Christian's Blog

FHA to Toughen Mortgage Rules in Lenders Crackdown

Citinet Mortgage — Wed, 02 Dec 2009 10:55:27 -0600

FHA to Toughen Mortgage Rules in Lenders Crackdown

Published: Wednesday, 2 Dec 2009 | 9:46 AM ET

By: Diana Olick
CNBC Real Estate Correspondent

Amid rising foreclosures and falling home prices, the Federal Housing Administration is proposing new rules to crack down on lenders and asking Congress for the authority to raise certain borrower requirements, all in an effort to reduce risk to its $685 billion mortgage portfolio.

According to a recently released actuarial study, FHA's secondary reserves have fallen below the required two percent level, to 0.53 percent of total insurance-in-force.

While FHA Commissioner David Stevens said in an interview on CNBC following that release that the FHA would not need additional federal funding to meet its loan losses, he added that FHA will be looking for new ways to reduce risk.

Those steps will include raising minimum borrower FICO scores, possibly requiring larger downpayments, and reducing the maximum permissible seller concession from six percent currently to three percent.

It could also include raising up-front and/or annual insurance premiums, which would require Congressional authority. This is according to the testimony HUD Secretary Shaun Donovan is scheduled to present to the House Financial Services Committee on Wednesday afternoon, obtained by CNBC.

In addition to changes for borrowers, Secretary Donovan is proposing increased lender accountability.

"We will hold lenders accountable for their origination quality and compliance with FHA policies," Donovan will tell lawmakers.

To that end, HUD will develop a so-called "Lender Scorecard," to summarize the performance of lenders who do business with the FHA. This is similar to steps taken by Treasury officials, who release a monthly status report on banks participating in the administration's Home Affordable Modification Program.

Secretary Donovan will tell the House panel that he intends to expand enforcement for new loans, including "requiring lenders to indemnify the FHA fund for their own failures to meet FHA requirements, and holding lenders accountable nationally for any improper activities."

HUD is currently limited to sanctioning only individual branches. Those requirements would also require Congress to act.

Administration officials have spoken repeatedly of cracking down on lenders, but this is the first time Secretary Donovan has asked Congress for the authority to raise annual premiums, which are currently at the maximum three percent.

FHA was originally created as a doorway to home ownership for low income borrowers with less than stellar credit. Last year, 51 percent of African American homebuyers and 45 percent of Hispanic homebuyers purchase homes using FHA financing. Raising the current premiums and FICO scores may elicit criticism that FHA is straying from its original mission.

FHA, however, has taken on more risk in the past five years than ever before. It has gone from a bit player, insuring barely three percent of U.S. mortgages in 2006, to almost 30 percent of purchase loans today and 20 percent of refinances. The vast majority of FHA's purchase borrowers are first time home buyers.

Still, like the rest of the mortgage market, FHA is seeing skyrocketing delinquencies. The delinquency rate for FHA loans now stands at just over 15 percent, according the Mortgage Bankers Association.

Foreclosures at FHA are rising as well; this despite the fact that FHA only insures 30-year fixed rate loans with full documentation. The faulty mortgage products that fueled the subprime boom and subsequent bust were never a part of FHA's portfolio.

Secretary Donovan will tell the House panel that while FHA's role today is crucial to the housing market's recovery, "the elevated role it is playing is temporary."

Senate and House Pass Home Buyer Tax Credit Extension

Citinet Mortgage — Fri, 06 Nov 2009 11:27:14 -0600

Christian Pak
Executive Manager
Citinet Mortgage
Phone: (678) 638-1200
Direct: (404) 939-0502
Fax: (678) 638-1215
cpak@citinetmtg.com
www.citinetmtg.com

Senate and House Pass Home Buyer Tax Credit Extension

Earlier yesterday the House of Representatives passed legislation to extend and expand the $8,000 first-time homebuyer tax credit, which was approved by the Senate this week. The legislation will be sent to the President for his signature today and signed into law.

Under the legislation, homebuyers will qualify for the tax credit until April 30, 2009 (as long as they have entered a binding contract), and have an additional 2 months (until June 30, 2009) to close the transaction. Borrower income limits have also been increased to $125,000 for individuals and $225,000 for couples (up from $75,000 and $150,000 respectively under the current program). The legislation also includes a tax credit not exceeding $6,500 for move up buyers who have owned their current homes for at least 5 years.

The Tax Credit Comparison Chart is available from NAR explaining the difference between the old tax credit and the newly passed tax credit extension. NAR has also made available a Tax Credit FAQ regarding the new tax credit extension to answer some questions you may have.

Obama To Sign Bill Friday Extending Homebuyers Credit

Citinet Mortgage — Thu, 05 Nov 2009 16:18:03 -0600

Obama To Sign Bill Friday Extending Homebuyers Credit

Published: Thursday, 5 Nov 2009 | 3:06 PM ET

The White House says President Barack Obama on Friday morning will sign a bill that expands a popular homebuyers tax credit and extends unemployment benefits.

Congress on Thursday completed work on the $24 billion economic package that seeks to help out the millions who have lost jobs and have been unable to rejoin the workforce. The White House announced Obama's intention to sign the bill shortly after Congress finished the legislation.

Under the measure, an $8,000 tax credit for first-time homebuyers would be extended for seven months and expanded with a $6,500 credit for some prospective homebuyers who already own homes.

The House passed the bill on a 403-12 vote Thursday, a day after the Senate ended a monthlong stalemate with a 98-0 vote. With some 7,000 people exhausting unemployment benefits every day and the $8,000 tax credit for first-time homebuyers set to expire at the end of November, President Barack Obama is expected to quickly sign it into law.

The $24 billion package also contains tax credits aimed at struggling businesses.

The IRS says some 1.4 million people applied for the homebuyers credit through August, helping enliven the moribund housing market. The legislation would extend the program through June of next year, as long as the buyer signs a contract by the end of April. It also offers a $6,500 tax credit to those who have lived in their current residence at least five years.

The measure doubles the income ceiling for eligible individuals to $125,000. Homes must cost less than $800,000 to qualify.

The nearly 2 million who have exhausted their unemployment benefits or face termination of benefits, usually about $300 a week, before the end of the year would receive 14 weeks of additional benefits under the bill. The unemployed in those states where the jobless rate tops 8.5 percent would get six weeks on top of that.

House Majority Leader Steny Hoyer said the bill would also help the economy because the unemployed quickly spend their checks on living necessities. "We help people in very bad straits and we help our economy and help us all."

All but 12 Republicans voted for the bill, although several took the opportunity to swipe at the Obama administration's efforts to produce new jobs. "Make no mistake, the unemployment benefits are no substitute for a good job,"said Rep. Kevin Brady, R-Texas.

The extension would be the fourth since June of last year and the first since the $787 billion stimulus package was enacted last February. The unemployed in the hardest-hit states could, once the bill becomes law, receive a maximum of 99 weeks of benefits, well above the previous record of 65 weeks in the 1970s.

Lawmakers said aggressive measures are needed because the unemployment rate, now at 9.8 percent, is expected to hover around 10 percent into next year and more than one-third of the 15 million unemployed have been looking for work for at least six months, a record.

