Real Estate Information

By Jennifer Liberto @CNNMoney February 6, 2012: 4:01 PM ET
retrieved from http://money.cnn.com/2012/02/06/news/economy/mortgage_settlement/index.htm?hpt=hp_t1

WASHINGTON (CNNMoney.com) -- States have until the close of the business day to agree to the latest draft deal aimed at relieving homeowners struggling with mortgages bigger than their home's value.

Attorneys general from California and New York, who had been cold to the deal in past weeks, are now involved in talks that could signal their participation.

A source close to the talks told CNN that California Attorney General Kamala Harris is now inclined to sign on to the deal.

New York Attorney General Eric Schneiderman is also talking with negotiators, sources say.

Federal officials and state attorneys general could announce -- perhaps as early as this week -- a deal with some of the nation's largest banks that could yield up to $25 billion for those homeowners. That would be more than any housing relief program has produced since the financial crisis began.

Obama proposes new home refinancing plan

Under the latest draft, about 1 million U.S. homeowners who are "underwater" on their mortgages -- with principal exceeding the home's value -- could be eligible for as much as $20,000 in relief of principal owed, according to U.S. Housing and Urban Development Secretary Shaun Donovan.

In return, mortgage servicers in states that agree to the deal would get immunity from future state servicing and originating claims -- although homeowners could pursue claims against banks and states could still pursue criminal investigations, according to reports.

Driving the deal originally were allegations that mortgage servicers cut corners and enlisted robo-signers that improperly foreclosed on homeowners. However, the deal under negotiation now wouldn't be able to return houses to those who have already been foreclosed on, according to reports.

What the deal would do is ensure that mortgage servicers agree to communicate better, avoid delays and give homeowners who are late on mortgage payments a fairer shake.

The big question is how much money would be available to help homeowners, but that depends on how many states agree to the deal. If all 50 states sign on, the mortgage servicing settlement has the potential to offer as much as $25 billion. But without California, the nation's largest state, the pot would be several billion dollars smaller.

Last week, California's Harris and Attorney General Beau Biden of Delaware said the deal, as drafted, wasn't good enough for their states.

New York's Schneiderman was tight-lipped about his participation when asked. Calls to his office on Monday weren't returned.

Generally, the attorneys general have said they're worried they if they agree to the deal it would cripple their own investigations into mortgage cases.

But California's Harris is more comfortable that the deal will leave her room to pursue her own investigations and lawsuits, a source close to the talks told CNN.

At least one consumer advocacy group, the Center for Responsible Lending, has said the deal -- while "no silver bullet" -- leaves room to hold banks accountable in other mortgage probes, said Kathleen Day, a spokeswoman for the nonprofit.

The negotiations are between federal agencies, including the U.S. Department of Justice and the U.S. Department of Housing and Urban Development, as well as the state attorneys general and the five largest mortgage servicers:Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM). A few other regional banks that service mortgages are reportedly considering signing on as well.

The big banks aren't as keen to sign off on a multi-state deal that doesn't include immunity from mortgage servicing claims from California's and New York's attorneys general, said a source familiar with the deals.

And left-leaning groups, including Move On and the New Bottom Line, are continuing to urge states to hold out for a big criminal investigation and a $300 billion settlement award.

-- CNN's Jessica Yellin and CNNMoney's Erica Fink contributed to this report.

By: Barbara Eisner Bayer

Published: January 5, 2012

Get an “A” on your Schedule A Form: Dodge these tax deduction pitfalls to save time, money, and an IRS investigation.

Trap #1: Line 6 - real estate taxes

Your monthly mortgage payment often includes money for a tax escrow, from which the lender pays your local real estate taxes.

The money you send the bank may be more than what the bank pays for your taxes, says Julian Block, a tax attorney and author of Julian Block’s Home Seller’s Guide to Tax Savings. That will lead you to putting the wrong number on Schedule A.

Example:

• Your monthly payment to the lender: $2,000 for mortgage + $500 escrow for taxes

• Your annual property tax bill: $5,500

Now do the math:

• Your bank received $6,000 for real estate taxes, but only paid $5,500. It may keep the extra $500 to apply to the next tax bill or refund it to you at some point, but meanwhile, you’re making a mistake if you enter $6,000 on Schedule A.

