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…
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!
In California, once the notice of default has been recorded, you have approximately 120 days to save your home before it is auctioned. Once you get the notice in the mail don’t waste any time!
Here are 5 things to do immediately….
- Call your lender and ask them what solutions they have. Banks are moving away from foreclosures and new programs are coming along all the time. The best way to be sure you have the latest information is to call the lender. If you want to keep your home, begin the process under as many avenues as are available, including non-profit programs.
- Find out who owns your mortgage. Even if your loan is with BofA, it could be owned by Fannie Mae or Freddie Mac (Question #9 in FAQ), If it is, you may qualify for a government program and be able to refinance without an appraisal (HARP2), to modify your loan (HAMP), or to do short sale and get a cash incentive to help with relocation expenses. (HAFA).
- Get professional advice from your tax preparer and an attorney about your financial options and the effect a short sale would have on your finances.
- Operate on the 120 day timeline. This is the typical timeline from Notice of Default to foreclosure and then auction. In that 120 day period is your opportunity to a) get a loan modification consent from the bank, b) short sale your property, or c) find a way to bring your mortgage current.
- Contact a certified short sale Realtor, such as myself, if you want or need to sell your home. Get that ball rolling as soon as possible.
Until the Home Owner’s Bill of Rights takes effect on January 1, 2013, the banks are under no legal obligation to stop the foreclosure process, even if they have told you they would work with you on a loan modification.One last thing: That Notice of Default you got; it is public record. So, put your guard up regarding people who may try to contact you. Some of them may be legitimate, but some may be working a scam.
Why Would a Bank Accept a Short Sale?
The easiest way to demonstrate why a bank will negotiate a short sale is to break down the costs of a foreclosure on a hypothetical property, one a short sale and the other a foreclosure.
The average cost of processing a foreclosure is between $40,000 & $50,000 for the bank before they ever bring the house to the market and pay the additional costs listed here. That is why banks are moving increasingly towards Short Sales.
Say the property has a current value of $200K and the owner owes the bank $225K. But, the best offer to come in is for $190K. The bank would be foolish to accept it, won’t they? Maybe not. Let’s go through the numbers.
|Closing Costs @ 2.25%||-$4,275|
|Commissions @ 6%||-$11,400|
|Proceeds from sale||$175,325|
|Short Sale Lender Loss||$49,675|
Foreclosure on the Same Property:
|6 Months Utilities||-$400|
|6 Months Maintenance||-$800|
|6 Months Interest Loss||-$6,650|
|Staffing Costs (Servicing Dept.)||-$2,000|
|Closing Costs @ 2.25%||-$4,275|
|Commissions @ 6%||-$11,400|
|Proceeds from sale||$139,775|
|Foreclosure Lender Loss||$85,225|
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.
Source: February 26th, 2012 in CDPE bulletin…
For awhile now, we’ve instructed agents on government incentives available to distressed homeowners who opt to do short sales. Such programs include the Home Affordable Foreclosure Alternatives (HAFA) program, which provides up to $3,000 to assist the borrower with relocation fees.
In recent news, major publications including USA TODAY and CNN Money have spotlighted the incentives provided by banks. These incentive programs, which offer anywhere from around $2,000 to upwards of $35,000, are intended to provide homeowners with the resources and motivation to pursue a short sale.
As banks look to ramp up short sales, such incentives are becoming more frequent. JPMorgan Chase began their incentive program last year, for example, and Bank of America (which plans a 60-70% increase in short sales this year) piloted a program in Florida this past December. Wells Fargo offers incentives as well, though primarily in states where the foreclosure process is particularly lengthy.
We’ve said it before, and we’ll say it again: This year looks to be the year of the short sale.
For banks, short sales can be a cheaper alternative to foreclosure. The foreclosure process is lengthy and costly, so much so that providing up to a $20,000 alternative for a short sale is still a cheaper option.
In USA TODAY’s article “Lenders Paying Borrowers to Do Short Sales”, Jim Gillespie, chief executive of Coldwell Banker, is quoted as saying “It’s a lot cheaper to shell out $10,000 or $20,000 to someone than it is to go through a long foreclosure.”
In addition to the cost of the foreclosure process itself, foreclosed properties sell for less than short sales on average. According to the National Association of REALTORS®, foreclosed properties sold for 22% less than conventional sales, while short sales sold for around 14% less.
12 Ways to Avoid Foreclosure
- REINSTATEMENT: Bring the loan current
- FOREBEARANCE: Temporary repayment plan
- REFINANCE: New loan with reduction in monthly payments
- LOAN MODIFICATION: Modify original loan terms or reduce principal (Visit: www.hmpadmin.com and contact your bank.)
- SHORT REFI: (New) Qualify for this process by showing a hardship as well as the ability to pay the new mortgage
- SELL THE PROPERTY: Use equity to pay off or pay difference
- RENT THE PROPERTY: Must make loan current
- SERVICE MEMBERS CIVIL RELIEF (SCRA): Protection for military personnel in foreclosure in specific situations
- HAP: Department of Defense for eligible service members and federal civilians
- SHORT SALE: Negotiate with bank to accept a sale less than the loan amount due
- DEED IN LIEU OF FORECLOSURE: “Friendly Foreclosure”
- BANKRUPTCY: Will stall foreclosure, but not prevent it