The nation has lost 8 million jobs since the "great recession" began at the end of 2007, said Rep. Jim McDermott, D-Wash., a chief sponsor of the legislation. Even with the recession winding down, "we know it will take considerable time to restore those lost jobs."

"A stunning 600,000 workers ran out of jobless benefits in the past two months alone, and thousands more are projected to by the end of the year," said Christine Owens, executive director of the National Employment Law Project. "Workers need this extension, the economy needs this extension."

The bill only applies to those running out of benefits before the end of the year, and McDermott reminded his colleagues that Congress may have to revisit the issue before it adjourns for the year.

The bill would also allow businesses that have incurred losses in 2008 and 2009 to seek refunds for taxes paid on profits over the past five years.

The two tax credits, each costing more than $10 billion over 10 years, are paid for by delaying enactment of a law giving international companies more leeway in how they allocate interest expenses between U.S. and foreign sources in determining tax liabilities.

The $2.4 billion cost of extending unemployment benefits is offset by extending through June 2011 the federal unemployment tax that employers pay for each employee.

The three measures would add $43 billion to the 2010 deficit and then be repaid over time.

IRS doled out $620 million to ineligible filers: Agency paid home-buyer tax credit to taxpayers as young as 4, report says

Citinet Mortgage — Mon, 26 Oct 2009 15:30:51 -0500

By Andrea Coombes, MarketWatch

SAN FRANCISCO (MarketWatch) -- Even as Congress mulls whether to extend the popular first-time home-buyer tax credit aimed at shoring up the decimated U.S. housing market, government auditors said Thursday that thousands of ineligible taxpayers have received millions of dollars under the program.

About 19,350 taxpayers claimed $139 million worth of tax credits for homes they had not yet purchased, and about 70,000 taxpayers claimed more than $479 million in credits despite evidence they were not first-time home buyers, according to a report by the Treasury Inspector General for Tax Administration, the agency that monitors the Internal Revenue Service.

Almost 600 people who claimed about $4 million worth of the credit were not yet 18 years old -- and the youngest taxpayer was 4 years old, the report said.

The tax credit, worth up to $8,000, expires on Nov. 30, though some lawmakers have proposed extending it, and some have said it should be extended and expanded to people beyond just first-time buyers.

Meanwhile, another 48,450 taxpayers who claimed the credit didn't get their full due, likely because they weren't aware they were eligible for up to $8,000 under the revised credit in the American Recovery and Reinvestment Act, versus the $7,500 maximum credit available originally, TIGTA said.

"Based on the administration of the credit to date, I am concerned about the IRS's ability to effectively administer the credits claimed within the original deadline, let alone within an extended deadline for certain taxpayers," said J. Russell George, Treasury Inspector General for Tax Administration, in testimony Thursday to a House Ways and Means subcommittee hearing looking at administration of the tax credit. Read his testimony (PDF).

The TIGTA report pointed to about 90,000 erroneous claims totaling about $622 million. Through Oct. 9, the IRS has processed more than 1.2 million tax returns claiming almost $8.5 billion worth of the credit, according to the report. Read the full TIGTA report (PDF).

Still, some of the erroneous taxpayers' claims may turn out to be correct, George said. For instance, the credit rules prohibit owning a home in the previous three years -- but that means a principal residence. The TIGTA report did not assess whether the evidence of taxpayers' previous homeownership on earlier tax returns was related to a principal residence or not.

And, the TIGTA report said, the IRS recently put in place strategies to prevent such problems happening in the future. Still, the past problems have yet to be resolved in some cases. For instance, while the law prohibits taxpayers from receiving the credit before they've bought a house, thousands of taxpayers did so before the IRS put controls in place, according to TIGTA.

"Many taxpayers will be identified by recently implemented IRS filters and subject to pre-refund audits; however, TIGTA identified 70,005 taxpayers whose tax returns were processed prior to the implementation of these filters," the report said.

For its part, the IRS said it's going after erroneous claims. "We will vigorously pursue those who filed fraudulent claims for the credit, and have already opened up scores of criminal investigations," said Linda E. Stiff, the IRS's deputy commissioner for services and enforcement, in a prepared statement for the hearing. Read Stiff's statement (PDF).

"We have selected thousands of returns for those claiming the credit for civil examination," she said.

Andrea Coombes is an assistant personal finance editor for MarketWatch, based in San Francisco.

Important Notice to All Taylor Bean & Whitaker Mortgage Customers

Citinet Mortgage — Wed, 19 Aug 2009 10:18:50 -0500

Taylor, Bean & Whitaker Mortgage Corporation

NOTICE TO HOME MORTGAGE CUSTOMERS

AT THIS TIME, TAYLOR, BEAN & WHITAKER MORTGAGE CORP. ("TBW") IS UNABLE TO EITHER OFFER AN ONLINE PAYMENT OPTION OR AUTOMATIC PAYMENT DEDUCTIONS FOR ITS HOME MORTGAGE CUSTOMERS. PLEASE NOTE THAT NO AUTOMATIC DEBIT PAYMENTS HAVE BEEN MADE SINCE AUGUST 10, 2009. MOREOVER, TBW IS NO LONGER SERVICING GINNIE MAE AND FREDDIE MAC LOANS.

FOR HOME MORTGAGE CUSTOMERS WITH A GINNIE MAE LOAN, YOUR LOAN WILL NOW BE SERVICED BY BANK OF AMERICA. BANK OF AMERICA CAN BE REACHED AT 1-800-669-6607. PAYMENTS SHOULD BE SENT TO:

BANK OF AMERICA HOME LOANS, LP
PAYMENT PROCESSING
P.O. BOX 10334
VAN NUYS, CA 91410-0334

FOR HOME MORTGAGE CUSTOMERS WITH A FREDDIE MAC LOAN, YOUR LOAN WILL NOW BE SERVICED BY ONE OF THE FOLLOWING SERVICERS:

IF YOUR LOAN IS CURRENT, YOUR SERVICER WILL BE CENLAR. CENLAR CAN BE REACHED AT 1-866-430-9689.

IF YOUR LOAN IS NOT CURRENT, YOUR SERVICER WILL EITHER BE SAXON OR OCWEN. SAXON CAN BE REACHED AT 1-888-422-6451. OCWEN CAN BE REACHED AT 1-800-74-OCWEN.

FOR ALL OTHER HOME MORTGAGE CUSTOMERS, PLEASE MAIL YOUR PAYMENT TO THE FOLLOWING ADDRESS:

TAYLOR, BEAN & WHITAKER MORTGAGE CORP.
ATTN: CASHIERING
1417 N. MAGNOLIA AVE.
OCALA, FL 34475

IT IS IMPORTANT FOR ALL CONSUMERS THAT YOUR LOAN NUMBER IS WRITTEN ON YOUR CHECK AND THAT YOU INCLUDE ANY SPECIAL PAYMENT INSTRUCTIONS SUCH AS ADDITIONAL PAYMENTS TO PRINCIPAL OR ESCROW. USE YOUR TBW LOAN NUMBER UNTIL YOU RECEIVE A NEW LOAN NUMBER FROM YOUR NEW SERVICER.

FOR QUESTIONS ABOUT YOUR FHA-INSURED LOAN, CONTACT FHA’S RESOURCE CENTER AT 1-800-CALL-FHA.

