First-Time Home Buyer Tax Credit – 2009

• The tax credit is available for first-time home buyers only. To be a First Time Home Buyer, you cannot have owned a home in the last three years.
• Tax credit =10 percent of the home’s purchase price
• The maximum credit amount is $8,000.
• The credit is available for homes purchased on or after January 1, 2009 and before
  December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
• The tax credit does not have to be repaid.

Frequently Asked Questions

Major points of Obama’s new plan to fight the mortgage crisis.

President Barack Obama on Wednesday unveiled his plan to fight the home mortgage crisis and pledged up to $275 billion to help 9 million families suffering from falling home prices and unaffordable monthly payments.

“The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly: by refinancing loans for millions of families in traditional mortgages who are underwater or close to it; by modifying loans for families stuck in sub-prime mortgages they can’t afford as a result of skyrocketing interest rates or personal misfortune; and by taking broader steps to keep mortgage rates low so that families can secure loans with affordable monthly payments.”

“Here is how my plan works:

“First, we will make it possible for an estimated four to five million currently ineligible homeowners who receive their mortgages through Fannie Mae or Freddie Mac to refinance their mortgages at lower rates.”
“Right now, Fannie Mae and Freddie Mac—the institutions that guarantee home loans for millions of middle-class families—are generally not permitted to guarantee refinancing for mortgages valued at more than 80 percent of the home’s worth. So families who are underwater—or close to being underwater—cannot turn to these lending institutions for help.”
“My plan changes that by removing this restriction on Fannie and Freddie so that they can refinance mortgages they already own or guarantee. This will allow millions of families stuck with loans at a higher rate to refinance. And the estimated cost to taxpayers would be roughly zero; while Fannie and Freddie would receive less money in payments, this would be balanced out by a reduction in defaults and foreclosures.”
“I also want to point out that millions of other households could benefit from historically low interest rates if they refinance, though many don’t know that this opportunity is available to them—an opportunity that could save families hundreds of dollars each month. And the efforts we are taking to stabilize mortgage markets will help these borrowers to secure more affordable terms, too.”

“Second, we will create new incentives so that lenders work with borrowers to modify the terms of sub-prime loans at risk of default and foreclosure.”
“Some sub-prime lenders are willing to renegotiate; many aren’t. Your ability to restructure your loan depends on where you live, the company that owns or manages your loan, or even the agent who happens to answer the phone on the day you call.”
“My plan establishes clear mortgage financing for the entire mortgage industry that will encourage lenders to modify mortgages on primary residences. Any institution that wishes to receive financial assistance from the government, and to modify home mortgages, will have to do so according to these guidelines—which will be in place two weeks from today.”
“And under this plan, lenders who participate will be required to reduce those payments to no more than 31 percent of a borrower’s income.”

“Third, we will take major steps to keep mortgage rates low for millions of middle-class families looking to secure new mortgages.”
“Today, most new home loans are backed by Fannie Mae and Freddie Mac, which guarantee loans and set standards to keep mortgage rates low and to keep mortgage financing available and predictable for middle-class families. This function is profoundly important, especially now as we grapple with a crisis that would only worsen if we were to allow further disruptions in our mortgage markets.”

“Fourth, we will pursue a wide range of reforms designed to help families stay in their homes and avoid foreclosure.”
“My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair market value—as long as borrowers pay their debts under a court-ordered plan. That’s the rule for investors who own two, three, and four homes. It should be the rule for ordinary homeowners too, as an alternative to foreclosure.”

Read the full text of President Barack Obama’s speech on home mortgage crisis posted by CNBC.com

New Changes by Fannie Mae and Freddie Mac

Mortgage rates are low, but expect to pay more fees for a mortgage today.

Fannie Mae and Freddie Mac are adjusting their pricing grids and fees will be increasing.  Mortgage lenders which are based on  Fannie Mae and Freddie Mac platform must also increase their price adjustments.   As a result your actual rate or closing costs could be higher.  For example:   Rates for refinancing condo will be higher than single family residence rates because lenders impose the condo adjustment. “It has created a different pricing scenario from one consumer to the next,” said Rick Allen, vice president of MortgageMarvel.com. “What you see in the Sunday paper could be perfectly close for one borrower. The guy next door could be 1% higher.”
Relationship between closing costs/points you pay and rate is also changed. Paying up-front closing costs/points gets borrowers a bigger discount these days. Historically, 1 point in fee (1% of the loan amount) gets borrower a rate that’s about 0.25% lower. Now 1 point gets the rate about 0.625% to 0.875% lower.

Please note the following important changes:

The credit score/LTV (Loan-to-Value) adjustment grid has changed. 

Certain cash-out refinance adjustment will increase. 

Two-unit property adjustment will increase.

Adjustment for loans with subordinate financing will increase.