• Instead, take the number from Form 1098—which your bank sends you each year—that shows the actual taxes paid.

Trap #2: Line 6 - tax calculations for recent buyers and sellers

If you bought or sold a home in the middle of 2011, figuring out what to put on line 6 of your Schedule A Form is tricky.

Don’t simply enter the number from your property tax bill on line 6 as you would if you owned the house the whole year. If you bought or sold a house in midyear, you should instead use the property tax amount listed on your HUD-1 closing statement, says Phil Marti, a retired IRS official.

Here’s why: Generally, depending on the local tax cycle, either the seller gives the buyer money to pay the taxes when they come due or, if the seller has already paid taxes, the buyer reimburses the seller at closing. Those taxes are deductible that year, but won’t be reflected on your property tax bill.

Trap #3: Line 10 - properly deducting points

You can deduct points paid on a refinance, but not all at once, says David Sands, a CPA with Buchbinder Tunick & Co LLP. Rather, you deduct them over the life of your loan. So if you paid $1,000 in points for a 10-year refinance, you’re entitled to deduct only $100 per year on your Schedule A Form.

Trap #4: Line 10 - HELOC limits

If you took out a home equity line of credit (HELOC), you can generally deduct the interest on it only up to $100,000 of debt each year, says Matthew Lender, a CPA with EisnerLubin LLP.

For example, if you have a HELOC for $200,000, the bank will send you Form 1098 for interest paid on $200,000. But you can deduct only the interest paid on $100,000. If you just pull the number off Form 1098, you’ll deduct more than you’re entitled to.

Trap #5: line 13 - Private mortgage insurance

You can deduct PMI on your Schedule A Form, as long as you started paying the insurance after Dec. 31, 2006. Unless Congress acts to extend the PMI deduction, however, 2011 is the last year for which you can take this deduction. (Also, this is also a good time to review your PMI: You might be able to cancel your PMI altogether because you’ve had a change in loan-to-value status.)

Trap #6: line 20 - casualty and theft losses

You can deduct part or all of losses caused by theft, vandalism, fire, or similar causes, as well as corrosive drywall, but the process isn’t always obvious or simple:

• Only deduct losses that are greater than 10% of your adjusted gross income (line 38 of Form 1040).

• Fill out Form 4684, which involves complex calculations for the cost basis and fair market value.  This form gives you the number you need for line 20. 

Bottom line on line 20: If you’ve got extensive losses, it’s best to consult a tax pro. “I wouldn’t do it myself, and I’ve been dealing with taxes for 40 years,” says former IRS official Marti.

This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

By: Dona DeZube

Published: December 28, 2011

We explain the tax details around giving the gift of a home down payment.

With lots of inventory and low home prices, your gift of a down payment to your credit-worthy children can be a stepping stone to getting into a first or next house. A nice thought at this time of year. (I’m speaking both of the holidays and the upcoming tax season.) Speaking of which, there are rules — like there’s no tax deduction for giving a non-charitable gift. But your gift of up to $13,000 can be given tax-free.

My husband and I used our parents’ generous wedding gift as a down payment rather than spend it all on the wedding. And we’re not the only couple boosted into home ownership by parents, according to blogger Amy Hoak. She says about one-quarter of first-time home buyers get a down payment gift from relatives or friends (note to my friends: My birthday is coming up in February and nothing says you’re my BFF like a down payment!).

“Many times a gift will allow a buyer to make a down payment without severely depleting their savings — a big plus in an uncertain economy,” writes Hoak. “Most lenders will require borrowers to have some money in the bank after closing. And some parents would rather their adult children keep saving for a rainy day than use all of their funds to make a down payment.”

The rules for using down payment gifts differ depending on which lender you use and whether your loan is guaranteed by Fannie Mae, Freddie Mac, or FHA. Hoak outlines the rules for each in her blog.

If you’re the one making the down payment gift, you won’t have to pay federal income tax, nor will the recipient, as long as you give $13,000 or less in 2011 or 2012. You can give up to $13,000 per person without tax implication to any number of people in one year.