FOR QUESTIONS ABOUT YOUR FREDDIE MAC LOAN, GO TO THE FREDDIE MAC WEBSITE AT WWW.FREDDIEMAC.COM OR CONTACT FREDDIE MAC’S HEADQUARTERS AT (703) 903-2000.

FOR OTHER QUESTIONS, PLEASE CONTACT TBW AT 1-888-225-2164 OR 1-800-530-2602.

An Explanation of FHA Mortgagee Letter on Tax Credit Monetization

Citinet Mortgage — Mon, 22 Jun 2009 15:45:37 -0500

An Explanation of FHA Mortgagee Letter on Tax Credit Monetization (Quoted from NAHB with my edits)

On Friday, May 29, HUD issued Mortgagee Letter 2009-15, which outlines the requirements that must be met in order to monetize the first-time homebuyer tax credit. The tax credit can be monetized in two ways:

• Government agencies and instrumentalities of government are allowed to make tax credit advances secured by second liens.

• FHA-approved mortgagees (lenders) and FHA-approved nonprofit organizations, as well as government agencies may purchase the anticipated tax credit from a homebuyer.

Following is an excellent FAQ from the NAHB (National Association of Home Builders) site regarding the tax credit monetization. #7 of the FAQ pertains to the most talked about topic of using the tax credit for down payment.

FAQ on Monetization

1. What exactly does “monetizing” the tax credit mean?
The term “monetization” is defined as the act of converting something into money. In the context of the first time home buyer tax credit, monetization means to treat the payment of the credit as if it was cash and allow its use as a payment for certain closing and downpayment expenses.

2. What is a “bridge” loan?
A bridge loan is a type of loan that is intended to be outstanding for a very short time period, often only a few days or weeks. Bridge loans are use to provide funds in situations where the borrower is expected to receive funds, such as the payment of this tax credit, within a very short time.

3. What is a state housing finance agency?
A state housing finance agency, often referred to as an “HFA,” is an organization that provides funding for a variety of loan and grant activities related to for-sale and rental housing. HFAs are also typically responsible to distribute grant funds from federal agencies, such as the U.S. Department of Housing and Urban Development (HUD).

4. How do I find out if my state housing finance agency is providing this service?
The best way to locate information about your state’s HFA is via the Internet. The National Council of State Housing Agencies (NCSHA) maintains a directory of state HFAs at: http://www.ncsha.org/section.cfm/4/39/187

5. What kinds of lenders are doing this? How can I find a list of lenders who are providing these short-term loans?
Many state housing finance agencies are either running or sponsoring programs that will use a tax credit for a downpayment. These programs often place a second lien on the home as collateral to secure the eventual repayment of the tax credit funds. Some state HFAs lend directly to home buyers while other HFAs work through networks of state-approved lenders.
In addition to state agencies, FHA-approved lenders may be offering to purchase a first time home buyer’s tax credit in conjunction with an FHA-insured mortgage loan.
Interested buyers should check with area lenders, home builders, or real estate agents for the names of participating lenders.
The Federal Housing Administration (FHA) also has an online tool to find FHA-approved lenders: http://www.fhaoutreach.gov/FHALookup/

6. What types of loans qualify?
Any lender could offer a program that would permit a first-time home buyer to apply the tax credit to funds needed for a loan that is obtained in conjunction with a home purchase. At this time, however, only the Federal Housing Administration (FHA) has issued guidance regarding the monetization of the first-time home buyer tax credit in conjunction with FHA-insured mortgage loans.

7. Can this short-term loan be applied to the minimum 3.5% downpayment required by my FHA loan or is it only available above and beyond the initial downpayment required?
If an FHA-approved lender or state housing finance agency is purchasing a tax credit and therefore making a short-term loan that is secured only by the repayment of the first-time home buyer tax credit, these funds cannot be applied to a downpayment in lieu of the home buyer’s funds. A home buyer still has to provide the 3.5 percent downpayment from his or her own funds. The money from the short-term loan can be used to pay closing costs and prepaid expenses, such as escrows for taxes, insurance, and community association assessments. These funds could also be used to make a larger downpayment or to “buy down” the interest rate on the mortgage loan.
However, many HFAs are offering tax credit loan programs that offer home buyers a short-term loan backed by the anticipated tax credit and secured by a second lien, which in general will be paid off after the homebuyer receives their income tax credit from the IRS. The proceeds of these loans may be used to satisfy the 3.5 percent downpayment requirement for FHA-insured loans. The National Council of State Housing Agencies (NCSHA) maintains a list of such tax credit loans programs at: http://www.ncsha.org/section.cfm/3/34/2920.

8. Who should I contact at my state housing finance agency to urge them to participate in this program if they don’t already do so? What should I say?
The best way to locate information about your state’s HFA is via the Internet. The National Council of State Housing Agencies (NCSHA) maintains a directory of state HFAs at: http://www.ncsha.org/section.cfm/4/39/187
Most state HFA web sites include phone numbers and email addresses by which they can be contacted.

9. Is this an interest-free loan or are there fees associated with this type of short-term loan?
If a governmental agency, such as a state housing finance agency, or an FHA-approved lender purchase a first-time home buyer tax credit, they are allowed to charge no more than 2.5 percent of amount of the credit.

10. How can I tell if the short-term loan on the tax credit is being offered by a reputable company?
If the organization is a unit of state government, it is safe to say that it is reputable. Otherwise, a home buyer may want to check with their local Better Business Bureau or through a state or local government’s department of consumer affairs.

Georgia $1800 Home Buyer Tax Credit

Citinet Mortgage — Mon, 22 Jun 2009 08:56:27 -0500

On May 11, 2009, Governor Sonny Perdue signed into law HB 261 which provides home buyers up to $1800 tax credit. The tax credit must be claimed in one-third increments over a three year period and is eligible to home buyers who purchase single family residences closing between June 1 and November 30 of this year. Following is a FAQ provided by the Georgia Association of Realtors (GAR):

1. Is this tax credit limited to first time homebuyers?
NO, all purchasers of an eligible single family residence in Georgia that file a Georgia income tax return can claim the credit.

2. Can the Georgia credit be combined with the federal $8,000 first time homebuyer tax credit?
YES, if buyers meet the qualification for each credit they may claim both. Each credit operates independently from the other. One is claimed on your federal income tax return, the other is claimed on your Georgia income tax return.

3. Is it true this credit is limited to the purchase of a single family residence?
YES, the tax credit is limited to the purchase of one single family residence.
Single-family residences (including condominiums) are eligible if they are:
* New residences, residences occupied at the time of sale, or previously occupied residences, if such residences:
- Were for sale prior to the effective date (5/11/09) and were still for sale after the effective date;
* Owner-occupied residences with respect to which the owner’s acquisition debt is in default on or before March 1, 2009; and
* Residences with respect to which a foreclosure event has taken place and which are owned by the mortgagor or the mortgagor’s agent.

4. Is it true that eligible single family residences must have been listed prior to May 11, 2009 in order to qualify for the credit?
YES, the original intent of the bill was aimed at reducing the housing stock that has been on the market for an extended period of time.

5. Is it true that only eligible buyers that close between June 1, 2009 and Nov. 30, 2009 can claim the credit?
YES, the intent of credit is to stimulate the market by encouraging potential buyers to get off the fence and BUY NOW!

