Eliminating or curtailing the mortgage interest deduction would have a disproportionate impact on younger, middle-class families, who would see their ability to become owners significantly diminished, with sober implications for their longer term financial prospects, the National Association of Home Builders (NAHB) told Congress today. 

“How housing is treated in any future tax reform will shape the economy going forward,” Robert Dietz, an economist and assistant vice president for NAHB, testified during a Senate Finance Committee hearing on tax reform options to provide incentives for homeownership. 

Most Americans consider homeownership to be their single best long-term investment and a primary source of wealth and financial security. According to the 2007 Federal Reserve Survey of Consumer Finances, the median net worth of a home owner is $234,600, compared to $5,100 for renters. 

“We believe that any policy change that makes it harder to buy a home, or delays the purchase of the home until an older age, will have a significant long-term impact on household wealth accumulation and the make-up of the middle class as a whole,” said Dietz. 

In the short term, tampering with the mortgage interest deduction would undermine an already fragile housing market and wreak havoc on the tenuous economic recovery by hurting housing demand, which would place downward pressure on home prices. In turn, this would leave more home owners underwater and trigger even more foreclosures. 

This cornerstone of American housing policy provides benefits for home buyers at all income levels and retains overwhelming public support. In a New York Times/CBS News poll conducted in June of 2011, 89 percent of the respondents said that homeownership is an important part of the American Dream and more than nine in 10 opposed doing away with the mortgage interest deduction. 

Public support runs strong, despite misleading claims that the deduction benefits only wealthy taxpayers and only a small number of home owners utilize the deduction because they must itemize their deductions in order to claim it. 

Setting the record straight, Dietz told lawmakers that 70 percent of the tax benefits go to middle-class home owners who earn less than $200,000 and that a deduction that reduces the net cost of monthly house payments is particularly important to younger home buyers, who typically have large home loans and less equity and are paying mostly interest in the early years of the mortgage. 

Dietz said that arguments that most home owners do not itemize and cannot benefit from the deduction are false. 

“Out of 75 million home owners, 35 million claimed the mortgage interest deduction in 2009,” he said. “This fails to take into account the millions of taxpayers who are renters and one day aspire to own a home of their own and the roughly 25 million who own their homes free and clear and used the deduction in the past. The bottom line is that 70 percent of home owners with a mortgage have claimed the deduction.” 

Dietz also stressed the importance of several other housing tax incentives, including the Low Income Housing Tax Credit, which is the most successful affordable rental housing production program in the nation’s history and produces approximately 90,000 full-time jobs per year.

The second home deduction is also important for many who do not think of themselves as owning two homes. “For example, the second home deduction facilitates moving when owning two homes during the tax year and also permits existing home owners to claim interest on a construction loan for a future home,” said Dietz.

Eliminating the mortgage deduction for second homes could threaten the economic viability of second home and vacation markets.

“We are not just talking about well-known coastal markets, but also small towns in states such as Maine, Vermont, New Hampshire, Michigan, Colorado and Florida,” said Dietz. “And nearly every state has areas with significant numbers of second homes; 49 states have a county where at least 10 percent of the housing stock consists of second homes.”

Home owners are also allowed to deduct interest on up to $100,000 of home equity loan debt. Half of all home equity loans are used for remodeling and home improvement, which provides jobs and are important activities for a nation with an aging housing stock.

As policymakers look to create jobs and boost economic growth, housing has an important role to play, said Dietz.

“Building 100 single-family homes creates more than 300 full-time jobs,” he said. “Housing can act as a catalyst for job growth and an economic recovery because home building employs such a wide range of workers.”

Thousands of first-time and move-up buyers who hoped to make a foreclosed property their new home now face uncertainty, anxiety and possibly remorse as they worry that closing on their desired property could be in jeopardy.

For many, the dream of homeownership could turn into agony if their home purchase is indefinitely delayed by a moratorium on foreclosures declared by some banks, the National Association of Realtors® said today. The moratoriums are needed, banks say, to review all of the foreclosures in their portfolios to make sure they’re in compliance with the law and that titles are clear.

NAR warned that a prolonged review process would have a damaging impact on many communities and hinder the nation’s economic recovery.