Interest-only loan adjustment will increase.

Condominium adjustment will increase.

The adjustment summarized above will apply to all loans locked on or after February 17th, 2009. In addition, the new fees will apply to all loans that need a rate lock extension on or after this date.

Read New Rules and Guidelines  for conforming and super conforming (Jumbo up to $625,500) loans.

US May Start Subsidizing Some Mortgage Payments

“The Obama administration is said to be near a plan to lower costs for homeowners with problem loans, reports CNBC’s Diana Olick.”

Preventing further home collapses the US government is planning a new program to subsidize mortgages for troubled homeowners. They are talking about standardized loan modification eligibility test even before a homeowner becomes delinquent, before a foreclosure process. Currently, you must be at least 90 days behind on your mortgage payments to qualify for modification.

Treasury is going to put 50 billion dollars towards attacking the foreclosure problems. It can be some form of mortgage buy-down. For example: You can not afford to pay your current mortgage payment $2,000 due to a hardship. But you can afford to pay $1,400. Government will come and use 50 billion dollars to share with the bank the difference $600.  .

 CNBC News:
“I’ve talked to all the major servicers — both the big bank ones and the big independent ones — and they are all ready to go, they’re chomping at the bit,” Lockhart, the director of the Federal Housing Finance Agency, said. “The other thing they’re asking for standardization.”

Under the plan being mulled, homeowners would have to make a case of hardship to qualify for new loan terms.

Housing policymakers weighed but have for now shelved one plan that would have seen the government stand behind low-cost mortgages of between 4 and 4.5 percent, sources said.

Lockhart said that policymakers are eager to prevent a large drop in home values from their current, deflated levels.” Read more…

$550 Billion Disappeared in “Electronic Run On the Banks”

Rep. Paul Kanjorski of Pennsylvania, The Capital Markets Subcommittee Chair, explains C-Span how the world economy almost collapsed in a matter of hours.  “It would have been the end of our political system and our economic systems as we know it.”

On 09/15/08 the Federal Reserve told Congress members about a “tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars.” According to Kanjorski, this electronic transfer occured over the period of an hour or two.

Rep. Paul Kanjorski said: “The Treasury opened its window to help. They pumped a hundred and five billion dollars into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn’t be further panic and there. And that’s what actually happened. If they had not done that their estimation was that by two o’clock that afternoon, five-and-a-half trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.”

Provided by RealHistoryChannel

The New Rules of Mortgage Lending

I found very helpful article on  Yahoo! Finance  about mortgage changes: 

• Paying Up-Front Points
• Making More Than the Minimum Down Payment
• Locking in the Mortgage Rate

 by Les Christie
Friday, February 6, 2009

Shopping for a home loan? Things have changed — here’s what you need to consider.

If you’re shopping for a mortgage these days, it’s a whole new world out there.

“There have been a huge number of changes over the past few years in mortgage borrowing,” said Gibran Nicholas, founder of the CMPS Institute, which trains and certifies mortgage advisors.

Of course, many of the subprime loans that helped fuel the housing boom — those that didn’t require borrowers to show any proof of income, or that let homeowners make minimum payments — are simply no longer available.

But even buyers looking for a traditional mortgage are now faced with different factors to consider.

Here is what you need to know:  Read full article 

 

Read Closing Costs vs. No Closing Costs and What Fees are Included in Closing Costs? Can You Avoid Them?

Senate approves $15,000 tax credit for homebuyers

Yahoo News

By DAVID ESPO, Ap Special Correspondent – Wed Feb 4, 6:48 pm ET

WASHINGTON – The Senate voted Wednesday night to give a tax break of up to $15,000 to homebuyers in hopes of revitalizing the housing industry, a victory for Republicans eager to leave their mark on a mammoth economic stimulus bill at the heart of President Barack Obama’s recovery plan.

The tax break was adopted without dissent, and came on a day in which Obama pushed back pointedly against Republican critics of the legislation even as he reached across party lines to consider scaling back spending.

“Let’s not make the perfect the enemy of the essential,” Obama said as Senate Republicans stepped up their criticism of the bill’s spending and pressed for additional tax cuts and relief for homeowners. He warned that failure to act quickly “will turn crisis into a catastrophe and guarantee a longer recession.”

Democratic leaders have pledged to have legislation ready for Obama’s signature by the end of next week, and they concede privately they will have to accept some spending reductions along the way.

Sen. Johnny Isakson, R-Ga., who advanced the homebuyers tax break, said it was intended to help revive the housing industry, which has virtually collapsed in the wake of a credit crisis that began last fall.

The proposal would allow a tax credit of 10 percent of the value of new or existing residences, up to a $15,000 limit. Current law provides for a $7,500 tax break for the purchase of new homes only.

Source:  AP News

Read more…