Federal Government Looks to Spread Awareness of Refinancing Options>PRWEB.COM NewswireChicago, IL PRWEB October 03, 2013The Federal Savings Bank is continuously informing current lien holders of various refinance opportunities. With refinance activity on the decline, the Federal Housing Finance Agency is doing all it can to spread awareness about the Home Affordable Refinance Program.However, theres more to the FHFAs awareness campaign than just spurring on mortgage activity. The government agency has said that too many Americans who are eligible to benefit from the program have not done so due to a lack of knowledge regarding HARP.”Theres a perception among some that youve got to be delinquent in order to have some government-sponsored program that can help you,” FHFA Acting Director Edward J. DeMarco told Bloomberg on September 23rd. “What we want to do is correct that misperception.”
When you escape a debt the IRS normally counts the amount of the debt you were forgiven as income, and taxes you accordingly. In terms of a taxable event, this could be significant to you financially if you short sale your home.
Example: Mr. & Mrs. Jones owe $550,000 on their mortgage, but the current market value for the house is $350,000. Faced with a transfer, they have to sell their home. Their lender allows them to Short Sale their home for the current market value even though it will net less than the balance owed on the mortgage. In agreeing to sale short, the lender also agrees to forgive the debt on the outstanding balance; in this case, $200,000. Enter the IRS, who view the $200,000 as taxable income!
The Mortgage Forgiveness Debt Relief Act addresses this very scenario, and has been in effect for the last since 2007 when the market began its collapse, throwing many homeowners into financial distress by owing more on their mortgage than what their house was actually worth in the changed market. (It has recently been extended to the end of 2013.)
This act allows a home owner a tax exclusion for the forgiven mortgage debt. Without this Act, in the scenario above, the Jones would get a tax bill on the $200,000 as though it were regular, earned income. That means a bill of somewhere around 30%, or $60,000. Quite a deep hole to fall into!
The Mortgage Forgiveness Debt Relief Act is about making it possible to get out from under financial hardship so you can get back on your feet again.
Note: While this is fantastic news, there are some qualifiers to this tax act. Be sure to consult a qualified tax preparer before moving ahead. Also, another thing to consider; the state of California is expected to follow suit with their own forgiveness of debt relief. However, as of this writing, they have not yet extended this tax break on the state level. Plain English: You may get off the hook at the Federal level, but the state is not there….yet.
If you fit this description:
- Have low to moderate income
- Owe more than your house is worth
- Live in your home
- Are delinquent, or have a hardship that puts you at risk of default
- Have a mortgage balance of less than $729,750
Read this article….
Principal relief for stressed homeowners
A limited number of underwater homeowners in California will soon be able to get principal reductions of up to $100,000 apiece on Fannie Mae and Freddie Mac loans through the federally funded Keep Your Home California program.
The federal agency that oversees Fannie and Freddie has steadfastly refused to allow permanent principal reduction on loans they own or guarantee on the grounds it would cost taxpayers money. But in mid-September, Fannie and Freddie told servicers they could immediately begin accepting money for principal reductions from programs financed by the U.S. Treasury’s Hardest Hit Fund, including Keep Your Home California.
Fannie’s and Freddie’s willingness to accept money from Hardest Hit Funds does not signal a change of heart on the part of their regulator, the Federal Housing Finance Agency. Lest anyone get the wrong idea, Freddie says it will allow funds to be used for “principal curtailment.”
Read the rest here…
When you escape a debt the IRS normally counts the amount of the debt you were forgiven as income, and taxes you accordingly. In terms of a taxable event, this could be significant to you financially.
Example: You owe $550,000 on your mortgage, but the current market value is $350,000. Under an a Short Sale agreement with your lender, you sell your home for the $350,000 and the remaining $200,000 is forgiven. Enter the IRS, who view the $200,000 as taxable income!
The Mortgage Forgiveness Debt Relief Act addresses this very scenario, and has been in effect for the last 5 years for distressed home owners who short sell their homes between 2007 and 2012. This act allows a home owner a tax exclusion for the forgiven mortgage debt. However, the measure is due to expire at the end of 2012 with a very good chance it will NOT be extended before the end of this year.
