Seriously though, the government has again ramped up their efforts to help the millions of Americans who are upside down in their mortgage and need to sell for reasons of financial hardship.  Yet another acronym lurks…HAFA which stands for Home Affordable Foreclosure Alternatives Program goes into effect April 5, 2010.  HAFA is designed to simplify and streamline the short sale process/transaction.   While there are 43 pages of guidelines to review, below are some of  the changes that are key to helping streamline the current process of completing a short sale.

• The banks will now tell the borrower (or borrower’s real estate agent) the net figure required to complete the sale prior to the borrower listing the home.  This is huge, since in the past in most cases borrowers had no idea what amount the bank would accept and the home sat on the market because it was overpriced or the bank took more than a month to respond.
• The new laws requires banks to fully release borrowers from future liability for the first mortgage debt.  No cash contribution, promissory note, or deficiency judgment is allowed.
• New forms were created to standardize the process.  With the new forms comes standardization of responses times for each step in the process.
• HUD now provides financial incentives to get the short sale completed –  $1,500 for borrower  as “relocation assistance”, $1,000 for servicers to cover administrative and processing costs, and up to $1,000 for investors.

Oh, and a nice bonus included in this program is that banks can’t ask the real estate brokers to cut their commission anymore.  That is if the broker is charging 6% or less on the listing agreement.   And ya know, 3% is fair compensation to an agent having to guide a buyer or a seller through the short sale process.

Officially, the program does not take effect until April 5, 2010.  However, banks can start offering this earlier if they meet requirements.  In fact, I’m certain that they are already using the new process because we have more than one client in this situation.  You can learn more about the government programs at MakingHomeAffordable.gov.

President Obama signed a revised home buyer tax credit into law today. Before I get too far into this, let me clarify that we are in the business of helping people buy and sell homes and this tax credit is definitely good for our clients today – maybe not tomorrow, but at least for today. As such, we will do whatever it takes to help them take advantage of any misguided government giveaway program that they come up with in Washington. But you know a government spending program is a bad idea when the New York Times comes out against it.

The original program, set to expire at the end of the month, provided an $8,000 tax credit to first time home buyers who made less than $75,000 individually or $150,000 jointly. The new program extends the credit until the end of April, raises the income limit to $125,000 individually or $225,000 jointly, and also introduces a $6500 credit for people who already own a home and want to buy another one. The reason for the inclusion of people who already own homes is…well, they just want to spread our wealth around.

The NAR is jumping for joy at the success of their lobbying campaign – over 500,000 realtors begged congress for this handout. And I assume they will be lined up in the spring with their hands out yet again for the third sequel to this horror show. I can only imagine the concept: Ckash 4 Shacks – a tax credit for bulldozing your house and replacing it with a house that has energy efficient windows.

First it was going to be October 1, then November 2. That’s when new FHA condo approval rules were going to be implemented. Now it’s December 7. I know it’s shocking but the government just can’t seem to get their act together – in this one rare instance.

One of the more significant items we’ve been waiting for is some relief on the restriction that condo associations can not be approved if they have the right of first refusal. On the one hand, I’ve never understood why condo associations have this right anyway – like they’re going to have the funds to buy a condo and do what with it? On the other hand, I never understood why FHA cared – as long as it’s not discriminatory. But forever promising to remove this restriction on the right of first refusal one month from now is leaving condo associations in limbo. Why incur the legal expense of changing the bylaws to relinquish the right when the government is going to relax the requirements in just one month? However, with 36% of the buyers using FHA mortgages how can the associations afford to keep waiting?

As if this issue weren’t thorny enough, some folks within the mortgage industry aren’t exactly optimistic that things will get better even with the new rules. According to Tom Fishwick of Guaranteed Rate, “I am not sure how much easier it will be once whatever changes do go into place. Clearly they are having trouble figuring out how to implement the changes. As it stands now, they will need to review every single condo building that gets an FHA loan. Currently the spot approval allows an FHA underwriters to sign off on the easy projects once they confirm those basic questions. [with the new process] I am expecting long delays, if not a tougher qualification process, even if they will allow for a right of first refusal. For now I am cheering every time they announce another delay.”

While the passing of this credit is still to come,according to the Wall Street Journal,  the Senate  reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers.  The terms of the new agreement are as follows:

• Extend the first time buyer credit worth up to $8k (read about the current program)
• Offer a new credit of up to $6,500 for existing homeowners given the home buyer has lived in their current residence for 5 out of the last 8 years (consecutively)
• Raise the qualifying income limits to $125k  for single taxpayers and $250k for joint taxpayers (Current is $75k and $150k)
• Have sales agreements April 30,2010 and close by June 30, 2010

This isn’t a done deal, this agreement still faces votes in the Senate and the House.  Increasing the duration of this program will certainly continue to help sales of homes under $400k.  Adding the credit to existing homeowners should help stimulate the “trade up” market.

Did you know that?   We didn’t. After searching a multitude of sites including the official FHA, IRS and first time home buyer tax credit sites and making several calls we still didnt have an answer.  Finally, I found official documentation on the IRS page.  It wasn’t located under guidelines, or even frequently asked questions but it was under “scenarios”.  Glad they made that easy for the millions of people seeking information on the tax credit.

According to the IRS “scenario”, if a first time home buyer who otherwise qualifies for the tax credit purchases a duplex, then he or she is entitled to a tax credit equal to 10% of the purchase price allocated towards the unit the buyer will be occupying as primary residence.   There is still a maximum credit of $8,000.  Simply put, if you buy a property with two equal units, then half of the purchase price would be the basis for the 10% credit.  A purchase of a building that costs $160k or more and has two equal units will allow the homebuyer to achieve the maximum credit. 

Oh, and in case you were wondering, if a homebuyer buys a travel trailer and it is attached to land, he or she also qualifies for the credit.