The smart tool for buying your next home

31 01 2010

Is four minutes of your time worth $14,000?  If so, get cozy, pour a hot cup of coffee, and click on the picture below.  I will give you the secret tool to finance your next home the smart way and save almost $14,000.

Are you using the right tool to buy your next home?


A spoon or an ice scraper?

29 01 2010

I am snowed in and stocked up.  I’ve got food, flashlights, and ice scrapers.  You probably do too.

But I learned something valuable during the last ice storm that can save you  frustration and a ton of money when selling your home.

Click here or on the picture below for the story.

Click for video

Big change is a-comin’ for FHA borrowers

20 01 2010

FHA Announces Policy Changes to Address Risk and Strengthen Finances

New Measures Will Help FHA Better Manage Risk, While Maintaining Support for the Housing Market and Access for Underserved Communities

WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced today are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.

The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement. U.S. Housing and Urban Development Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.

Announced FHA Policy Changes:

  1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
    • The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
    • If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
    • This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
    • The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
  2. Update the combination of FICO scores and down payments for new borrowers.
    • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
    • This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
    • This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
  3. Reduce allowable seller concessions from 6% to 3%
    • The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
    • This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
  4. Increase enforcement on FHA lenders
    • Publicly report lender performance rankings to complement currently available Neighborhood Watch data – Will be available on the HUD website on February 1.
      • This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
    • Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
      • Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
      • This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
    • Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
      • Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
    • HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
      • Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
      • Legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

In addition to the changes proposed today, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.

These guidelines are changing daily, so please feel free to contact me to discuss how they affect you.  Thanks!

What they didn’t tell you about the Home Buyer Tax Credit

18 01 2010

A CPA Shares Little-Known Facts About the 2009 Home Buyer Tax Credit Extension

Like most government legislation, the Nov 6, 2009 homebuyer tax credit extension created more questions than answers. However, according to Doug Geissler, CPA, the IRS is literally writing the “refund rules” as they go along. 

Unbeknown to homebuyers, real estate agents and the mortgage industry, the IRS is giving behind-the-scenes instructions—that are not available to the general public—to CPA’s and tax advisors on how to file for the home buyer tax credit after Nov 6, 2009. It will be completely different than what you might have advised your clients previously—and your clients are NOT going to like these changes!
The first shocker?   Your clients cannot file a 1040 EZ to claim the tax credit! Nor can they file tax returns electronically if claiming the tax credit!  
Read exactly what and how the MAGI is figured; how the forms need to be filed; what docs need to accompany the tax return and the estimated time the IRS is projecting for the tax credit refund! 
In addition, Link to the most recent IRS Updates and FAQ’s. 
Why no electronic filing or 1040 EZ forms?
It’s the first step in stopping fraudulent tax credit refunds. Believe it or not, the IRS never had a way to determine if a person owned a home—no auditing software in place–to determine if they previously claimed a “mortgage interest” deduction within a 3-year time period. The IRS is building “auditing software” now to “catch” previous homeowners who are trying to claim a FTHB tax credit. 
Secondly, the IRS now requires that the HUD 1 or closing statement be attached to the 5405 form (and that cannot be attached electronically).
Third, speaking about the 5405 form…unless the home was purchased on or before November 6, 2009, currently there is NO FORM on the IRS website to file the amended return. Here’s the wording that you will find when you to the IRS website and try to download the form:
FROM THE IRS WEBSITE:  Changes have been made to the first-time homebuyer credit by Public Law
111-92, the Worker, Homeownership, and Business Assistance Act of 2009,
which was enacted on November 6, 2009. As a result, the 2008 Form 5405
can be used only for homes purchased before November 7, 2009, for which
an election is made to claim the credit for 2008. We will soon issue a
December 2009 revision of Form 5405. The December 2009 revision will be
for use for all homes purchased after November 6, 2009 (whether the credit
is claimed for 2008 or for 2009) and for all claims on 2009 returns for
homes purchased any time in 2009.
And to give them time to audit the document, the IRS is telling tax advisors to expect an average of a 16-week turn around time…which means that it could either be the refund OR a request for additional documentation. Geissler says that one of his clients recently received an IRS notice, requesting a letter from a landlord, a copy of a driver’s license and the closing statement on an amended tax return where the client was claiming the FTHB tax credit. Yes, the new law allows them to ask for additional info on amended returns. 
So, what means, that if your clients is expecting an income tax refund AND a homebuyer tax credit refund, BOTH refunds could be held up for several months.  
We all know what adjusted gross income is, right? But did you know that there are over 20 different “modified adjusted gross income” interpretations for different tax forms and credit tax claims?  
The simple explanation is that is Line 38 on the 1040 form (remember, no 1040EZ to claim this tax credit). However, if IRS Form 2555 (Foreign Earned Income) or IRS Form 4563 (Exclusion of Income fro Bona Fide Resident of American Samoa) is attached, this income has to be ADDED to line 38 to determine if the clients meet the maximum income limits of $125,000 or $225,000.   While this might not apply to very many clients, it’s something you can counsel your client about if they claim foreign income to qualify for a loan.
Here are the links to the most recent updates regarding the Nov 6, 2009 homebuyer tax credit extension.
10 Important Facts About the Extended First-Time Buyer Tax Credit – 11-30-09
First-Time Homebuyer Tax Credit – 11-24-09
Info obtained from Mortgage Girlfriends website: 

HUD cracking down on FHA lenders

13 01 2010

HUD Subpoenas 15 Mortgage Companies Over High FHA Insurance Claims

Posted By JON PRIOR On January 12, 2010 @ 1:37 pm | No Comments

The US Department of Housing and Urban Development (HUD) launched an initiative to review Federal Housing Administration (FHA) approved mortgage lenders with high foreclosure rates.

