February 14th, 2012 in CDPE by cdpe.com

The Obama administration announced its latest plan to help troubled homeowners, enabling an estimated 3.5 million underwater mortgage holders to refinance at today’s historically-low interest rates.

However, experts speculate the proposal—which is expected to cost up to $10 billion and would be paid for by imposing a fee on major banks—could have a difficult time getting Congressional approval.

This proposal follows a string of government-initiated programs that have had mixed success, including the Making Homes Affordable Program. The difference is, Obama’s latest plan would assist borrowers with private (non-government backed) loans.

Under the current proposal, to be eligible borrowers must:
Have not missed a mortgage payment in the past six months, and have no more than one late payment in the six months prior;
Have a credit score of 580 or higher;
Have a current mortgage balance within loan limits for FHA-insured loans in their communities; and
The property must be their primary residence

As an agent, it’s important to understand the details and restrictions of the program so you can effectively advise your clients on their options. This proposal is already getting a lot of attention by the media, and distressed homeowners may view this as a viable solution to their problems.

However, it’s important to remember that this program would require Congressional approval, which may never happen. If you have clients who are on the edge, if they are facing foreclosure and desperate for help, don’t let the media talk of this proposal distract them from finding a real solution.

WASHINGTON – Jan. 9, 2012 – You may owe federal income taxes in 2013 if you have a short sale, foreclosure after this year. Now is the time to make the hard decision: Are you going to walk away from your underwater home?

Uncle Sam is still giving homeowners until Dec. 31, 2012, to go through a short sale or foreclosure without tax consequences – as long as the lender officially releases the debt.

But on Jan. 1, 2013, the rules change: The amount a lender forgives, ether in a short sale or foreclosure, on a primary residence will be taxable on federal income taxes.

So if a house sold $50,000 short of what is owed on the mortgage, then the selling homeowners will owe federal income taxes on that $50,000. Homeowners would owe $12,500 if they’re in the 25 percent bracket; $7,500 if in the 15 percent tax section.

Homeowners would be on the hook even if the house sold but the bank had not formally forgiven the loan in a letter: The banks must officially sign off in writing before Dec. 31.

“It’s a huge issue – it will be a shock to many taxpayers after 2012,” said Mark Steber, the Florida-based chief tax officer for Jackson Hewitt Tax Service.

The law first came into affect five years ago as the housing market went bust nationwide.

The Mortgage Debt Relief Act of 2007 “generally allows taxpayers to exclude income from the discharge of debt on their principal residence,” according to the Internal Revenue Service. “Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”

Up to $2 million of forgiven debt can be forgiven this year, $1 million if married and filing separately, according to the IRS.

Homeowners declaring bankruptcy could escape paying income taxes on any cancellation of debt income if the debt is forgiven in the bankruptcy even if the debtor is solvent, said Nick Jovanovich, a board-certified tax attorney in Fort Lauderdale, Fla.

“Bankruptcy trumps everything,” he said.

Or homeowners might not have to pay income taxes on any cancellation of debt income to the extent that they are insolvent immediately before the cancellation – that is, their debts exceed the value of their assets, Jovanovich added.

Steber and Jovanovich said homeowners should decide now what they are going to do – to give themselves time.

Short sales can take a long time, said Timothy Singer of Coldwell Banker in Fort Lauderdale.

He said he knows of one that had been pending for three years.

But lenders “have been gearing up” and speeding up the process, Singer added.

But even if banks quickly approve a short sale, the would-be buyer may get cold feet and the deal fall through, Singer said.

Then the sellers have to begin again, he said.

Copyright © 2012 the Sun Sentinel (Fort Lauderdale, Fla.), Donna Gehrke-White. Distributed by McClatchy-Tribune News Service.

The holiday season should be a magical time of year. However, for a growing number of families, the usual holiday celebrations are trumped by financial troubles, foreclosure and the looming threat of eviction.

Fannie Mae and Freddie Mac offered some relief to such families by announcing an “Eviction Moratorium” through January 2, 2012. During this time, families living in foreclosed homes will not be forced to leave, though legal proceedings may continue as scheduled.

