Right now, the minimum down payment requirement for FHA is 3.5% to purchase a home, but some experts feel that that's not enough ‘skin in the game' for buyers. Many believe that FHA will raise the requirement to at least 5% and maybe 10%. What do you think?



Are Bigger FHA Downpayments Coming?
by Peter G. Miller

Rep. Scott Garrett (R-NJ) has a new bill that would cut off FHA mortgages from large numbers of borrowers.

Under the grossly mis-named FHA Taxpayer Protection Act of 2009 (HR. 3706), Garrett would increase the minimum FHA mortgage downpayment from 3.5 percent to 5 percent AND prohibit the financing of closing costs under such mortgages.

In essence, what Garrett is proposing is a back-door way to close down the FHA program at a time when we need more home sales to bring back real estate values.

"Homeownership is a noble goal," Garrett says. "However, the benefits of promoting homeownership using government subsidies must be balanced against the potential risk of insuring less creditworthy borrowers and exposing the American taxpayer to that risk. As we have learned repeatedly throughout the mortgage crisis, the amount of equity a homeowner has in their home directly correlates to the credit risk associated to their mortgage. In trying to find a reasonable balance between the current, extraordinarily low level and a level that would ensure a significant reduction of risk to the taxpayer, I am introducing legislation to increase the FHA down payment requirement to 5%."

Here's the reality:

FHA mortgages have LOWER foreclosure levels than prime loans. Who says so? The Mortgage Bankers of America. As the Association reported in August, 3.00 of all prime loans were in the process of foreclosure versus 15.05 percent for subprime loans and 2.98 percent for FHA mortgages.

The effort to increase the FHA down payment would reduce the number of FHA mortgages issued each quarter. With fewer mortgages there would be fewer home sales and less refinancing. The result of fewer home sales would be larger numbers of unsold homes and bigger inventories of unsold homes would push down home values.

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Source: FHALoanPros

Top 10 Tax Tips for Small and Growing Businesses

Taxes are one of the most important issues facing small and growing businesses. And like a company's profits, its annual tax bill will in part reflect the owner's skills and knowledge. Business owners need to be sure that they are meeting all of their responsibilities to the tax man -- and also seizing every opportunity to reduce their taxes. These tax tips will ensure Uncle Sam is not getting more than his due.

1. Writing It Off: Deductions

Businesses can deduct all "ordinary and necessary" business expenses from their revenues to reduce their taxable income. Some deductions are obvious - expenditures in such areas as business travel, equipment, salaries, or rent. But the rules governing write-offs aren't always simple. Don't overlook these potential deductions:

· Business losses. Business losses can be deducted against a business owner's personal income to reduce taxes. If a business owner's losses exceed personal income for the year, some of the year's business losses can be used to reduce taxable income in future years.

· Trips that combine business and pleasure. If more than half of a business trip is devoted to business, deduct the traveling costs, as well as other business-related expenses.

2. Employee Taxes

If a business has employees, a variety of taxes will have to be withheld from their salaries. Among them are:

· Withholding. Social Security (FICA), Medicare and federal and state income taxes must be withheld from employees' pay.

· Employer matching. Businesses must match the FICA and Medicare taxes and pay them along with employees.

· Unemployment tax. Businesses must pay federal and state unemployment taxes.

3. Quarterly Estimated

This area trips up many an entrepreneur and is especially vexing for home-based businesses. Failure to keep up with estimated tax bills can create cash flow problems as well as the potential for punishing IRS penalties. Among the issues are:

· Who should pay? A business probably must pay quarterly estimated taxes if the total tax bill in a given year will exceed $500.

· How much should you pay? By the end of the year, either 90 percent of the tax that is owed or 100 percent of last year's tax must be paid (the figure is 110 percent if a business's income exceeds $150,000). Businesses can subtract their expenses from their income each quarter and apply their income tax rate (and any self-employment tax rate) to the resulting figure (their quarterly profit).

4. Sales Taxes Most services remain exempt from sales tax, but most products are taxable (typical exceptions are food and drugs). If a business owner sells a product or service that is subject to sales tax, he or she must register with the state's tax department. Then taxable and nontaxable sales must be tracked and included on the company's sales tax return.

Having what is considered a "presence" in a state is the criteria used by the IRS to determine whether or not you are liable for paying state sales tax.