We are still 2.5 months from the end of this year–the deadline to close so that you can benefit from the current Mortgage Debt Relief Act. Getting from listing to close in that time is a challenge but may be doable depending on your lender.
One advantage you have right now is that the inventory of available homes for sale in Sonoma County is drastically low. Buyers are competing aggressively for homes and that is pushing the prices up. Depending on your lender, it may be possible still to accomplish a short sale in time so that you don’t have to hope that the bill is extended next spring.
But if you missed it, and there is a chance you may at this stage…have some hope.
It is believed that the law may be retroactively extended in spring of 2013. So, if you talk to your accountant, you may find that by going ahead with your short sale and doing an extension next year, you would be able to claim the benefit after all. There is still a chance that it won’t be renewed, but if a Short Sale is definitely in your path, then this gives you an added chance to avoid penalty.
By extending your tax return to October 15th, 2013, if the law is extended retroactively in the first half of 2013, you may then be able to exclude the forgiven amount. Remember: consult with a tax professional before deciding.
Fannie Mae site helps you find your way through…
Confused about what options might be available to you and if you even qualify for them? Fannie Mae’s Know Your Options site will get you rolling in no time!
First, to be sure your mortgage is owned by Fannie Mae, start with the Loan Look Up on the very top menu line. Once you’ve confirmed this, you have a literal plethora of assistance in sorting out what options may be open to you.
Their Option Finder makes this all easy! You answer simple, focused questions and come out the other end with your options! If there is something you are not sure about, you can contact them for assistance from a real person!
- How to refinance with little to zero equity
- How to modify your loan
- Options to stay in your home
- Options to leave your home
- What to do if you are already in foreclosure
- A Resource list for Mortgage Assistance & Government Programs that may apply
Another great feature are the calculators made available on the site so that you can get an estimate of your monthly payments would be on a modification or refinance.
Check it out now at www.knowyouroptoins.com!
A pilot program begun in Florida is now being taken nationwide by Bank of America. The program provides home owners with relocation assistance when they complete a Short Sale.
Amounts run from $2,500 to $30,000 depending on the situation, the value of the property, and the decision of the investor who owns the loan.
Here’s the criteria:
- Must have pre-approval for a short sale
- Must participate in either the government’s HAFA (Home Affordable Foreclosure Alternative) short sale program or B of A’s proprietary short sale program
- Process must be initiated by 2012
- Sale must be completed by September 13, 2013
Note: Short Sales already in escrow are not eligible for this program.
Important Federal tax break for some homeowners set to expire this year
For the last five years, the federal government has given tax breaks to distressed homeowners who work out a deal with their lender to reduce or release mortgage debt. But unless members of Congress agree to an extension, starting next year any break you get on your mortgage debt will be considered taxable income.
In distressed mortgage situations like we’re seeing across the country, the lender’s financial loss is considered a financial benefit to the homeowner who gets out of paying their full debt. In a short sale for example, where your mortgage balance is $300,000 and your home sells for $240,000, the outstanding balance of $60,000 is considered forgiven debt and would ordinarily be ruled taxable income.
But since 2007, under the Mortgage Forgiveness Debt Relief Act, forgiven debt has been tax free. That’s set to change after the end of this year.
“As it stands, mortgage debt that’s forgiven is not going to be treated as taxable income here in 2012,” said Greg McBride of Bankrate.com. “But, it remains to be seen whether that’s going to be continued into 2013 or not.”
McBride advises anyone facing a distressed mortgage situation to get things worked out before the end of the year, in case the federal tax break is not extended so you’re not caught by surprise.
What qualifies for the income tax break? Short sales, loan modifications, deed in lieu transactions — where you turn your home over to the bank — and in many cases, foreclosure. Just keep in mind the Debt Relief Act only applies to principle residences. No rental property or second homes.
And don’t even think about getting a break on canceled credit card debt or other consumer loans.