In addition, you and your spouse can each give separate gifts to your child. The IRS calls this gift splitting. For instance, if you’re planning to give to your two children, you and your spouse can each give each child up to $13,000 for a total of $52,000 ($13,000 x 4), says CPA Sue Medicus, owner of Liberty Tax Service in Catonsville, Md.

If you want to give more, you still may not owe taxes, but you have to inform the IRS of your gift using Form 709. Check with your tax adviser to see if the amount above $13,000 counts against a lifetime exclusion that we all get to use to pass along assets via gifts and estates, Medicus says.

You can’t deduct the value of gifts you make (other than gifts that are deductible charitable contributions) or any federal gift resulting from making those gifts.

For more, IRS Publication 950 outlines the rules about gift and estate taxes.

What do you think about making down payment gifts to children? Have you done it? Would it have helped you?

By: Gavin Mathis

Published: January 26, 2012

In his third State of the Union address, President Barack Obama called on Congress to expand refinancing opportunities to millions of Americans.

It was nice to finally hear a politician talking about solving our housing market woes — the bull's-eye in terms of economic recovery.

Aiming to strike a populist chord with voters, President Barack Obama asked Congress Tuesday night during the State of the Union address to pass a mass refinancing effort that would help home owners take advantage of today’s lower mortgage rates.

“I’m sending this Congress a plan that gives every responsible home owner the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates,” the president said. “No more red tape. No more runaround from the banks."

The proposal is an extension of the administration’s Home Affordable Refinance Program, which made it easier for home owners with loans owned or backed by Freddie Mac and Fannie Mae to refinance at record low interest rates. The proposal would broaden refinancing opportunities to home owners whose loans aren’t backed by the federal government.

To pay for the plan, Obama said that a small fee on the nation’s financial institutions would be implemented to ensure that the plan is deficit neutral.

Although Obama’s words were music to the ears of many home owners (especially since politicians on both sides of the aisle have been relatively mute on housing issues) — more needs to be done to help underwater home owners modify their loans and encourage banks to streamline the lending process. In the weeks ahead, Obama needs to leverage his refinancing proposal by emphasizing it on the campaign trail and letting every home owner know how easier rules and lower interest rates will help them.

Housing is a key driver of the economy. The NATIONAL ASSOCIATION OF REALTORS® estimates that for every two homes sold, one job is created. Plus, housing accounts for more than 15% of the U.S. gross domestic product. In past recessions, a rebound in housing has usually been one of the first signs that economic conditions are improving.

Besides stepping up refinancing efforts with banks, the president outlined the creation of a new mortgage fraud unit to investigate misconduct by lenders. “This new unit will hold accountable those who broke the law, speed assistance to home owners, and help turn the page on an era of recklessness that hurt so many Americans,” Obama said.

As we get closer to Election Day, the need for comprehensive housing solutions must not become just populist rhetoric in a speech. Effective housing policy is too important to too many Americans to be lost in election year jockeying.

In fact, housing and mortgage issues are make-or-break election issues for many voters and perilous territory for politicians. In a recent survey of voters, 60% believe dealing with mortgage and foreclosure issues is key to stabilizing the economy, including 57% of Republicans and 66% of Democrats.

The clearest way for Obama and his Republican opposition to prove to the American people that they’re fighting for the interests of their fellow Americans is to help home owners by making housing a priority. 

What did you think of the comments President Obama made about housing issues and mortgage lending?

By: Dona DeZube

Published: January 18, 2012

Tax rules that let you escape paying federal income tax after a short sale expire this year.

If you can’t afford your mortgage and know you’re going to eventually have to sell your home via short sale, you might want to get going on that sooner rather than later.

If you complete your short sale in 2012, you won’t owe federal taxes on the transaction. If you wait until 2013, you could owe a hefty federal tax.

In a short sale, the lender lets you sell your house for less than what you owe on the mortgage.

For example:

• You have $200,000 left on your mortgage.

• You can sell your house for $150,000.

• Your lender agrees to let you sell the house and takes $150,000 instead of the $200,000 you owe.

• Your lender forgives the $50,000 difference between the $200,000 you owe and the $150,000 you sold your house for.

If you did the short sale in this example this year, you wouldn’t owe taxes on the $50,000 the lender forgave. That’s because in 2007 and again in 2008, Congress told the IRS to stop collecting taxes on forgiven debt until 2013.