“As the leading advocate for homeownership issues, we understand that many lenders need a time-out to review their actions to ensure that homeowners are not improperly foreclosed on and that the lenders are following regulations and state laws. After that, the foreclosure process must resume quickly to return stability to families, the housing market and the economy,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates, Tucson, Ariz.

Over the past few months NAR has met with officials of top banks to discuss market issues. NAR urged banking leaders to seek resolution quickly through loan modifications and the short-sale process rather than through foreclosure. “We stand ready to help lenders develop better short-sale procedures,” Golder said.

“There are valid foreclosures that should move ahead quickly, and we shouldn’t lump them in with mortgages that are suspect. That would cause deep problems in an already fragile market and throw many families into uncertainty,” Golder said.

Golder said that she is receiving reports from Realtors® that the moratorium is already creating some anxiety among purchasers as transactions are being delayed and that some foreclosure listings are being removed from the market.

Compounding the problem is that the requirements for foreclosure vary by state, and practices to meet these requirements vary by firm. NAR is working with regulators, such as the Federal Housing Finance Agency; and encouraging them to identify and quickly address process problems.

In a letter to the U.S Treasury Department, the U.S Department of Housing and Urban Development, and the Federal Housing Finance Agency, NAR stated the hope that banks would complete their foreclosure review expeditiously to assure that the rights of borrowers are protected and remove doubt that buyers will receive clear title to their purchase.

“NAR has long urged the lending industry to take every feasible action to keep families in their homes with a loan modification and, if that is not possible, to give them a ‘graceful exit’ through a short sale. These options are far better than a foreclosure, and nothing has driven this point home more clearly than the questions being raised about foreclosures. Lenders should place additional resources into processing loan modifications and short sales,” NAR wrote.

A year ago, NAR instituted a special short sale training program for its Realtor® members to work more closely with banks in expediting mortgages at risk by resolving them through short sales and loan modifications. More than 51,000 Realtors® have been certified in the program.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

To work with a National Association of Realtors certified Short Sale and Foreclosure expert, contact me today! I have sold Katy real estate for over 21 years–experience does count!

It”s nearly impossible for the average citizen to keep track of all events directly impacting housing and mortgage markets.  Professional mortgage lenders monitor the live trading of Mortgage-Backed Securities (MBS). Government and conventional mortgage rates are directly based upon MBS. So…what exactly is a MBS?

Compliments of Wikipedia

A mortgage-backed security (MBS) is an asset-backed security or debt obligation that represents a claim on the cash flows from mortgage loans, most commonly on residential property.

First, mortgage loans are purchased from banks, mortgage companies, and other originators. Then, these loans are assembled into pools. This is done by government agencies, government-sponsored enterprises, and private entities, which may offer features to mitigate the risk of default associated with these mortgages.

Mortgage-backed securities represent claims on the principal and payments on the loans in the pool, through a process known as “securitization”. These securities are usually sold as bonds, but financial innovation has created a variety of securities that derive their ultimate value from mortgage pools.

In the United States, most MBS’s are issued by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), U.S. government-sponsored enterprises. Ginnie Mae, backed by the full faith and credit of the U.S. government, guarantees that investors receive timely payments.

Fannie Mae and Freddie Mac also provide certain guarantees and, while not backed by the full faith and credit of the U.S. government, have special authority to borrow from the U.S. Treasury. Some private institutions, such as brokerage firms, banks, and homebuilders, also securitize mortgages, known as “private-label” mortgage securities.

Residential mortgages in the United States have the option to pay more than the required monthly payment (curtailment) or to pay off the loan in its entirety (prepayment). Because curtailment and prepayment affect the remaining loan principal, the monthly cash flow of an MBS is not known in advance, and therefore presents an additional risk to MBS investors.

For information about Katy real estate, contact me directly at 713-818-2404 or via email. I have specialized in Katy real estate for over 20 years. Experience does count!

The Federal Housing Administration, FHA, has kept mortgage rates and Mortgage Insurance Premiums, MIP, lower than the market dictated for some time to encourage home buyers to shore up the economy.

MIP premiums are about to increase; the date is April 5th. On case numbers dated after April 4th, MIP premiums go from 1.75% of the total loan value to 2.25%. It’s not as dreadful as it sounds. On a $200,000 mortgage, the increase, based on today’s interest rates, is approximately $6 per month–stay out of…to read the rest of my article, see OnlyKaty.com.