6. How do I determine the amount of tax credit I am eligible for?
The tax credit will be for 1.2% of the purchase price, with a maximum credit of $1,800 (whichever is less). Homes purchased for $150,000 or more will receive a maximum of $1,800.

7. Can I claim all $1,800 on my 2009 income tax returns?
NO, the total amount of your credit must be claimed in one-third increments over a three year period. The maximum credit per year is $600 if you are eligible for the maximum $1,800. Any excess or unused credit may be carried forward to apply to succeeding years’ tax liability.

8. Can I amend my 2008 Georgia income tax return to claim the credit?
NO, the tax credit cannot be applied against prior years’ tax liability.

9. I am looking for investment property or a second home, is the credit available for the purchase of owner-occupied residences only?
NO, all eligible single family residences qualify for the credit. However, each taxpayer can claim the credit one time only.

10. Is there an income limit for buyers who claim the credit?
NO, there are no income limits applicable to this credit.

11. Is there a limit to how long a buyer must own the property to claim the credit?
NO, there is not a limit to how long a buyer must own the property.

12. Does any portion of the credit require repayment for any reason?
NO, if you are awarded the credit there are no penalties that would require you repay any portion of the credit.

The Department of Revenue memo regarding the home buyer tax credit is available here: DOR Home Buyer Tax Credit Memo.

Making Home Affordable Program (Loan Modification & Refinance)

Citinet Mortgage — Wed, 25 Mar 2009 16:12:10 -0500

The President in conjunction with Fannie Mae and Freddie Mac announced the Making Home Affordable Program several weeks ago. Since the introduction of the program, there seems to be much confusion about what the program entails and what home owners can qualify for. In a nut shell, there are two main programs: A Refinance program and a Loan Modification program. I have posted details of the program on a separate previous posting.

To provide further clarity, a brand new website has been established to provide further information on the program. It provides a self-assessment test to help you determine exactly which program you qualify for. Website address is: http://makinghomeaffordable.gov/.

Once you complete the self-assessment and need further information, please post your questions in the comment section and I will answer as many as I can.

You can check if your loan is owned by Fannie MAe or Freddie Mac by using the following links:

Fannie Mae Freddie Mac

A plain English explanation of the homeowner bailout

Citinet Mortgage — Fri, 06 Mar 2009 09:46:32 -0600

Courtesy of the Clark Howard Show

clarkhoward.com

Mar 05, 2009 -- A plain English explanation of the homeowner bailout

CLARKONOMICS: There's much confusion over the federal bailout for homeowners and Clark wants to clear some of it up.

There are two scenarios under which the "Making Home Affordable" program could possibly work for you. The first is if you're behind on your mortgage, and the second is if you're current.

Let's examine the first scenario. If you can not afford payments and can not refinance for whatever reason, you will have the opportunity to have your loan temporarily reduced to 31% of your monthly income. This applies to homes valued at up to $759,750 in most areas of the country. Your interest rate may drop to as low as 2% for the next 5 years!

Under the second scenario, those who are current on a mortgage held by Fannie Mae or Freddie Mac will also be allowed to refinance -- as long as they're not more than 5% upside down in their home. (Note: This does not include a second mortgage). The new loan you'll get will likely be re-written to an interest rate of around 5.125%.

To determine if you're loan is held by Fannie Mae or Freddie Mac, simply follow our web links or call them directly. Contact Fannie at 1-800-7-FANNIE and Freddie at 1-800-FREDDIE from 8 a.m. to 8 p.m. ET. Start with Fannie Mae -- they're the larger of the two.

And you may also be eligible for assistance even if your loan is not with Fannie or Freddie. That's up to your individual lender, so get in touch with them to find out if you qualify.

For an additional resource that fleshes out more details, see The San Francisco Chronicle's Q & A and a link to the Treasury Department's official guidelines.

Meanwhile, it looks like the idea of empowering bankruptcy court judges to cram down mortgages is gaining momentum -- despite Clark's worries that this would undermine some of the basic tenets of capitalism. We'll keep you updated.

UPDATE: Fannie Mae has now setup a link to received instant verification and feedback as to whether Fannie is holding your loan: FANNIE MAE. Christian Pak

New $8000 Tax Credit for First Time Home Buyers.

Citinet Mortgage — Mon, 16 Feb 2009 10:56:35 -0600

There has been a lot of chatter about the tax credits for first time home buyers contained in the new stimulus bill. Last week both the House and the Senate passed the American Recovery and Reinvestment Act of 2009 and President Obama is expected to sign it into law this week.

The provisions in the bill pertaining to the tax credit for first time home buyers are as follows:

* The $8000 tax credit or 10% of the home's purchase price, whichever is less is available only for first-time home buyers (Definition of a ";first-time home buyer"; is a buyer who has not owned a principal residence during the three-year period prior to the purchase)
* There is a $75,000 adjusted gross income limit for tax filers filing as single and $150,000 limit for joint return filers.
* The $8000 tax credit is available only for primary residence purchases.
* The tax credit does not require a repayment for most cases.
* The tax credit does have a repayment provision if the homeowner does not occupy the property for a minimum of 3 years from the closing date.
* The home buyer must purchase a home between January 1, 2009 and December 1, 2009.
*The $8000 tax credit is received when you file your tax return. An example of how the credit would work (example courtesy of Intuit):

How does the credit affect the taxes I owe and the refund I get?

The credit reduces your tax liability, that is, the amount of taxes you are required to pay. Depending on your tax withholdings, you could get a bigger refund or owe less in taxes when you file.

If, for example, your taxes owed for one year are $6,000, you’ve had $4,000 withheld from your wages, and you buy a home worth $100,000, the housing credit would entitle you to a refund, as shown below:

Tax liability	$6,000
Minus housing credit	-8,000
Minus withholding	-4,000
Refund	$6,000

But if, for example, your tax liability was $10,000, but you had paid no withholding, then the credit would reduce the taxes you owe, as illustrated below.

Tax Liability	$10,000
Minus housing credit	- 8,000
Minus withholding	0
Taxes due	$2,000

Keep in mind that if you purchased a home between April 9, 2008 and December 31, 2008, you are still eligible for the $7500 tax credit. This tax credit does have a repayment provision to be paid back over 15 year’s interest free. You can read more about the $7500 tax credit further down on my blog.

BEFORE YOU POST A QUESTION, PLEASE READ THE MULTIPLE COMMENTS BELOW. ANSWERS TO MANY OF THE MOST COMMON QUESTIONS ARE AVAILABLE. THANK YOU.

Reference links:

IRS form 5405 (First-Time Homebuyer Tax Credit): http://www.irs.gov/pub/irs-pdf/f5405.pdf

IRS Form 1040X (Amended U.S. Individual Income Tax Return): http://www.irs.gov/pub/irs-pdf/f1040x.pdf

National Association of Home Builders has an extensive FAQ regarding the new $8000 Tax Credit.

IRS has established an excellent FAQ and scenario section on their website regarding the First Time Home buyer Tax Credit: IRS Firstime Home Buyer FAQ.

If you are located in certain states, you may be able to utilize the First-Time Homebuyer Tax Credit Loan Programs to use the tax credit for your down payment and closing cost assistance. Please visit the NCSHA (National Council of State Housing Agencies) for further information.