If you do not have a physical presence in another state, but sell items via the Internet or by catalog in that state, you can be subject to a state's "use tax," but typically not to their state sales tax. A "presence" in another state does not necessarily mean that you have a retail outlet in that state. If you have an office, warehouse, or employees working for you in that state, the IRS may consider you to have a presence in that state. Make sure you are aware of your sales tax responsibilities in all states in which you are doing business.

5. Keep Tax Documents for at Least Seven Years Good record keeping saves money. Some things like copies of business tax returns, licenses, incorporation papers, and capital equipment expenses should be preserved indefinitely. Keep any tax-related documents (e.g., expense receipts, client 1099 forms, and vehicle mileage logs) for a minimum of seven years.

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Source: AllBusiness.com

4 tips for the homebuyer tax credit
By Marcie Geffner

The federal homebuyer tax credit is back in action in a new-and-improved format that will benefit both first-time homebuyers and homeowners who want to sell their current home and buy a new one. The credit is reasonably straightforward, but there are some tips for those who want to take advantage of it. Here's what you should know:


1. Deadline: April 30, 2010

The most important tip is to be aware of the deadline. Buyers who want to use the tax credit must have their new home under contract (i.e., in escrow) by April 30, 2010, and must close the transaction within 60 days after that date.

That deadline is much sooner than it may seem: Many buyers take months to locate a house, and closing a transaction typically takes 45 to 60 days.

First-time buyers should get started soon because they may face a lot of competition from other buyers who also want to purchase a moderately priced home, according to Ann Pettijohn, a broker and owner of Oaktree Realtors in Orange, Calif. That price range is "very popular" and those homes tend to sell more quickly than higher-priced homes, she says.

Buyers who wait until 2010 may also find fewer homes on the market from which to choose, according to Allyson Bernard, broker and owner of Real Estate Professionals of Connecticut.

"Smart buyers will be out during the holidays when other people are preoccupied," she says.

The short deadline may create even more of a crunch for homeowners who need to sell their current home and purchase a new one, Pettijohn says. Sellers need to be realistic about the value of their current home and put their home on the market as soon as possible, so they'll feel confident about buying their next home, she says.

Buyers who get behind the curveball shouldn't count on another extension to keep them in the game since Sen. Johnny Isakson, R-Ga., a former Realtor and the principal supporter of the legislation that extended and expanded the credit, has said in a statement that the tax credit won't be extended again.


2. Credit up to $8,000 or $6,500

Buyers also need to understand that the tax credit is equal to 10 percent of the sale price of the home, which could be less than the maximum of up to $8,000 for first-time buyers and up to $6,500 for repeat homeowners.

For example, if a first-time buyer purchased a small condominum that cost just $70,000, the tax credit would be $7,000. And by the way, if the home costs more than $800,000, the credit now drops to zero.

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Source: Bankrate

Fannie Mae: "Deed For Lease" Program Will Let Thousands Rent Out Homes To Avoid Foreclosure
ALAN ZIBEL

WASHINGTON — Can't pay the mortgage? You still might be able to stay in your home. Government-controlled mortgage company Fannie Mae is going to give borrowers on the verge of foreclosure the option of renting their homes for a year.

The change announced Thursday could give a temporary break to thousands of homeowners, but critics question whether it will only add to the mushrooming losses at the company, which has received billions in taxpayer money.

The new "Deed for Lease" program will allow homeowners to transfer title to Fannie Mae and sign a one-year lease, with potential month-to-month extensions after that. It also helps save money because the lender does not need to complete the often lengthy and time-consuming foreclosure process.

The program helps "eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities," Jay Ryan, a Fannie Mae vice president, said in a statement.

It also does less harm to the borrower's credit record.

"It shows that you put your best effort to work out a solution," said Gabe del Rio, director of homeownership at Community HousingWorks of San Diego.

However, Mike Himes, director of homeownership services at NeighborWorks Sacramento, said the industry should push harder to modify loans at lower monthly payments. "The preferred option is allowing people to retain ownership," he said.

Fannie Mae executives said the rental program is designed to help delinquent homeowners who don't qualify for a loan modification, but still want to stay in their homes.

To qualify, homeowners have to live in the home as the primary residence and prove that they can afford the market rent, which will be established by the management company running the program. Rents are based on current market rates.

The plan is expected to be particularly attractive in places like Phoenix or Orange County, Calif., where homeowners are stuck paying large mortgage bills on properties that are now worth far less than they originally paid. At the same time, rents have been falling in those areas. So by renting the same house, former homeowners could wind up paying far less every month.

