In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today provided details on the adjustment to its refinance program which was announced earlier this year that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth. Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage. For more details go to Real Estate Rama

Highlights

• To collect either tax credit, homes must be under contract by April 30.
• “The first thing they need to do is make sure they can get a mortgage.”
• Insurance premiums on FHA loans increase after April 2.

There are two homebuyer federal income tax credits: the first-time homebuyer tax credit of up to $8,000, and the move-up homebuyer tax credit of up to $6,500. Both come with deadlines.

To collect either tax credit, buyers have to have homes under contract by April 30. That means that both buyer and seller must have signed the purchase contract by that date. After that, there’s another deadline: The transaction has to close by June 30.

Below is a timeline for homebuyers who want to complete the transaction on time to collect the federal income tax credit. The following dates aren’t ironclad; the real estate agent, lender and title company will know if you need to deviate from this timeline because of your situation or location. Use this timeline as a general guide and as motivation to take action quickly.

Above all, let everyone — from the lender to the seller to the inspector — know about your deadlines

Compliments:

Chad E. Bahnsen

What does it all mean?The new guidelines will be extended to:

Repeat home buyers…
Current home owners that are looking to purchase a new home are eligible for the credit as well! To qualify as a repeat home buyer, you must have owned and lived in your current residence for 5 consecutive years. Now these home buyers can receive a credit for up to $6,500 or 10% of the cost of the home. The new home does not have to be more or less expensive than your current home. The same income limits apply as for first time home buyers.

The fine print..The fine print.. For both credits,

• The homes purchased must be less than $800,000.
• The credit is refundable, meaning it will be issued as a check to you if your tax liability is less than the refund.
• The new extension cannot be applied retroactively; for example, it cannot be used if a home was purchased before November 6, 2009 and the owners did not receive the credit because of the old income limits.

Just when I thought I had the 2008 First Time Homebuyer credit figured out, here comes a 2009 First Time Homebuyer credit that is better than the 2008 Credit…If you bought in December, 2008, I feel your pain! The 2009 credit is up to $8000 and never needs to be paid back…Contrast that with the 2008 credit of $7500 to be paid back over 15 years…Timing is everything! For more details on the American Recovery and Reinvestment Act of 2009, go to the IRS website . New details are emerging every day.

The election is over…phones will stop ringing, and it is time to focus on the economy and on our spending patterns– Protecting ourselves…and trying to deal with items like Upside Down Mortgages and how to survive this change….I’ll be posting tidbits over the next few weeks to help people deal with the problems they face…
The first problem I am hearing about is upside down mortgages and how to refinance…and get payments manageable in these times…
JP Morgan Chase has announced some innovative programs to attempt to avoid foreclosure.

J. P. Morgan Chase & Company has announced that it will make its own contribution to stemming the tide of foreclosures sweeping the country by modifying around $70 billion of its owned mortgages that are in or nearing default.

The bank’s efforts will focus on restructuring loans for borrowers who are at risk of foreclosure and it has placed a 90 day moratorium on all foreclosures in order to put guidelines for its program in place. The company will hire and train an estimate 300 additional loan counselors (it currently employs about 2,500) and open two dozen new regional counseling centers.

The company has targeted 400,000 families for the rescue program. This is in addition to what it claims are 250,000 families which have already been helped in the earlier restructure of some $40 billion in loans.

The bank is also a major servicer of loans owned by others. Its own mortgages account for only 20 percent of the total portfolio it controls. (The Wall Street Journal pegs the number at only 4.7 percent.) The restructuring program will not, at least at present, apply to those serviced mortgages however it hopes that eventually the initiative can be expanded to include some of the investor owned loans.

The Chase program joins one previously announced by the Federal Deposit Insurance Corporation (FDIC) for the assets it has taken from the failed IndyMac Bank which was a major player in the mortgage industry. Bank of American has also started a modification program as did Wachovia Bank shortly before it was taken over by Wells Fargo Bank.

(source Mortgage News Daily

If you are not a Chase customer…call your banker, find a broker, and see what can be done…The options are endless…You do not need to lose your home.

The FHA has announced some plans too…including the HOPE for Homeowners Program, FHA secure, and a few other options to help you through the process….
You are not alone….
If you need help in understanding your options, give us a call….we’ll be glad to help…..If your lender is currently not participating in one of the programs you may need a lawyer or a broker to help you…But, the time is right and now!

I was reading a fascinating article today entitled “Why Housing Market Bubbles Pop”.  Traditionally we have not thought of housing as speculative or risky. We have been taught that houses increase. There may be short term regional bubbles and pops due to uncertain economic conditions in an area (think Pittsburgh when the Steel Mills started to leave), but in general, housing has always been a sure bet.

Frequently we see, after periods of rapid price appreciation (or depreciation), housing prices revert to where their long-term average rates of appreciation indicate they should have been all along.

Source: Office of Federal Housing Enterprise oversight

According to Barry Nielsen, CFA and the author of this piece,

Once you’ve established that an above-average rise in housing prices is primarily driven by an increase in demand, you might ask what the causes of that increase in demand are. There are several:

1. An upturn in general economic activity and prosperity that puts more disposable income in consumers’ pockets and encourages home ownership.
2. An increase in the population or the demographic segment of the population entering the housing market.
3. A low general level of interest rates, particularly short-term interest rates, that makes homes more affordable.
4. Innovative mortgage products with low initial monthly payments that make homes more affordable. (To learn more about mortgages, see our Mortgage Basics tutorial.)
5. Easy access to credit (a lowering of underwriting standards) that brings more buyers to market.
6. High-yielding structured mortgage bonds, as demanded by investors, that make more mortgage credit available to borrowers.
7. A potential mispricing of risk by mortgage lenders and mortgage bond investors that expands the availability of credit to borrowers.
8. The short-term relationship between a mortgage broker and a borrower under which borrowers are sometime encouraged to take excessive risks.
9. A lack of financial literacy and excessive risk-taking by mortgage borrowers.
10. Speculative and risky behavior by home buyers and property investors fueled by unrealistic and unsustainable home price appreciation estimates.

What does all of this mean to us….a continued slow down until the market corrects…

Too many home buyers use recent price performance as a benchmark for what they expect over the next several years. Based on their unrealistic estimates, they take excessive risks. This excessive risk-taking is usually associated with the choice of a mortgage and the size or cost of the home the consumer purchases. There are several mortgage products that are heavily marketed to consumers and that are designed to be relatively short-term loans. Borrowers choose these mortgages based on the expectation that they will refinance out of that mortgage within a certain number of years, and will be able to do so because of the equity they will have in their homes at that point.