Straight Scoop on Pricing Adjustments and Paying Points

Citinet Mortgage — Thu, 05 Feb 2009 14:42:09 -0600

In response to the higher mortgage default rates being experienced by Fannie Mae and Freddie Mac (the largest buyers of 30-year fixed, conforming mortgages), the formal announcement of “Risk Based Pricing” was established during 2008.

Before this was announced, a 30-year fixed loan was basically the same price for any borrower with a credit score of 660 or higher and a loan amount up to 95% of the home value. But now, Fannie and Freddie require pricing “add–ons” using a matrix of credit score and loan-to-value percentages. This risk based pricing is MANDATED by Fannie and Freddie, and is required of ALL lenders originating conforming 30-year fixed loans.

Sometimes the interest rate can be increased to cover these add–ons without having to pay them out of pocket, but that is becoming increasingly difficult in today’s market. Investors have changed the way they create rate sheet options, and they offer very little in the way of what is called “premium pricing”, which used to allow options for closing costs or points to be covered in return for a higher interest rate. But in today’s environment, sometimes the add-ons must be paid in the form of points – to either keep the rate and corresponding payments as low as possible, or sometimes because there simply is no other way they can be covered.

The bottom line is – smart consumers can’t just call a lender and say “what’s your rate and closing costs?” There are simply so many unknowns with the combination of credit score, loan-to-value percentages, property type, etc… that any reputable lender should be upfront, and be clear that any quote given is based on an assumption of certain parameters.

We are here to provide honest, straightforward advice. If we can be of any assistance to you, your friends or your family feel free to contact us. We will take care of you and your referrals in the same upfront fashion as we always have.

Freddie Mac Increases Fees on Some Mortgages

Citinet Mortgage — Tue, 03 Feb 2009 09:51:21 -0600

REAL ESTATE
JANUARY 31, 2009, 12:30 A.M. ET

Freddie Mac Increases Fees on Some Mortgages

By JAMES R. HAGERTY

Freddie Mac posted on its Web site late Friday higher fees that will raise costs for some home mortgage borrowers.

The move by the government-backed mortgage investor follows similar fee increases by its main rival, Fannie Mae, in December. A series of such increases over the past 15 months has drawn protests from the National Association of Realtors and the National Association of Home Builders. The trade groups say Fannie and Freddie are adding costs that deter home buying or refinancing at a time when the housing market badly needs a boost.

Freddie's announcement cited growing risks of mortgage defaults as home prices continue to drop. It noted that prices are down more than 30% from a year ago in some areas and said "all industry indicators" point to further declines in 2009.

Freddie's higher fees affect mortgages that finance condominiums; loans that allow borrowers to pay only interest in the initial years and defer principal repayments; refinance loans that allow the borrower to cash out some of their home equity, and loans with certain combinations of low credit scores and down payments.

Fannie and Freddie don't deal directly with consumers but have a big influence on the rates and fees they pay. For mortgages up to a limit of $625,500 in the most expensive areas of the country, the two companies acquire or guarantee loans that have been originated by lenders. For a growing number of loans, Fannie and Freddie reduce the price they will pay (through "delivery fees" or "loan level price adjustments") to compensate for what they see as higher risk characteristics. These surcharges typically are passed on to consumers in the form of higher loan fees or interest rates.

For instance, Freddie announced a fee of 0.75% of the loan amount on certain mortgages for condos on which the loan amounts to more than 75% of the estimated home value.

Write to James R. Hagerty at bob.hagerty@wsj.com

DPA (Down Payment Assistance) may be revived.

Citinet Mortgage — Fri, 23 Jan 2009 13:55:39 -0600

REAL ESTATE
JANUARY 21, 2009

Revived Plan Could Boost Home Sales

By DAWN WOTAPKA

With a new administration at the helm, a Texas congressman aims to revive seller-funded housing down-payment assistance -- a campaign that, if successful, could jump-start stalled sales and offer ailing home builders a glimmer of hope.

Rep. Al Green, D-Texas, is championing HR 600 to reinstate a program that the government, concerned about default rates, halted in the fall. "We didn't have to end it; we could have amended it and maintained it," Rep. Green said.

Prior attempts to rescue down-payment assistance, or DPA, have failed. But as the housing market's pain worsens, DPA supporters say a return is necessary.

It is a "cornerstone to strengthening a crumbling housing market," said Scott Syphax, president and chief executive of Nehemiah Corp. of America, which had been the largest DPA provider.

Until Oct. 1, a third party, typically a nonprofit such as Nehemiah, could fund a buyer's down payment and be paid back by the seller. That let buyers take advantage of mortgages backed by the Federal Housing Administration, which previously required a 3% down payment. (It is now 3.5%, but still lower than the 20% some lenders require.)

Critics have argued the programs contributed to the real-estate bust by helping people buy homes with little or none of their own money, fueling defaults.

Write to Dawn Wotapka at dawn.wotapka@dowjones.com

Status of the Current Mortgage Market

Citinet Mortgage — Tue, 30 Dec 2008 16:23:53 -0600

Christian Pak
Executive Manager
Citinet Mortgage
Phone: (678) 638-1200
Fax: (678) 638-1215
cpak@citinetmtg.com

Dear Valued Partners,

While the mortgage market continues to generate a lot of chatter in both the media and in Washington, interest rates are currently near or at all-time lows. If you or anyone you know are looking to take advantage of these low rates, let me explain why now is the time to act.

Lately there has been talk about the 4.5% 30-year fixed rate mortgage. Will it become a reality though? Right now, no one really knows. Homeowners who could benefit from a lower interest rate need to know that even if 4.5% becomes a reality from Washington's actions, it would only be available to home buyers, not homeowners seeking to better their rate. If you need to refinance, you will be left out.

You also may have heard about Hope for Homeowners, which is a program approved by legislators to help distressed homeowners. However, regardless of its best intentions, the program has not been embraced by investors, and it is not available to many it could help.

The bottom line is, the Fed announced recently that they are going to buy up to $600 billion in mortgage-backed securities. This has already driven rates to historical lows. In January, the SEC is meeting and information may be released that could have a significant bearing on rates, potentially for the worse.

Waiting to obtain the best rate is only possible for those with loan applications already in process. Interest rates are incredibly volatile and fluctuations that used to take months are now occurring in just days or even hours. If you don't have an application in process, you could lose out.

We are already seeing lender backlog due to low interest rates. In 2003, with rates at these same low levels, we saw some lenders taking up to 90 days to close a loan.

Home loan rates are currently in the mid- to low-5% range. Home values are currently at 2003-2004 levels, coming down significantly from their high point. If you–or friends and family members you know–are contemplating seeking financing, now is the time to act.

With a first time home buyer tax credit of up to $7,500 and low or no money down programs available for many people today, now is a great time to buy a home.

If you have any questions about how we can help you, call us today.

Sincerely,

Christian Pak
Citinet Mortgage
(678) 638-1200
cpak@citinetmtg.com

FHA Revised Downpayment and Maximum Mortgage Requirements

Citinet Mortgage — Tue, 16 Dec 2008 15:39:02 -0600

FHA Revised Downpayment and Maximum Mortgage Requirements

Effective Date: the revised downpayment requirements as described throughout this mortgagee letter takes effect with all new FHA case number assignments on or after January 1, 2009.