Normally, I don’t write articles explaining why rates are fluctuating. If you are like me, you just want to know what the rate is today. However, a recent change will  raise rates and we will also probably see them continue to increase in the future.

Read my entire article at OnlyKaty.com.

According to CNN News, the homebuyers tax credit has been extended; the bill now goes to President Obama for signature:

“The legislation would extend the $8,000 homebuyer tax credit to contracts signed by April 30, 2010 and closed by June 30, 2010. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30.

The bill also creates a $6,500 credit for those who buy a home after living in their current house at least five years. That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years.

The credit would be available only for the purchase of principal residences priced at $800,000 or less.

The bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.”

I am a Katy  Specialist having sold many houses in Katy over the last 20 years, both new construction and resale. This includes both working as a listing and selling agent. Call me for more information and for outstanding professional representation.

While at this time it is only available to Fort Bend buyers, there is a new loan program that makes financing a first home much more affordable and easier. It saves the homeowner up to $2000 off their taxes each year for the life of the loan.

The Mortgage Credit Certificate allows the lender to qualify for more home or to get approved if they have been denied in the past. The Mortgage Credit Certificate Program can be used to gross up income or ratios to enable the borrower to qualify for a mortgage loan.

The Mortgage Credit Certificate Program is available to first-time homebuyers, defined as a person who has not owned a home as a primary residence in the last three years.

One of the most exciting features of this program is that it can be combined with the current first-time homebuyer’s $8000 tax credit resulting in a credit savings of $10,000 in 2009! However, the $8,000 tax credit program expires on November 30, 2009 so it is important to buy your home prior to that date. If you act quickly, there is still time to shop for and close on a home.

The Mortgage Credit Certificate allows the homebuyer, if there is a tax liability, the benefit of a dollar-for-dollar reduction of their tax bill. The program enables the homeowner to claim a tax credit of 30% of annual  interest paid, not to exceed $2000 per-year, for the life of the loan.

This program is not for investors but for those who will purchase and occupy a home for at least nine years. If the Mortgage Credit Certificate borrower sells his house within nine years, makes a profit and if his income has greatly increased, the homeowner would have to pay back a % depending on what year he sells. The penalty decreases every year.

With low interest rates and the $8000 tax rebate program, there has never been a better time to become a home owner!

There is also a new loan program aimed at assisting teachers, police officers, firemen, EMS personnel, correction officers, school nurses, teacher’s aides, librarians, school counselors and county jailers to purchase a home. This program is not limited to Fort Bend County! For details, see an article I wrote for Only Katy.com: “Special Mortgage Loan Program Helps Teachers, Police Officers and Public Servants Purchase Homes”.

For more details on both programs and to be referred to a Mortgage Credit Certificate lender, contact me @ 713-818-2404.

For information about Katy area homes, you can search the entire Houston MLS from this blog. For questions or to tour any area homes, contact me directly at 713-818-2404 or via email. I have specialized in Katy real estate for over 20 years. Experience does count!

According to The Washington Post, “Two Dallas-area congressmen -  one a Democrat, the other a Republican – have introduced bills that not only would broaden the reach of the current housing tax credits to almost everybody, but would keep the program going until either mid-2010 or the end of that year.”

The current credit program expires on the last day of November 2009. H.R. Bill 2619, sponsored by Republican Kenny Marchant, would expand the current $8,000 federal tax credit to all homebuyers–not just first-time buyers. The bill would also extend the federal program through June 2010.

“The bill would also create an unprecedented $3,000 credit to help offset ‘qualified refinancing cots’ – closing fees, lender charges and the like -  through next June,” wrote The Washington Post.

Democrat Rep. Eddie Bernice Johnson introduced the Homebuying Credit Expansion Act (H.R. 2606). It would extend the current credit through December 31, 2010. The bill would open the tax credit to all buyers of principal residences. Unlike the Republican bill, it would not provide any new tax incentives to refinancing home owners.

According to The Washington Post, Mary Trupo, public policy director for the National Association of Realtors, said, “We say – if the credit is working for first-time homebuyers, then why not for all buyers, with no income limitations? We would like to see the expiration date extended beyond November 30, 2009. Expanding the credit is really the way to stabilize the housing market – by making it available to everybody.”