In a conference call held Jan. 12, Kenneth Donohue, the HUD inspector general, and David Stevens, the FHA commissioner, announced an initiative focusing on mortgage companies holding “significant” claim rates for the Federal Housing Administration mortgage insurance program.

HUD Office of Inspector General (OIG) served subpoenas to the offices of 15 mortgage companies across the country to gather documents and data on failed loans paid-out by the FHA mortgage insurance fund. The institutions had at least 1,000 FHA mortgages, were spread across the country and ranged in size.

“We will conduct an investigation if appropriate to determine who is responsible and recommend that appropriate action be taken against individuals and corporations. My office identified these direct-endorsement companies from an analysis of loan data focusing on companies with a large number of claims, loan underwriting volume, a high ratio of default,” Donohue said in the conference.

Alarmed by the amount of claims against the FHA insurance fun by a number of poor performing companies, Stevens prompted the initiation.

“We are taking risk management extremely seriously,” Stevens said in the press release. “In addition to the policy changes we are implementing and additional changes we plan to announce later this month, we need to hold FHA lenders accountable for the high rates of defaults and claims against FHA. The Inspector General’s initiative will help us determine whether there is fraud and better manage risk in the long run.”

Possible actions the HUD OIG could take are: audits, investigations, inspections and evaluations.

“The FHA market share has skyrocketed,” Donohue said. “Our job is oversight.  We work for the American taxpayer.  Each loan on this list will be thoroughly examined and we will track down the reasons why it failed.  Once we determine the causes, we will look to see whether there is a need for further review or remedial action.  We want to send a message to the industry that as the mortgage landscape has shifted we are watching very carefully and that we are poised to take action against bad performers.”

The companies are:

  • First Tennessee Bank, Memphis, TN
  • Alethes, Lakeway, TX
  • Security Atlantic Mortgage Co., Edison, NJ
  • Pine State Mortgage Corporation, Atlanta, GA
  • Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
  • Alacrity Financial Services, Southlake, TX
  • Assurity Financial Services, Englewood, CO
  • D and R Mortgage Corporation, Farmington, MI
  • Webster Bank, Cheshire, CT
  • Mac-Clair Mortgage Corporation, Flint, MI
  • Americare Investment Group, Inc., Arlington, TX
  • 1st Advantage Mortgage, Lombard, IL
  • American Sterling Bank, Independence, MO
  • Sterling National Mortgage Company, Great Neck, NY
  • Dell Franklin Financial, Columbia, MD

So what’s the deal with this new tax credit?

11 01 2010

Home Buyer Tax Credit

Think you know the details on the Home Buyer Tax Credit?  Many of the key parts from previous tax credits have changed. See below for the new guidelines, and happy house hunting!

General Rules:

  • A “first time buyer” is defined as someone who has not owned a home in the last three years.  If you are a “first time homebuyer”, your tax credit will amount to 10% of the purchase price of your home, not to exceed $8,000.
  • A “long time resident” is defined as someone who has lived in the same primary home for  5 out of the last 8 years.  If you are a long time resident”, your tax credit will amount to 10% of the purchase price of your new home not to exceed $6500.
  • The Tax credit does not need to be paid back if you continue living in the home as your primary residence for three years without selling it.
  • The home must be purchased for less that $800,000 before May 1, 2010. If you sign a contract to purchase a home before May1st, you would need to close on the transaction before July 1, 2010.
  • Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.
  • You cannot purchase the home from a related party like a spouse, direct ancestor, or direct lineal descendant (child or grandchild); however, you can still qualify for the credit if you purchase a property from siblings, nephews, nieces, and others.
  • If you are married both spouses must qualify for the credit.
  • If more than one unmarried individual is buying the property, the credit can be split up among all the individuals who qualify.  However, the total credit taken cannot exceed $8000 (or $6,500 for “long time residents”). Alternatively, if only one of the unmarried buyers qualifies for the credit based on their income or pas home ownership status, the individual who qualifies for the credit can claim the full credit.
  • The credit applies even if you have co-signors on your mortgage loan.
  • The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others.

How does the tax credit work?

A tax credit is kind of like a gift certificate that you can use to pay your taxes – it reduces your income tax bill on a dollar for dollar basis. Imagine paying your bill at IRS Restaurant, and then later getting an IRS Restaurant certificate.  Normally, you would need to go back to IRS Restaurant and buy more food in order to use your new gift certificate.  But what if the IRS Restaurant allowed you to just turn in your gift certificate for cash?  That’s how the home buyer tax credit works.  All you need to do is file a form with the IRS after you buy your new home and they will send you a refund check for $8,000 (or $6,500) just like the example of IRS Restaurant that allows you to exchange your gift certificate for cash! Remember though, you’ll receive the $8,000 (or $6,500) from the IRS AFTER you purchase your new home, so you cannot use the funds to help with the down payment.

For more information about the home buyer tax credit or other recent updates to the mortgage and real estate markets, just give me a call. I would be happy to assist you with your mortgage in the purchase of your new home!

Sleeping through the industry changes?

4 01 2010

While the world was sleeping in on New Years’ Day,

the rules of our industry changed.

Do you know how they affect you?

Click here or on the link below for a short video detailing the new GFE changes, their shortcomings, and how to overcome them.  I look forward to a prosperous year.  Cheers!