Effective Date: The revised downpayment requirement as described throughout this mortgagee letter takes effect with all new FHA case number assignments on or after January 1, 2009.

Closing costs: Closing costs may not be used to help meet the minimum 3.5% downpayment requirement. Closing costs are not considered in the mortgage amount/downpayment calculation for purchase money mortgages.

LTV: For purchase money mortgages, the LTV is 96.5 percent, i.e., the reciprocal of the 3.5 percent downpayment requirement. The examples that follow will use 96.5 percent and apply it to the lesser of the appraiser’s estimate of value or the adjusted sales price. The examples do not include UFMIP or closing costs to be paid by the borrower.

Premium pricing: FHA will continue to permit premium pricing, as described in paragraph 1-9J of handbook HUD 4155.1 REV-5, to pay the closing costs and prepaid expenses.

Combined loan-to-value ratio (CLTV): When combined with the FHA first mortgage, government subordinate liens are not limited to 100 percent. When a unit of government or an instrumentality of one is offering downpayment and/or closing costs assistance in the form of secondary financing, the CLTV can exceed 100 percent of the appraised value. The guidance in paragraph 1-13 of handbook HUD 4155.1 REV-5 remains in effect

Calculation of the maximum mortgage: The maximum mortgage is calculated by applying 96.5 percent to the lesser of either a) the appraiser’s estimate of value or b) the contract price for the property minus any required adjustments.

Example 1

Sales Price: $218,000 Appraiser’s Estimate of Value: $220,000

Maximum Mortgage: $218,000 x 96.5% = $210,370

Downpayment: $218,000 – 210,370 = $7630

The maximum mortgage shown does not include any upfront mortgage insurance premium, and the example does not consider any closing costs that must be paid by the borrower.

Seller Concessions: Sellers are still permitted to provide financing concessions up to 6 percent of the sales price. Amounts exceeding six percent must be subtracted from the sales price (or value, if less) before applying the downpayment percentage multiplier. Other inducements to purchase, as described in the mortgage credit analysis handbook (HUD-4155.1 REV-5) must also be subtracted from the sales price or value, as appropriate, in calculating the maximum mortgage amount/downpayment. In such cases, the actual downpayment is increased by the amount of the inducement.

Example 2

Sales Price: $218,000 Appraiser’s Estimate of Value: $220,000

Gift Card worth $3000 Adjustment to Sales Price: $218,000 - $3000

Maximum Mortgage: $215,000 x 96.5% = $207,475

Downpayment Calculation: $218,000 - $207,475 = $10,525

The calculation of the maximum mortgage requires that the gift card value, which was provided by the builder at closing, be subtracted from the sales price and, thus, the 96.5 percent applied to $215,000 rather than $218,000. The downpayment, of course, is calculated by subtracting the mortgage amount from the actual contract sales price.

Specialty products with higher LTVs: Section 203(k), Section 203(h) for disaster victims, and FHA’s Energy Efficient Mortgage (EEM) programs are not affected by the LTV limit. All existing policy guidance regarding the rehabilitation program under Section 203(k), including streamlined (k), mortgage insurance for disaster victims, and the EEM program remain in effect. (Please note that a separate mortgagee letter announcing higher EEM loan limits will be published.)

Refinance transactions: Refinances, including FHASecure refinances, are not subject to the 3.5 percent downpayment requirement since there is no “downpayment” on a refinance. The LTV will be calculated, as it has been, by dividing the loan amount prior to adding the UFMIP by the appraiser’s estimate of value. However, the loan amount, including the UFMIP, may not exceed 100 percent of the appraiser’s estimate of value for all new case number assignments made on or after January 1, 2009; this will result in various refinancing products including rate-and-term, FHASecure (including refinances of both non-delinquent and delinquent mortgages), streamlined refinances, and cash-out refinances having possibly different LTVs before adding the upfront mortgage insurance premium.

Example 3

Appraiser’s Estimate of Value: $220,000 UFMIP of 1.5%1

Maximum Mortgage before adding UFMIP = $216,749

Maximum Mortgage w/UFMIP = $216,749 + $3251 = $220,000

LTV before UFMIP: $216,749/$220,000 = 98.52%

This example assumes that the borrower’s payment of the existing first lien, closing costs, amount to establish a new escrow account, discount points, etc., yield an amount before adding the UFMIP of at least $216,749. Any shortfall would require payment in cash. If less is needed to extinguish the existing mortgage and pay associated transaction costs, a lower amount is required before adding the UFMIP.

Cash-out and FHASecure refinances have lower LTVs as described in ML 2008-13. (The amount of mortgage before adding the UFMIP can be determined by adding the insurance premium percentage, in this example1.5%, to 100% and then dividing that result into the appraiser’s estimate of value ($220,000/1.015 = $216,749 (rounded up)). The resulting amount substitutes for the “LTV ratio applied to appraised value” instructions in handbook HUD-4155.1, paragraphs 1-11A1 and 1-12B1.)

Interest rates fall off a cliff

Citinet Mortgage — Wed, 26 Nov 2008 10:48:12 -0600

On November 26, 2008, as part of the ongoing stimulus package, the Federal Reserve announced that they will buy up mortgage backed securities issued by Fannie Mae, Freddie Mac, Ginnie Mae and Federal Home Loan Banks. Mortgage backed securities are investment vehicles with mortgages as the underlying asset. The FED has pledged up to $600 billion dollars to buy up the mortgage backed securities. Yes, that’s billion with a capital B. This announcement had an immediate impact to current mortgage rates. Rates fell by as much as 0.75% overnight. Talk about volatility!

As with most loan originators, my office was flooded with calls from past clients wanting to refinance. This brings me to the conundrum of the current market place. I’m sure we have all come to the realization that the current market is anything but ordinary. Qualifying criteria have become more stringent, minimum credit scores have been raised, and overall credit market has become tighter. On top of all this, home prices have fallen in value approximately 12-15% year over year across the nation. Although I would love to refinance my customers, majority will not qualify today. It does not make them bad borrowers. Many have good scores, good income and good assets. The biggest issue I see is the state of current home prices. With the erosion of the equity in their homes, many borrowers will have a high LTV issue. Even if you put down 20% down payment when you bought your home 3 years ago, you will have only 5-10% current equity. If you bought your home 3-5 years ago with less than 20% down payment with a 30 year mortgage, you will currently own more than what the home is worth.

Many analysts have said that the move by the FED to buy up MBS’s thus lowering mortgage rates will have significant positive impact to the current housing market. Although I agree that it will have a positive impact, it certainty will have not be significant. The lower rates will motivate some buyers to get off the fence and enter the housing market but majority of buyers are not buying due to other more grave factors than interest rates. Most buyers have put off buying homes or any other big ticket items because they are uncertain about the future of the economy and the job market. Consumer spending has been contracting and will continue to contract. Just because you will save a few hundred dollars on your mortgage payment will not motivate these buyers into buying a home when their job security is uncertain and they perceive the home they are buying today will continue to decline in value.