In Orange County, for example, the average monthly rent for all apartments was about $1,450 in September, down nearly 8 percent from a year earlier, according to research firm MPF Research. In Phoenix, the average renter paid about $720, also down about 8 percent from last year.

Still, the effort is likely to attract a relatively small number of homeowners.

In the first nine months of the year, Fannie Mae took ownership of nearly 2,000 properties through a process known as a deed-in-lieu of foreclosure. That pales in comparison to the 90,000 foreclosed properties the company repossessed in the period.

Deed-in-lieu works like the new program, allowing homeowners to turn over title to Fannie Mae, but rather than renting, the owners simply walk away.

While Fannie Mae executives say the company's motives are community-minded, critics say the company is simply gambling that the properties will eventually sell for a higher price. That's folly, says Peter Schiff, president of Euro Pacific Capital in Darien, Conn., and a longtime bearish investor.

"Taxpayers are now going to own all these houses that (Fannie Mae) should have unloaded," he said. "It's going to cost a fortune."

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Source: Huffington Post

 

Filing for Bankruptcy - A Fresh Start!
By Stefano Grossi

There is nothing to be ashamed of when you consider filing for bankruptcy. Bankruptcy should be viewed as a fresh start, a way to revive your financial situation and start over again. When money is tight and your household is experiencing a crisis, sometimes your best option is to consult with an attorney to learn more about your options and possibility of filing for bankruptcy.

Chapter 7 bankruptcy generally is for those who don't have sufficient income to repay some or all of the unsecured debt. Chapter 7 bankruptcies are ideal for those who have debts such as unsecured personal loans or lawsuits and judgments, medical bills, and credit card debts.

There are few things you can do to help you along the way in rebuilding your financial situation.

First, make sure you have considered all other alternative before filing for bankruptcy. Consult with an attorney and get professional help. You will need to attend credit counseling regarding your financial situation.

Second, you need to be honest. You should not use bankruptcy to manipulate or cheat. Never use credit card loans and other debts to get ahead. This will only be a temporary solution and will get you deeper and deeper in debt.

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Source: Stefano Grossi
LegalCreation.com

Agents Find Benefits in Teaming Up
By ELSA BRENNER

SPECIALTIES The Alix Prince Team in Rye, part of Julia B. Fee Sotheby's, is one of a growing number seeking to sell clients on the advantages of a group approach. Team members (from left) areWendy Alper, Gayle Bronstein, Alix Prince and Micheline Madorsky.

Source: New York Times

TAKING a cue from successful medical practices, real estate agents who once plied their trade solo under the aegis of their companies are increasingly joining teams.

The idea is to try to persuade home buyers and sellers that a small group of specialists providing 24/7 coverage will ultimately make a difference. In Westchester, as elsewhere, the number of agent teams has grown in concert with the troubles of the housing market.

"Anything you can do in a highly competitive environment like this to stand out from the pack has to be good," said P. Gilbert Mercurio, the chief executive of the Westchester County Board of Realtors. "The only downside to such an arrangement is whether a larger company minds being outshone by a team within its ranks. But if the team generates more commissions for the agency, I can't imagine that would really matter."

Typically, teams operate under a separate banner within the company, like the Alix Prince Team in Rye, which was formed two years ago as part of Julia B. Fee Sotheby's International Realty.

Ms. Prince and three other agents work under a contract stipulating that they divide the commission based on the extent of each agent's role in the sale. As it is with solo agents, a share of the team's sales commission also goes to the real estate firm they are affiliated with.

Ms. Prince, 66, an owner of Julia B. Fee Real Estate before it was acquired by Sotheby's in 2006, said she had selected well-connected younger team members who could generate new listings.

Wendy Alper, the youngest member, has two children at Purchase Elementary School and says she fishes for leads at Little League soccer and baseball games and in the car pickup lane on weekday afternoons waiting for her children.

"A lot of schmoozing goes on in that parking lot," said Ms. Alper, 41, who was a television producer before going into real estate two years ago. "This is a group that's still having babies, which means they're often in the market for a bigger house."

Gayle Bronstein, a White Plains resident whose children are grown, said the group had appealed to her because she was new to the business, needed a mentor and wanted to share in the cachet of Alix Prince's name. For her part, Ms. Prince said she had hired Ms. Bronstein in part because of her background in interior design, which is especially helpful when staging a house to go on the market.

The remaining team member, Micheline Madorsky, a Purchase resident with experience in corporate marketing, noted that the full-time availability of a broker was a strong selling point with clients.