“For somebody who is currently going through some sort of program where they’re having debt that’s forgiven, if it’s not real estate debt, there’s a real good chance you’re going to get a 1099 form at the end of the year that says you now have to pay taxes on whatever debt was forgiven, because it’s treated as income,” McBride explained.
The U.S. Treasury Department is urging mortgage services to put pressure on Congress to extend the tax break. President Obama’s proposal calls for an extension into 2015, but right now, there’s no guarantee.
Think you may not make it in time? Read this post.
2012 may just be the perfect storm: Sonoma County’s available inventory of homes for sale is the lowest in years. Banks and Government programs are getting more and more favorable for the Distressed Homeowner who needs to sell. Banks have too many foreclosures on their books. Short Sales are getting, well, shorter because of improved operating standards by the banks and programs by the government. And the Number One Reason: The Forgiveness of Debt Tax Relief Act expires at the end of this year. Taking advantage of that may save you thousands in taxes you would otherwise have to pay.
Sound interesting? Pick up the phone and call me!
HARP 2.0: What it is; What it isn’t
October 26th, 2011 in CDPE by Alex Charfen
When the Obama Administration announced a series of changes to the Home Affordable Refinance Program (HARP) early this week, our phones started ringing with inquiries from the media for our input concerning the impact. And we had even more questions about HARP during our CDPE Advanced Broadcast yesterday afternoon.
The new HARP is by no means a game changer.
Here’s essentially what we’ve had to say about the revamped government mortgage refinancing program:
HARP 2.0, as the media has started to refer to it, has some merit, but it’s scope is very limited and it will have little or no impact on foreclosures or the estimated 6.4 million homeowners nationwide who are behind on their mortgage payments. The new HARP just expands the net of those who were eligible for help under the original version.
HARP was created in April of 2009 to help borrowers whose loans were backed by Fannie Mae or Freddie Mac, but did not have enough equity or negative equity to refinance. Under the original version of HARP, borrowers who were current on their payments and owed up to 125 percent of the current value of their homes could refinance their mortgage.
The original HARP fell short of expectations. Over the past two and a half years, only 838,000 homeowners have benefited from the program. The new HARP has broadened the base with looser eligibility requirements.
Borrowers with FHA, Fannie Mae or Freddie Mac mortgages that were sold to Fannie or Freddie before May 31, 2009, will be able to refinance, no matter how far underwater they are. Banks will only have to verify that borrowers have made their last six payments, that they’ve haven’t missed more than one payment over the past year, and that they have a job or another source of regular income.
Other key changes:
- Appraisals are no longer required if there is a reliable automated valuation model (AVM)–a significant hurdle in the previous plan.
- Risk-based fees have been eliminated for borrowers who refinance to 15-year mortgages.
- Existing mortgage insurance coverage can be transferred much easier than under the original HARP.
While the new HARP won’t help homeowners who are behind on their payments and at risk for foreclosure, it is a welcome relief for homeowners who have been caught in the Catch-22 of not being able to refinance because they owe more on their mortgage than their home is worth, and at the same time, don’t qualify for a short sale or a loan mod because they are current on their payments and still have income and assets sufficient to cover their costs.
More money into the pockets of this segment will mean more dollars back into the economy, potentially heading off strategic defaults and keeping and stemming the tide of homes entering the foreclosure pipeline.
Free Online: HAMP Calculator
Source: May 26th, 2011 in CDPE by cdpe
The Treasury Department is offering a free online calculator that helps borrowers estimate whether or not they qualify for the Home Affordable Modification Program (HAMP).
The calculator is available at checkmynpv.com.
In the two years since its launch, HAMP has helped more than 270,000 borrowers receive permanent loan modification, thus lowering their monthly mortgage payments. That number falls far short, however, of the millions of homeowners at risk of foreclosure — which is bad for homeowners and bad for the housing market.
The current glut of foreclosures — stalled by paperwork delays — poised to hit the market is already far more than can absorbed by first-time homebuyers, according to the research firm Campbell Surveys.
That is why HAMP is so important. Every homeowner who modifies a loan and stays in a distressed property adds one less property to an already flooded market.