The Washington Post reported that Trupo said, “First-time homebuyers accounted for one-half of all purchasers in March – up from one-third in January – and that increase is directly attributable to the tax credit.”

In summary, The Washington Post article read, “…later this year, you can bank on it: There will be a significant push to extend the housing tax credit – and maybe even open it up to everybody.”

Personally, I have sold several first-time homebuyers as a direct result of the tax credit. I am currently working with two more.  I hope the tax credit will be expanded in scope and extended time-wise. The rebirth of our economy is tied directly to the residential real estate market.

For information about Katy area homes, you can search the entire Houston MLS from this blog. For questions or to tour any area homes, contact me directly at 713-818-2404. I have specialized in Katy real estate for over 20 years. Experience does count!

Many Katy Realtors still do not understand the process of a  Short Sale  even though there are many such properties in Katy. What does it take to get a get a Short Sale written and closed?  Acquaint yourself with the basics by reading this article and call me at 713-818-2404; I am an expert in the field of Short Sales!

Let’s start at the beginning, what is a “Short Sale”. A Short Sale is where the net proceeds from the sale of a property are less than what is owed to  mortgage companies and other lienholders. The seller receives no funds from the sale and all lienholders must agree to the transaction.

The seller’s best interest is served by having any sale approved by the mortgage company.  Although the seller’s credit is adversely affected, they do not have a foreclosure on their record.

The mortgage company tries to get the highest amount they can in order to reduce their loss on the transaction . This involves a negotiation process which can take quite some time. As a general rule, these transactions will take a minimum of 30 days to complete but,  depending on the circumstances, can take 90 days or more. All parties involved in the transaction need to be aware of the possible time frame involved.

Because the mortgage company is taking a loss on the transaction, they control a lot of the specifics of the sale, including, but not limited to, what can/can’t be included in the contract and when closing/funding must occur.

Following are the usual stipulations tied to a Katy Short Sale:

• Any contract submitted is subject to acceptance by all mortgage companies and lienholders. It is not considered executed until all approvals are received, even though the seller will sign the contract in order to submit it to the mortgage company. The Special Provisions section of the sales contract will include verbiage similar to this: “This contract is subject to acceptance of seller’s mortgage companies and lienholders.”
• All offers must include a lending pre-approval letter.
• The seller will not be able to do any repairs to the property. The sale is “as-is, where-is”. (Note: This not always true. It depends on how many offers are on the property which is usually multiple.)
• Seller is not in the position to provide Homeowner’s Association documents. If buyer requires the documents a part of evaluating the purchase of the property, buyer will need to order and pay for them.
• Mortgage companies generally will not pay for surveys, inspections, treatments or residential service contracts. Depending on the offer and the amount they will receive, the mortgage company may or may not allow some seller contributions to buyers closing costs.
• When and if the mortgage company accepts an offer, they will have a specific date for closing/funding. These dates are generally firm and while it may be possible to get an extension, there is no guaranty an extension will be granted.
• There is no guarantee that any offer submitted by a buyer will be accepted by the bank.

Want an extra $8,000? If you’re a first-time homebuyer, you’re in for a nice gift.

Last fall, the Federal Government introduced a financial incentive to prospective first-time homebuyers, an income tax credit of up to $7,500. The rules were simple: You must have been a first-time homebuyer, (as defined by not owning a home in the previous three years), and you met certain income restrictions.

The new $8,000 tax credit is available to those who buy between January 1, 2009 and December 1, 2009. It’s not a deduction, it’s an actual credit. Unlike the $7,500 first-time homebuyer tax credit introduced last summer, this does not need to be repaid.

First-timers who qualify can make no more than $75,000 in adjusted gross income if they’re single or $150,000 if filing jointly. The maximum tax credit is $8,000 or 10 percent of the sales price of the home, whichever is less. After purchase, three years residence in the property is required. As always, check with your accountant for details and be sure to submit IRS form 5405 when you file your taxes.

For information about Katy area homes, you can search the entire Houston MLS from this blog. For questions or to tour any area homes, contact me directly at 713-818-2404.I have specialized in Katy real estate for over 20 years. Experience does count!

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