HAFA Relief

Small Single-family home
Image via Wikipedia

Some of the pain of short sales may start to wain. The potential salve comes from the Home Affordable Foreclosure Alternatives (HAFA) program. It is designed to help homowners who couldn’ keep their home under the Home Affordable Modification Program (HAMP)

If the program works as planned, listing, selling and closing will get streamlined and documents will get streamlined for all parties, making short sales less excruciating than they are now for all parties. This new program runs until 12/31/2012.

HAFA eligibility is as follows:

  • Property must be borrower’s principal residence
  • It must be a first lien mortgage originated prior to 1/1/2009
  • The mortgage is delinquent or delinquency is reasonabley foreseable
  • The unpaid principal balance is no more thatn $729,750 for single family residences. Higher limits for duplexes or multi family properties.
  • Borrower’s total monthly mortgage payment exceeds 31 percent of their gross income
  • After notification of potential HAFA eligibility, borrower have 14 days to request HAFA consideration.
Enhanced by Zemanta

Congress passed the $8,000 tax credit extension!

United States Capitol in daylight
Image via Wikipedia

Congress passed an extension of the closing deadline for the Homebuyer Tax Credit, the Homebuyer Assistance and Improvement Act (H.R. 5623). The extension applies only to transactions that have signed contracts in place as of April 30, 2010, that have not yet closed. The legislation is designed to create a seamless extension; the new closing deadline for eligible transactions is now September 30, 2010. There will be no gap between June 30 and the date the President signs the bill into law. Extending the tax credit closing deadline will help provide additional stability to real estate markets across the nation.

Great news for those that were not able to make the cut off of June 30th due to the backlog this created.

Enhanced by Zemanta

7 Things all borrowers should know about FHA loans

Logo of the Federal Housing Administration.
Image via Wikipedia

“We have seen home buyer interest in FHA loans go from practically zero three years ago to upwards of 87 percent today,” said Christopher Gardner, founder and president of FHA Pros, LLC. “Despite this rapid rise in popularity, many buyers still do not fully understand the benefits of these loans, and we believe it’s time to change that.”

1. FHA Loans Are Not Only For Lower-Income Borrowers. FHA loans are available to everyone. In fact, even Bill Gates can get one. There is no maximum income restriction associated with FHA loans. Borrowers do need to substantiate income and assets by submitting proper documentation. This requirement ensures that borrowers are well-vetted and truly able to afford their future homes.

2. FHA Loans Are Not Only For First-Time Buyers. Many people believe FHA loans are available only to first-time homebuyers. This is not the case. Whether borrowers are making their first home purchase or their fifth, they can look to FHA loans as a home financing option.

3. FHA Loans Are Not Just Small Loans; In Fact, Loan Amounts Can Be As High As Almost $800,000. The government recently raised the maximum loan amount from its original cap of $362,790 to $793,750 as a way to help stabilize the housing market. The amount a buyer can borrow varies from county to county. Later this summer, condo buyers interested in FHA loans can visit www.checkfhaapproval.com to instantly identify FHA-approved condo associations and review maximum loan amounts for a given location.

4. FHA Loans Are Not Affiliated With The Section 8 Housing Program. While both programs are administered by the U.S. Department of Housing and Urban Development (HUD), FHA loans have nothing to do with low-income subsidized housing. FHA loans are simply mortgages insured by FHA. This insurance provided by the federal government allows lenders to lend more freely by assuring them that they will be repaid in the event of default. Most traditional lenders, including Wells Fargo & Co., JP Morgan Chase and Citigroup are able to provide FHA loans to their customers.

5. FHA Loans Are Often More Affordable Than Conventional Loans. While FHA loans typically offer the same interest rates as other loans, borrowers benefit from a much lower down payment of as low as 3.5 percent.

6. FHA-Approved Condo Developments Are More Desirable To Buyers. With 87 percent of home buyers indicating that they plan to use FHA loans, condo associations that are not FHA approved are missing out on a significant pool of prospective buyers. Under rules in place since February 2010, an entire condominium development must now apply to HUD and be granted FHA approval before a buyer can purchase a unit in an association with an FHA loan or before an existing unit owner can refinance into an FHA loan.

Due to the general unwillingness of today’s lenders to extend credit with respect to conventional loans, many borrowers find that FHA is their best bet. Lenders don’t mind lending when the federal government (FHA) assures them of repayment.

Homeowners associations (HOAs) should note that although FHA-insured mortgages might be easier to obtain, they are not “risky” loans, due in large part to the strict “full documentation” requirements placed on borrowers.

Individual buyers or sellers can initiate the approval process or current owners can encourage their HOA to apply. More information about the FHA- approval process is available at www.getfhaapproval.com.

7. FHA Loans Are Assumable. In addition to lower down-payment and credit-qualifying requirements as compared to conventional loans, FHA loans are assumable. This means that when a seller with an FHA loan sells his or her property, the loan and its financing terms (interest rate) can be transferred to the new buyer. This unique feature will certainly make a property more valuable in times of rising interest rates.

(reprinted with permission)

Enhanced by Zemanta

No more State Tax on Forgiven Debt

Assorted international currency notes.
Image via Wikipedia

They finally passed it. Distressed homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure or a loan modification. It was just signed into law on Monday. This puts the State in line with the Federal law. For debt forgiven on a loan secured by a “qualified principal residence” borrowers will now be exempt from both federal and state income tax consquences. The existing federal exemption is for indebtedness up to $2 million, where the new California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.

“Qualified principal residence” indebtedness is defined as debt incured in acquiring, construction, or substantially improving a principal residence. It includes both first and second trust deeds. It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified.

The tax breaks apply to debts discharged from 2009 to 2012. Californias who have already filed their 2009 tax return may claim the exemption by filing a Form 540X amendment.

Taxpayers who do not qualify for the above exemptions (for example a second home or rental property) may nevertheless be exempt under other provisions. Most notably, taxpayers who are bankrupt are exempt from debt relief income tax. Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent  their current liablities exceed current assets.

For more information go to California Franchise Tax board Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue’s Mortgage Forgiveness Debt Relief Act and Debt Cancellation web page. 

Of course each person’s tax issues are different so check with your tax preparer to see what applies to your specific case.  

Reblog this post [with Zemanta]