I’m not a pessimist nor do I want to depress anyone. The reality of the matter is that we are in an unprecedented economic situation and what the FED has currently done is not a fix all. It will help buyers who are currently in the market to purchase. It will create additional buyers but not in any great number to tip the balance of the current supply demand ratio. It will create a mini refi market but the borrowers must have extensive equity in their home and must meet tight qualifying criteria.

Georgia Credit Freeze Update

Citinet Mortgage — Wed, 03 Sep 2008 11:07:27 -0500

As of August 1, 2008, Georgia consumers will have the ability to freeze their credit file with all three major credit bureaus. The cost of the freeze will be $3.00 per bureau with a total cost of $9.00 to place a freeze with all three bureaus, Equifax, Transunion, and Experian. There will be no charge for victims of identity fraud and senior citizens age 65 and older. Consumers will have the ability to unfreeze their credit file at any time and will have access to their credit file within 15 minutes of the request (in theory). However, there will be an additional cost of $3.00 each time a temporary lift or "thaw" is requested.

Georgia is one of only four states currently in the nation that allows for consumers to freeze and unfreeze their credit file on-line. Rest of the nation will have access to all three bureaus to initiate a freeze and unfreeze on-line by November 1, 2008.

You can initiate the credit freeze or thaw by contacting the following credit reporting agencies. The links provide direct links to credit freeze section of their web page.:

Experian Security Freeze
P.O. Box 9554
Allen, TX 75013
www.experian.com
1-888-397-3742

Equifax Security Freeze
P.O. Box 105788
Atlanta, GA 30348
www.equifax.com
1-800-685-1111

TransUnion Security Freeze
P.O. Box 6790
Fullerton, CA 92834-6790
www.transunion.com
1-888-909-8872

New FHA Upfront MIP and Annual Premiums announced

Citinet Mortgage — Wed, 27 Aug 2008 16:59:24 -0500

FHA has just published new guidelines regarding their upfront MIP (Mortgage Insurance Premium) and annual premiums. The information directly from FHA is as follows;

Directions to FHA-Approved Mortgagees on Premium Pricing during Moratorium.

The upfront and annual premiums on mortgages for which new FHA case number assignments are made on or after October 1, 2008 and before October 1, 2009 are as follows:

Upfront Premiums: FHA will charge an upfront premium in an amount equal to the following percentages of the mortgage:

Purchase Money Mortgages and Full-Credit Qualifying Refinances = 1.75%
Streamline Refinances (all types) = 1.50%
FHASecure (Delinquent Mortgagors) = 3.00%

Annual Premiums: An annual premium, shown in basis points below, to be remitted on a monthly basis, will also be charged based on the initial loan-to-value ratio and length of the mortgage (except for FHASecure delinquent mortgages) according to the following schedule:

Purchase Money Mortgages, Full-Qualifying Refinances, and Streamline Refinances:

LTV Annual for Loans > 15 Years LTV Annual for Loans <=15 Years

<=95% 50 <=90% -None-

>95% 55 >90% 25

FHASecure (delinquent mortgagors):

LTV Annual (all loan terms)

<=95% 50

>95% 55

FHA will issue another notice that will formally advise when the moratorium is concluded and the premium pricing structure that should be followed once the moratorium ends.

To put it all in a nut shell, FHA is increasing the upfront MIP to 1.75% (was 1.5%) and annual MI premium to 0.55 (was 0.50%). These numbers are for a 30yr purchase money and non-streamline refinance. These premium amounts will be in place beginning October 1, 2008 to October 1, 2009. More changes to follow. Stay tuned...

Frequently Asked Questions About the First-Time Home Buyer Tax Credit

Citinet Mortgage — Fri, 08 Aug 2008 13:40:56 -0500

For those of you having trouble with the link, below is the FAQ regarding the First-Time Home Buyer Tax Credit as presented by the NAHB:

Frequently Asked Questions
About the First-Time Home Buyer Tax Credit

The Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time home buyers purchasing homes on or after April 9, 2008 and before July 1, 2009. The following questions and answers provide basic information about the tax credit.

Who is eligible to claim the $7,500 tax credit?
What is the definition of a first-time home buyer?
What types of homes will qualify for the tax credit?
Instead of buying a new home from a home builder, I have hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
What is "modified adjusted gross income"?
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Can you give me an example of how the partial tax credit is determined?
Does the credit amount differ based on tax filing status?
Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $7,500 tax credit?
I heard that the tax credit is refundable. What does that mean?
What is the difference between a tax credit and a tax deduction?
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
I live in the District of Columbia. Can I claim both the DC first-time home buyer credit and this new credit?
I am not a U.S. citizen. Can I claim the tax credit?
Does the credit have to be paid back to the government? If so, what are the payback provisions?
Why must the money be repaid?
Because the money must be repaid, isn't the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?
If I'm qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

Who is eligible to claim the $7,500 tax credit?
First time home buyers purchasing any kind of home-new or resale-are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.
What is the definition of a first-time home buyer?
The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit.
What types of homes will qualify for the tax credit?
Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses, and condominiums.
Instead of buying a new home from a home builder, I have hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after April 9, 2008 and before July 1, 2009.

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
What is "modified adjusted gross income"?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $7,500 are available for some taxpayers whose MAGI exceeds the phaseout limits. The credit becomes totally unavailable for individual taxpayers with a modified adjusted gross income of more than $95,000 and for married taxpayers filing joint returns with an AGI of more than $170,000.
Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. The result is $3,750.

Here's another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer's income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $7,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,625.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
Does the credit amount differ based on tax filing status?
No. The credit is in general equal to $7,500 for a qualified home purchase, whether the home buyer files taxes as a single or married taxpayer. However, if a household files their taxes as "married filing separately" (in effect, filing two returns), then the credit of $7,500 is claimed as a $3,750 credit on each of the two returns.
Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $7,500 tax credit?
In general, the tax credit is equal to 10% of the qualified home purchase price, but the credit amount is capped or limited at $7,500. For most first-time home buyers, this means the credit will equal $7,500. For home buyers purchasing a home priced less than $75,000, the credit will equal 10% of the purchase price.
I heard that the tax credit is refundable. What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that taxpayer qualified for the $7,500 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 minus the $1,000 owed).
What is the difference between a tax credit and a tax deduction?
A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 tax credit would owe nothing to the IRS.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $7,500 in income taxes. If the taxpayer receives a $7,500 deduction, the taxpayer's tax liability would be reduced by $1,125 (15 percent of $7,500), or lowered from $7,500 to $6,375.
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
No. The tax credit cannot be combined with the MRB home buyer program.
I live in the District of Columbia. Can I claim both the DC first-time home buyer credit and this new credit?
No. You can claim only one.
I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
Does the credit have to be paid back to the government? If so, what are the payback provisions?
Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.
Why must the money be repaid?
Congress's intent was to provide as large a financial resource as possible for home buyers in the year that they purchase a home. In addition to helping first-time home buyers, this will maximize the stimulus for the housing market and the economy, will help stabilize home prices, and will increase home sales. The repayment requirement reduces the effect on the Federal Treasury and assumes that home buyers will benefit from stabilized and, eventually, increasing future housing prices.
Because the money must be repaid, isn't the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?
Yes. Because the tax credit must be repaid, it operates like a zero-interest loan. Assuming an interest rate of 7%, that means the home owner saves up to $4,200 in interest payments over the 15-year repayment period. Compared to $7,500 financed through a 30-year mortgage with a 7% interest rate, the home buyer tax credit saves home buyers over $8,100 in interest payments. The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed.
If I'm qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Changes to FHA loans and the impact of HR 3221 on FHA loan programs.

