. Thus, we will continue to state that until the labor market stabilizes and jobs start being created, the housing market will undergo a slow, frustrating recovery process (for mortgage and real estate professionals especially).

Consumers: Have you found the loan qualification process difficult?

Mortgage and Real Estate Professionals: Are you turning down more applicants? Are less deals closing? Are lending regs still tightening?

Are we being too bearish here?

Tags: home sales, mortgage, new home sales
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