Undoubtedly, Fannie and Freddie’s efforts will prove comforting to homeowners who find themselves in this situation. However, the relief is short lived.

Remember, the “eviction moratorium” is only a short reprieve, so we urge you to continue reaching out to homeowners during the holiday season. Simply knowing that options exist can provide them with peace of mind. And during the holidays, a little peace of mind is an invaluable gift.

By   CDPE.com

Builder mag: 8 Healthiest Housing Markets

JACKSONVILLE, Fla. – Nov. 8, 2011 – The construction industry thinks two Fla. metropolitan areas – Jacksonville and South Florida – are poised for a rebound, according to an analysis by Builder Magazine.

To find the cities with the greatest potential for growth, Builder Magazine as Hanley Wood Market Intelligence to consider local factors, such as major universities, military bases, and the strength of businesses in the private sector. The study also considered Economy.com’s housing projections, expected price appreciation, and estimated employment and income growth.

Under those criteria, two Florida cities made the top eight nationwide. Jacksonville came in at No. 4, and South Florida (Miami-Fort Lauderdale-Pompano Beach) ranked No. 5.

In Jacksonville, surveyors expect the number of building permits to almost double between 2011 and 2012, rising from 2,284 to a forecast of 4,363. The number of jobs will grow, the financial businesses will grow, and a military base will continue to call Jacksonville home. The builders believe housing prices will rise 5 percent in 2012.

In South Florida, surveyors believe building permits will skyrocket 178 percent: from 2,708 in 2011 to 7,522 in 2012. Unemployment will, according to forecasts, stop declining and rise 2.7 percent next year. Builders say the rosy picture is driven in large part by two big projects that will add over 10,000 jobs: the CitiCentre and Resorts World Miami.

The complete list of cities in the top eight include:

1. Minneapolis-St. Paul-Bloomington Minn.-Wis.
2. Fort Collins-Loveland, Colo.
3. Salt Lake City, Utah
4. Jacksonville, Fla.
5. Miami-Fort Lauderdale-Pompano Beach, Fla.
6. Charlottesville, Va.
7. Colorado Springs, Colo.
8. Oklahoma City, Okla.

Source: “Healthiest Housing Markets: Mid-2011 Update,” Builder Magazine, Boyce Thompson

According to Fiserv, the monthly mortgage payment for a median-priced single-family home today is $700 – a drop of close to 40 percent from 2006, when it was $1,140.

“Housing affordability has improved dramatically because of declines in both prices and mortgage interest rates,” David Stiff, chief economist at Fiserv, said in a statement. “Nationally, purchase mortgage payments now account for only 13 percent of monthly median family income, the lowest percentage on record (since 1971), and compared to 23 percent in the first quarter of 2006.”

Source: “Monthly Mortgage Payment Almost 40% Cheaper Than 2006,” HousingWire (Nov. 9, 2011) and Fiserv

© Copyright 2011 INFORMATION, INC. Bethesda, MD (301) 215-4688

NEW YORK – Oct. 27, 2011 –

Rising rents are forcing renters to outspend homeowners on housing costs, according to a new study.

Since 2005, homeowners’ housing expenses have climbed from 31.9 percent of their household budget to 33.2 percent. In that same time period, renters’ expenses have jumped from 35.6 percent to 38.4 percent, according to the October CoreLogic U.S. Housing and Mortgage Trends.

In the last 26 years, homeowners have increased the amount they spend on household expenses by 12 percent while renters have increased it by 22 percent, according to the study.

Earlier this month, Capital Economics economists noted that for the first time in 30 years the median monthly mortgage payment is about the same – or less – than the median rental payment.

Yet, with the bleak job market, homeownership rates continue to fall in many parts of the country, particularly among younger generations. CoreLogic found in its report that the homeownership rate for the 25-to-34 age group dropped from 51.6 percent in 1980 to 42 percent in 2010. For the 35-to-44 age group, homeownership rates fell from 71.2 percent to 62.3 percent over that period.

Source: “Renters Outspend Owners on Housing,” RISMedia (Oct. 25, 2011) and Capital Economics

© Copyright 2011 INFORMATION, INC. Bethesda, MD

WASHINGTON – Oct. 25, 2011 – Economists have significantly raised their estimates of third-quarter economic growth ahead of the government’s official report Thursday, easing near-term fears of another recession.