Indeed, many sellers with only one agent worry about getting lost in the shuffle, said Elaine Clayman, a broker with Brown Harris Stevens in Manhattan who oversees an eight-member team, one of the first formed in the New York area.

"Clients tell me, ‘I met the broker, I liked the broker, but I never heard from the broker again,' " said Ms. Clayman, who started her team almost a decade ago and often serves as a role model for newer team leaders. "Someone should always be available to hold the client's hand."

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Veterans Aid and Attendance Benefits: Are You Eligible?

November 11, 2009 is Veteran's Day. Right at Home would like to remind wartime Veterans and surviving spouses of deceased wartime Veterans about a special monthly benefit called Aid and Attendance.

What is the Veterans Aid and Attendance Benefit?
Aid and Attendance (A&A) is a benefit paid in addition to the monthly pension. Benefits are for Veterans and surviving spouses who require the regular attendance of another person to assist in bathing, dressing, meal preparation, medication monitoring or other various activities of daily living. This benefit is available to individuals who reside in assisted living communities, personal care homes, skilled nursing facilities and those receiving personal in-home care.

How Can These Benefits Help Someone?
Aid and Attendance can help pay for care in the home, a skilled nursing facility, personal care home or an assisted living community. A Veteran may be eligible for up to $19,728 a year, a Veteran with a dependent spouse may be eligible for up to $23,388 a year, a surviving spouse of a Veteran may be eligible for up to $12,672 a year, and two Veterans married to each other may be eligible for up to $30,480 a year.

Who is Eligible?
Any war Veteran with 90 days of active duty with at least one day during active wartime (WWII, Korea, Vietnam, Gulf). A surviving spouse of a war Veteran may be eligible if he/she remained married to the Veteran until his/her time of death and has not remarried. The only exception to this rule is if the remarriage took place after January 1, 1971 and ended before November 1, 1990. The individual must also meet medical, service and financial qualifications.

How Do I Determine Eligibility?

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Renters get relief from foreclosure
By Marcie Geffner

A new federal law offers renters more protection from eviction if their landlord loses the property through foreclosure. The law has some fuzzy requirements, but should be a boon to renters who otherwise might have been evicted with little or no notice.

"The fundamental purpose of the Protecting Tenants at Foreclosure Act is to ensure that tenants facing eviction from a foreclosed property have adequate time to find alternative housing. To that end, the law establishes a minimum time period that the tenant can remain in a foreclosed property before eviction," a Federal Reserve memorandum states.

The national foreclosure crisis has not been kind to renters, despite their seeming bystander status. Indeed, the National Low Income Housing Coalition, or NLIHC, in Washington, D.C., has estimated that some 40 percent of households that have lost their home due to foreclosure have been renters.

The new law should provide some relief from immediate evictions, according to NLIHC President Sheila Crowley.

"This bill brings long overdue relief for the most blameless victims of the foreclosure crisis -- the families who, after paying their rent each month, are suddenly told they must move out of the homes because their landlords have been foreclosed on," Crowley said in a statement.

Renters will get 90 days' notice
The new law allows tenants who have a lease to remain in their home until the end of the lease period, unless a new owner purchases the home at a foreclosure sale and intends to occupy it as a personal residence. In that case, the renter can be evicted with 90 days' notice even if a longer-term lease is in force.

A rare but potentially important exception occurs if the renter signed the lease before the owner obtained the foreclosed loan. In that case, the lease will still "survive" the foreclosure, according to Janet Portman, an attorney and author of "Every Tenant's Legal Guide," published by Nolo Press in Berkeley, Calif.

Tenants who don't have a lease also are entitled to 90 days' notice prior to eviction under the new law.

Technically, the law applies only to "any foreclosure on a federally related mortgage loan." That requirement shouldn't be a burden for tenants because, as Portman explains, the definition of "federally related" encompasses virtually all loans.

The law became effective May 20 and is scheduled to sunset Dec. 31, 2012.

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Source: Bankrate

A look behind the lack of affordable family housing
Elizabeth Razzi

Families are being priced out of the Washington area housing market. Or at least they're being driven to the far edges of the metro area and forced into long commutes to and from employment hubs. That's the message in a new report from the Urban Land Institute's Terwilliger Center for
Workforce Housing.

