Friday, October 23, 2009

$8,000 Tax Credit

Although, in my opinion, it is still more likely than not that the tax credit will be extended past the November 30, 2009 deadline (and perhaps expanded to include all primary home purchases), there is a disturbing article on page A3 of today's Wall Street Journal.

$139 million was paid out on fraudulent claims regarding the credit to, at minimum, 19,000 people. The most common scam was for people who did not qualify because their income exceeded the cap to use their children's names and social security numbers to file. Although there are simple remedies to ensure this will not continue - such as requiring a copy of the HUD settlement statement - no such measures are currently in place. With that said, many of the proposals to expand the credit include such safeguards. (Source: WSJ)

Let's hope that the negative press attributable to the fraud as referenced above is insufficient to derail any possible extensions of the credit.

Friday, October 9, 2009

Important Mortgage Information

Bank of America, Wells Fargo, Citigroup and J.P. Morgan are all significant players in an experimental government-backed loan modification program. In most cases, in order to qualify for the program, a buyer must be at least 60 days delinquent on the loan. If you think you may qualify, or are heading in that direction, I encourage you to contact your lender. Also, as of now, or in the very near future, standard forms to apply for this program will be available on the govenment website entitled Making Home Affordable (http://makinghomeaffordable.gov). (Source: WSJ 10/9/9).

Also of note in the article referenced above is the following quote. "[S]everal senior House lawmakers expressed support for extending an $8,000 tax credit for first-time home buyers."

Wednesday, October 7, 2009

Better Late Than Never

I meant to comment on an article in The Wall Street Journal last week, the thrust of which was that holders of distressed mortgages are more inclined to write down principal than they have been in the recent past. While it is more likely for a lender to negotiate an interest rate adjustment, in certain instances they are now willing to reduce principal as a last-ditch effort to avoid foreclosing on homes. 

Regardless of one's political inclinations, this is good news for home values. By way of example, assume you have a neighbor who is under water on his mortgage payments. He cannot afford to sell, because of his home value in relation to what he owes on the property. If renegotiating his interest rate is inadequate to alllow him to make his payments, traditionally there are only two likely results. He would either negotiate a short sale, or let the home go to foreclosure and thus the home would ultimately be sold by the lender. The result would be disasterous regarding your home value. Assuming your neighbor's home is similar to yours, that home (which was sold under distressed cirumstance) would now be used as a comparable home in any appraisal or comparative market analysis of your property.

Now assume in that same instance, the lender writes down the principal of your neighbor's home to such an extent that the mortgage now become affordable. The result is no impact on the value of your home. Your neighbor keeps his home and the bank loses less money than it would going through the foreclosure process. Moreover, the principal write-down should not affect an appraisal or comparative market analysis on your property, as there is no mechanism for this information to come to light when these reports are promulgated.

On a lighter note, I recently heard an amusing interview on CNBC with a woman who follows anecdotal evidence relating to the economy. At the inception of an economic recovery, the rate at which men purchase denim products, pink ties and underwear increases. Take that for what it is worth.