Citinet Mortgage — Fri, 01 Aug 2008 18:40:55 -0500

HR 3221, the Housing and Economic Recovery Act of 2008, will make several changes to the FHA insured loan program. FHA loan program is a government insured loan program designed to assist low to moderate income (not so much any more) borrowers obtain home ownership. So let's start with the good changes:

1. FHA loan limits will be permanently increased to 115% of the local median home price up to a maximum of $625,500 for some high cost areas. Current max loan limit for Metro Atlanta is $346,250 for a single family residence. I will post any updates to the max loan limit as they become available.

2. FHA instituted a FHA Risk Based Pricing on July 14, 2008. The risk based pricing created higher up front FHA mortgage insurance premiums and monthly premiums for lower credit score borrowers. The bill will place a moratorium on the risk based pricing from October 1, 2008 through September 30, 2009. This will allow the low credit score/higher risk borrowers to obtain lower up front MIP and monthly premiums.

Some of the new changes could be considered "bad" depending on how you perceive the changes. I personally think that the changes will eliminate the extreme risk borrowers and create greater safety net for to the FHA loan program so that we do not end up with another repeat of the recent debacle. So on with the "not so good" changes:

1. Seller Funded Down payment Assistance Programs (Nehemiah, AmeriDream) will not be allowed. Borrowers will have to come up with their own down payment or gift from relatives instead of increasing the price of the home and having the seller contribute the down payment. What a concept! Borrowers having to come up with their own down payment! Some will view this as a huge blow and creating additional challenges to home ownership but keep in mind that according to FHA, borrowers who utilize DAP have a 3 times greater foreclosure rate than a borrower who puts their own money down.

SIDEBAR: If a borrower is really having a tough time coming up with their own down payment, there may be another solution by utilizing the tax credit provision of the same bill. Call me or mail me to discuss my solution.

2. Currently, FHA requires the borrower to make a 3% minimum cash investment into the transaction. This minimum contribution will be increased to 3.5%. HUD has not clarified how this 3.5% should be calculated. Once I receive clarification, I will post it here.

Again, the entire bill is over 700 pages and it will take additional time to decipher all of the information. I will post any and all updates so check back often or simply subscribe to this blog.

Tax Credit provision of the Housing and Economic Recovery Act of 2008

Citinet Mortgage — Thu, 31 Jul 2008 14:43:34 -0500

In the Housing and Economic Recovery Act of 2008, a new tax credit provision authorizes a $7,500 tax credit for qualified first-time home buyers. The "tax credit" is more like an interest free loan since the $7,500 has to be paid back over a 15 year period or when the home is sold. The credit is equal to 10% of the purchase price with a cap of $7,500 maximum. If you purchase a home for less than $75,000, your "tax credit" can be less. The credit is also based on the purchaser's income. To receive the maximum credit, single tax filer income should be less than $75K and $150K for married couples. Purchasers may be able to receive partial credit even if their income exceeds the $75K and $150K limits.

Following is a great link to some FAQ's about the tax credit as done by the NAHB (National Association of Home Builders):

http://www.federalhousingtaxcredit.com/faq.php#15

The entire housing bill is about 700 pages long in fine government print so stayed tuned for additonal updates and information. Looks like I have a huge reading assignment!

New Housing Bill signed into law.

Citinet Mortgage — Wed, 30 Jul 2008 16:06:56 -0500

The new housing bill also known as H.R. 3221, the "Housing and Economic Recovery Act of 2008" has been signed into law. Many have been asking, what does this do for the current housing market and for current and future homeowners? In the next coming days and weeks, the bill will be deciphered over and details of the bill will be posted here. In the mean time, I am posting a good article from CNNMoney.com that explains some of the benefits (pit falls) of the bill. I have edited some of the content:

NEW YORK (CNNMoney.com) -- The Senate on Saturday passed a $300 billion housing rescue bill aimed at helping troubled homeowners avoid foreclosure and supporting mortgage giants Fannie Mae and Freddie Mac.

President Bush is likely to sign the bill into law within days (Signed into law 7/30/2008). After the law kicks in on Oct. 1, thousands of at-risk borrowers will be able to refinance their unaffordable old mortgages into new low-cost fixed-rate loans insured by the Federal Housing Administration (FHA).

The Congressional Budget Office estimates that 400,000 borrowers with $68 billion in loans may benefit from the program - but the bill allows for as many as 1 million or 2 million borrowers to participate in the program.

Here's what homeowners need to know.

Who's eligible?

Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.

They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.

Before homeowners can get FHA-backed mortgages, they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it's to pay for necessary upkeep on the home.

To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time.

How can I apply?

Borrowers can contact their current mortgage servicer or go directly to an FHA-approved lender for help. These lenders can be found on the Web site of the Department of Housing and Urban Development.

How does the refinancing process work?

This is a voluntary program, so lenders holding the original mortgage have to agree to rework a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the home's current value. In areas where prices have plummeted by as much as 20%, that will mean a substantial loss for the lender.

But lenders won't sign off on a workout unless they think that they'll lose less money on that than they would by allowing a home to go through the costly foreclosure process.

Each loan will have to be underwritten by an FHA lender on a case-by-case basis. That means the banks will do a new appraisal to determine the home's current value, as well as examine and verify income statements, bank accounts, job histories and credit scores.

Based on that new appraised home value, the FHA lender must determine how much the original lender has to reduce the original mortgage, so that it will reflect 90% of the home's market value.

If the original lender agrees to the writedown, the new lender buys the old loan and takes over the reworked mortgage.

As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally, it pays the FHA an up-front premium equal to 3% of the mortgage principal.

What does it cost?

There should be little up-front costs for borrowers to bear. Loan origination fees will vary by lender, but these can usually be paid by the borrower over the life of the loan in the form of a slightly higher interest rate.

However, the refinanced loans do come with many strings. For one thing, borrowers are responsible for paying an insurance premium to the FHA guaranteeing the loan, which will be 1.5% of the principal annually.

Borrowers also agree to share any profits from future home-price appreciation with the FHA. To do that, they'll pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance.

Plus, they'll agree to pay the FHA 100% of any profits they realize from higher home prices if they sell or refinance within a year. So if the original loan principal is $200,000 and the home sells for $250,000, the borrower will owe the FHA $50,000, minus costs.

After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays.

What will I save?

Savings depend on what borrowers are paying for their present loan and where they live, but for most people it will be substantial, even after factoring in the FHA fees.

In areas that have sustained huge price drops, such as Sacramento, Calif., where prices have fallen by about 30% over the past year, some loans might be reduced by more than 40%.

Additionally, the FHA loans carry reasonable interest rates, which are fixed for the life of the loan, as opposed to a subprime adjustable-rate mortgage that can jump higher every six months.

Citinet Mortgage is an Approved FHA Lending Institution

Citinet Mortgage — Wed, 30 Jul 2008 14:53:29 -0500

Citinet Mortgage is an Approved FHA Lending Institution