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.

The State of Illinois has instituted a change to all property owners claiming Property Tax on their 2009 Illinois Tax Return. In order for your return to be accepted by the State of Illinois, those who are claiming a property tax credit must provide, on their return, their Property Index Number (PIN), sometimes called “parcel number”.

This number can be found on the taxpayer’s property tax bill or tax assessment notice. Taxpayers who pay their property taxes through a mortgage may need to contact their lender for a copy of their bill, or obtain the number from their county assessor’s office. If you have trouble locating your PIN, feel free to contact Lucid Realty and we would be glad to help you determine the correct number.

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.

A couple weeks ago, the NAR made an announcement that the $8000 tax credit could be used as the down payment for FHA loans.  Some opined that lenders would provide a “bridge loan” for the down payment.  Unfortunately, this was rescinded.  Currently, the funds are only available in the form of a tax credit, which entitles first time home buyers a refund on their 2009 taxes (claimed in 2010).

There are several hypotheses as to why it was rescinded.  The first is that law makers believe buyers should have some of their own money invested in the property.   They believe that one of the factors that led to the sub prime meltdown was 100% financing.  When a buyer has their own money invested in a property, they may be less likely to default.  Currently, FHA requires a 3.5% down payment.

The second reason seems to rest on the “bridge loan.”  While in theory, the loan seems safe to the lender, because the IRS is paying the tax credit.  However, they questioned how they would get reimbursed  after the buyer received it.

In the end, it was rescinded.

There have been rumors that third party non for profits like NACA may somehow get involved.

Nonetheless, the $8000 tax credit is still a HUGE incentive.

As we all have just experienced, the rules are changing at a torrid pace, sometimes daily.  It is essential that we all stay up to date so we can provide the best customer service.

If you have any questions you can contact Marc at marcj@aandnmortgage.com.