It's not exactly news to anyone of average income looking to buy a home in the area -- or to drivers stuck on clogged roads. But the Terwilliger Center report quantifies our misery and says things are likely to get worse if someone (ahem, government) doesn't do something to make it profitable for developers to build more affordable homes -- big enough to accommodate families earning 60 to 100 percent of the area median income -- close to jobs in the region's six employment cores: Alexandria (broadened to include Arlington's Crystal City and Pentagon City), Bethesda, Downtown D.C., Reston/Herndon, Rockville and Tysons Corner.

In the Washington metro area, 60 to 100 percent of the median represents a pretty healthy paycheck. For a single person it's $43,140 to $71,900; for a couple, $49,320 to $82,200; for a three-person household it's $55,440 to $92,400; for four people it's $61,620 to $102,700; and for five it's $66,540 to $110,900. Almost a quarter of Washington-area households -- what the report defines as the "workforce" -- falls into these income ranges.

We have a shortage of about 40,000 for-sale homes within a 30- to 45-minute commute of those employment hubs that are affordable to people earning these incomes, according to the report. It forecasts that the shortage of affordable for-sale homes will grow by 5,000 units per year from 2010 to 2030. And recent declines in area home prices haven't helped much, it says, because housing close to those employment hubs took less of a hit than homes farther out in the suburbs.

What about all that housing development that has sprung up around Metro stations? Convenience makes them expensive -- and much of that housing is geared toward singles, not households with children. The report says we have a balance or oversupply of for-sale homes for singles in these income ranges in downtown D.C., Bethesda, Tysons Corner and Alexandria. However, the report says there is not enough affordable housing for singles to buy near jobs in Reston/Herndon and Rockville.

There's some irony that this declaration, that the close-in homes built recently are unaffordable, comes from the development industry itself; ULI is funded by urban planners and developers. But J. Ronald Terwilliger, founder of the Terwilliger Center and chairman of Trammell Crow Residential, the giant apartment developer, says the private sector can't build homes for this market without government intervention because the land is simply too expensive to make the finances work. "The problem, of course, is an economic one," Terwilliger said in an interview. To get more affordable homes built, he said, "you can either mandate it or you can incent it."

He suggests using the mortgage-interest deduction as a source of revenue that could offset the cost of government incentives. "Eliminate the deduction for second homes, which includes boats, and restrict the ability to deduct interest," he said. "That would be a way to pay for a tax credit for the workforce."



Source: Washington Post

Homeowners Walking Away
By BOB TEDESCHI

A RECENT study suggests that most homeowners have qualms about abandoning a mortgage that they can afford to pay, even if it straps them to an investment that's unlikely to pay off anytime soon.

But if the house has lost significant value, or if many neighbors walk away from their mortgages, the study says, "strategic defaults" are significantly more likely.

It is an increasingly common question facing homeowners, many of whom have seen their properties lose large amounts of equity in recent years: would you give up a home that is considered to be "underwater" even if you could still afford the monthly payments?

Three academic researchers posed that question this year in a telephone survey of about 1,000 homeowners nationwide and found that when a mortgage exceeds the home's value by less than 10 percent, strategic defaults are rarely considered. But if the home's value dropped to half of the mortgage amount, 17 percent would abandon the loan.

"The fact that there is a price for morality is kind of obvious, in a sense," said Luigi Guiso, a researcher with the European University Institute in Fiesole, Italy, who, along with American researchers at Northwestern University and the University of Chicago, completed the survey in March. "What we did not know was how big of a price it would be."

Eighty percent of the respondents considered strategic defaults morally wrong. People under age 35, though, judged strategic defaults less harshly - 69 percent found them morally wrong - than those of middle age, of whom 86 percent found them morally wrong.

The survey suggests that the moral barriers to strategic default erode significantly once the mortgage exceeds a home's value by at least 20 percent.

There are roughly 461,000 homeowners in New York City and its surrounding counties who are considered underwater with their mortgages, and more than 23,000 of them have mortgages whose value exceeds the value of their homes by at least 25 percent, according to First American CoreLogic, a mortgage industry consultant in Santa Ana, Calif.

Mr. Guiso says social factors can affect a person's decision to stay in his or her home or walk away. According to his survey, people who bought their homes more than five years ago were nearly 80 percent less likely to consider a strategic default than recent purchasers. Friendships with neighbors and ties to the local school system are strong anchors, he explained.

Homeowners may not always understand the implications of a strategic default, said Jeanne Kelly, the president of the Kelly Group, a credit consulting business in Rhinebeck, N.Y. A foreclosure will drop the borrower's credit score by at least 100 points, and will remain on a credit report for seven years, she said.

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Source: New York Times