Before the 2007 law passed, you had to pay federal income tax on forgiven debt. If your lender forgave $50,000, the IRS said that $50,000 was income. If you were in a 28% tax bracket you’d owe $14,000 (.28 x $50,000) in federal income taxes.

Here we are 12 months away from the deadline, and it’s anybody’s guess whether Congress will renew that no-taxes-on-forgiven-debt rule. It’s just one of literally trillions of dollars of tax benefits expiring at the end of this year, and there’s no signal yet as to what, if anything, Congress will do about any of them.

And if that’s not confusing enough, states have their own tax laws on debt forgiveness that you have to consider, too.

Silver tax lining for 2013?

If you end up having to short sale in 2013, you may be able to escape taxes another way. If what you owe all your creditors exceeds the value of everything you own, you may not owe tax. Read about the insolvency rule in Publication 4681. (Note: The IRS includes all your assets in determining if you’re insolvent before the short sale.)

Despite its name, a short sale often takes a long time to complete. To ensure you have short sale success before the tax rule changes, work with a real estate agent who has done short sales, promptly give your lender any paperwork it asks for, and pray for patience. You’ll need it.

Did you buy or sell in a short sale? How long did your transaction take?

By Les Christie @CNNMoney January 12, 2012: 8:18 AM ET

NEW YORK (CNNMoney) -- Foreclosure filings and repossessions fell to their lowest level since 2007 last year.

Total filings, including default notices and bank repossessions were down 33% for the year to 2.7 million, according to RealtyTrac, the online marketer of foreclosed properties.

One in every 69 homes had at least one foreclosure filing during the year, while 804,000 homes were repossessed. That's a significant improvement from the peaks reached in 2010 -- when 1.05 million homes were repossessed -- and the lowest levels seen since 2007.

More than 4 million homes have been lost to foreclosure over the past five years.

While the declines seem like good news for the housing market, where a flood of foreclosed homes has depressed home prices, much of it is due to processing delays caused by fall-out from the "robo-signing" scandal that broke in late 2010.

During the year, banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days during the fourth quarter, up from 305 days a year earlier.

"Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year," said Brandon Moore, chief executive officer of RealtyTrac.

However, Moore said there were "strong signs" during the second half of the year that lenders are working through foreclosure backlogs in certain markets. He expects foreclosure activity to rise above 2011's level but remain below the peak hit in 2010.

Low rates offer some help for homeowners

Early in 2011, many forecasters were predicting a wave of foreclosures due to resetting adjustable-rate mortgages, but low mortgage rates helped many borrowers refinance into more affordable loans, said Moore.

The government helped as well, through efforts like the Home Affordable Refinance Program (HARP), which made refinancing easier for borrowers who owe more on their mortgage than their homes are worth.

Government foreclosure prevention programs, including HARP and the Home Affordable Modification Program (HAMP), have started about 5.5 million mortgage modifications since April 2009, according to the U.S. Department of Housing and Urban Development.

"Programs like HAMP and HARP have definitely made a dent in the foreclosure problem," said Moore "However, they are certainly not living up to their billing of preventing several million foreclosures. In addition, many [HAMP] homeowners fall back into foreclosure later on."

Of course, there were still plenty of factors working against homeowners in 2011, including the continued erosion in home prices. Falling prices rob homeowners of home equity, which they can tap if they need emergency cash.

Foreclosure hot spots

Hot spots for foreclosures remain mostly in "bubble states," where speculative investors helped drive up home prices beyond their fundamental values during the mid-2000s housing boom.

Nevada, where one out of every 16 households received some kind of default notice during the year, was the worst hit of all, a distinction it has held for the fifth consecutive year.

Foreclosure free ride: 3 years, no payments

Arizona had the second highest foreclosure rate and California came in third. Florida, which had been running neck-and-neck with the other "Sand States" in past years, fell to seventh, behind Georgia, Utah and Michigan.

Among metro areas, Las Vegas suffered from the highest foreclosure rate in 2011. California put seven cities in the top 10, led by Stockton in the second slot. Other cities in the top 10 included Phoenix, which finished sixth, and Reno, Nev. was eighth.