A consensus of economists surveyed by Bloomberg News estimates the economy grew at a still-modest 2.5 percent annual pace last quarter, up from their 1.8 percent projection less than two weeks ago. The brighter picture follows better-than-expected data on retail sales, manufacturing, jobs and business investment.

“We should take some comfort that the economy isn’t hurtling into recession,” says Capital Economics’ Paul Ashworth. Ashworth estimates third-quarter growth was 3.2 percent.

That’s not robust, but it beats the anemic expansion of less than 1 percent the first half of 2011. Amid last summer’s debt battle in Congress, the downgrade of the U.S. credit rating and financial turmoil in Europe, many analysts thought the U.S. was on the verge of another downturn.

Since Oct. 3, 10-year Treasury yields have risen nearly half a percentage point, indicating growth prospects are prompting a shift of money to higher-risk assets, says market strategist Anthony Valeri of LPL Financial.

Many experts say the third-quarter upturn was due to temporary factors, particularly the end of supply disruptions after the Japanese earthquake, and the decline in oil prices. The Commerce Department said last week that retail sales jumped 1.1 percent in September, partly because of a 3.6 percent rise in auto sales as Japanese bottlenecks eased.

Meanwhile, manufacturing grew at a 4.3 percent annualized rate in the third quarter. And business investment in equipment and software has rebounded. Both measures were buoyed by the unclogging of Japanese supply channels and lower oil prices.

Many economists say growth will slow to a sluggish 2 percent rate over the next year. Unemployment, at 9.1 percent, is high and consumer confidence is shaken.

Yet a recession appears less likely. New jobless claims have been falling since summer. “You would be seeing claims shooting up” if a downturn were imminent, says chief economist James O’Sullivan of MF Global.

Some say growth could beat estimates. Excluding autos, retail sales rose 0.6 percent last month. Consumer stock prices, often a leading job indicator, are at a record premium relative to stocks overall, says economist James Paulsen of Wells Capital Management.

But Bernard Baumohl of the Economic Outlook Group notes consumers have been borrowing more and saving less to finance their increased spending – which he says can’t continue.

© Copyright 2011 USA TODAY, a division of Gannett Co. Inc., Paul Davidson

Recently, I was asked by Logan Mohtashami, a columnist for Benzinga, which is an online news and financial analysis service, to respond to the question: “What do you think the main problems in the housing market are, and what ideas do you have to help the housing market out of its current malaise?”

Here’s an excerpt from the column in which my response appeared on Oct. 12:

The biggest problem in housing right now is that we are still dealing with the issues from the boom and too many people want to somehow find a magic bullet or program to fix everything. There is no such program, and while in many cases, the programs that have been launched are working, we need to allow this financial process to run its course.

The continued call for government stimulus or a jumpstart is troublesome, since many interventions have caused market anomalies or confusion. Also, the continued pressure to “provide a solution for the housing market” is tantamount to providing a single solution to the health care crisis—there isn’t one. What’s needed is a series of rational financial decisions that will eventually return us to a rational housing market.

The perception that a healthy market is a return to 2004-2007 is a dangerous one. We have seen first-hand just how unhealthy and unstable that market was.

Little by little, housing is coming back, and housing is more affordable than it has been in many consumers’ lifetimes. If we can cure the perception that housing is somehow damaged, we will see a return to primary home purchases. We are already seeing the return of both domestic and international investors. In some markets, this is actually driving an inventory shortage.

In summary, we are in a saw-tooth recovery and we will see housing indices go up and down at monthly or quarterly intervals for the forseeable future. This is predictable. As inventories swell, prices go down and sales increase. As inventories constrict, the opposite happens.

The challenge is that each fluctuation is seen by the media as either a recovery or a (double, triple, or quadruple) dip. The housing market traditionally runs in 7- to 12-year cycles, yet the media runs in 7- to 12-minute cycles.

The perception that housing is erratic is driving buyers away and providing investors with a major opportunity. An educated consumer today is one who is purchasing if they can.