President George W. Bush signed legislation into law on Thursday that will ease the tax burden for home owners who have had debt forgiven on a mortgage due to a foreclosure, short sale, or deed in lieu of foreclosure. The bill — Mortgage Forgiveness Debt Relief Act — has been supported by NAR since the 1990s.

“The president offered a Christmas present to many people who have suffered the agony and humiliation of losing their home,” said NAR President Dick Gaylord in a statement. “Today’s bill will ensure that any debt forgiven on a mortgage secured for a principal residence will not be taxed. This is very significant legislation.”

The tax code used to require a lender who forgives debt to provide a Form 1099 to the IRS stating the amount the borrower had been forgiven. If the property was sold at foreclosure or was sold for less than what was borrowed, that difference was considered income and subject to the tax.

“We have always believed that it is clearly an issue of fairness and of not kicking people when they are down,” Gaylord said. “By making the forgiven debt taxable income, individuals in already unfortunate situations most likely faced IRS actions because they did not have the money to pay the additional taxes. This legislation will relieve that additional burden and may also encourage families to work with their lender to negotiate terms, knowing they will now not be subject to an IRS bill.”

Other Legislation Making Its Way to the President

Also, this week, the U.S. House passed two other bills — which have already passed the Senate — that could have a big impact on the real estate industry.

The bills are:

• Mortgage Insurance Tax Deductibility. This bill makes mortgage insurance premiums tax deductible for all mortgages originated for the next three years. Mortgage insurer Genworth Financial estimates that this tax break is worth $350 to the average taxpayer who has purchased a home with less than 20 percent down.
• Terrorism Risk Insurance Act. Federal backstops for terrorism insurance, passed initially after the Sept. 11 attacks, have been extended for another seven years. The bill also expands the program’s protection by including domestic terrorism. The insurance and real estate industries have pushed for an extension, saying federal guarantees to help cover catastrophic losses are crucial to stimulating the investment needed to spur economic growth.

via Realtor.org

The stock market plunged today as Federal Reserve Chariman Ben Bernanke announced that the fed would be cutting interest rates for the third consecutive time by a quarter point.

What does this mean for homeowners? While this won’t be the key to fixing the economy, it does mean the Federal Reserve is on our side:

• Purchasing a home is even more affordable with the new lowered interest rate.
• With a lower interest rate, now is a great time to refinance!
• Home equity lines of credit will now be cheaper.
• Rate resets might not be as severe for borrowers with adjustable rate mortgages

Continue reading about the rate cuts and how this will effect homeowners and our economy.

via CNNMoney.com

Who exactly can get help from Bush’s plan? There are millions of struggling homeowners. Under Bush’s plan,

“the mortgage industry would voluntarily help as many as 1.2 million homeowners who are heading for trouble paying their subprime mortgages but aren’t yet lost causes.
…
In some cases, people with good credit scores will be excluded. Also left out are those deemed able to afford the higher interest rates scheduled to replace their introductory rates over the next two years.”

Click here to continue reading who can and can’t be helped under this new plan.

via RISMEdia

Last Thursday, after Treasury Secretary Henry Paulson explained the Bush administration plans to aid as many as 1.2 million home owners facing the prospect of foreclosure, questions arose quickly. Here are the answers to some of the key ones.

Which adjustable-rate mortgages are affected? To qualify to have their interest rate frozen for five years, home owners must have received a loan sometime between Jan. 1, 2005, and July 31, 2007, and be facing a reset of their interest rate sometime between Jan. 1, 2008, and July 31, 2010.

Who qualifies for this deal? Home owners who haven’t missed a payment, but who might if their mortgage resets. Those who can’t afford the higher payments, and who have credit scores below 660 and less than 3 percent equity in their homes, will get the biggest break from the lenders. People who are financially secure enough to pay the higher mortgage payments don’t qualify.

Do owners of second homes or investors qualify? No. The plan excludes people who don’t live in the property that’s facing foreclosure.

Why didn’t the plan go further? If home owners are going to pay less on their mortgages than investors expected, then people are going to lose money. Not all of those people are fat cats. Potential losers include pension funds for teachers, firemen, police and an array of mutual funds whose clients are individual investors.

Last Friday, November 16th, the House passed H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, by a vote of 291-127.

This piece of legislation provides protection to consumers of home mortgage products by providing certain minimum standards for consumer mortgage loans, and prohibiting steering incentives to mortgage originators, including incentive compensation.

The bill additionally establishes minimum repayment standards for mortgages and prohibits refinancing that does not benefit the borrower. For more information regarding the bill, you can click here.

Via MortgageOrb.com

Long-term mortgage interest rates inched up again Monday, and the benchmark 10-year Treasury bond yield dipped to 4.74 percent.

The 30-year fixed-rate average gained to 5.81 percent, and the 15-year fixed rate rose to 5.55 percent. The 1-year adjustable dipped to 5.4 percent.

The 30-year Treasury bond yield sank to 4.89 percent.

Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.

Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.

In other economic news, the Dow Jones Industrial Average jumped 108.33 points, or 0.86 percent, finishing at 12,720.46. The Nasdaq was up 26.39 points, or 1.06 percent, closing at 2,518.33.

Home buyers in the Central Valley and Mother Lode have something new this spring to factor into their home financing calculations: A new federal tax deduction allows many qualified families to write-off premiums for private and government mortgage insurance on loans that close in 2007. Click “read more” below >> Read the rest of this entry »

With subprime mortgages making headlines over the past few weeks, buyers can be ambivalent about their lending options. There are some new online guides and free brochures help to clear up any confusion and help them find a loan that fits. The new guides cover “Understanding Mortgages,” “Specialty Mortgages: What are the risks and advantages?,” “Traditional Mortgages: Understanding your options,” “How to avoid predatory lending,” and “Learning about FHA Mortgages.” Click Read More below for links to the free guides.

Read the rest of this entry »

Day by day, evidence grows that the housing finance boom of the last few years was dangerously out of control. Mortgage brokers gave loans to people who could barely afford a house — and then to people who couldn’t.

Now we are beginning to see the results.

The Mortgage Bankers Association this week said foreclosures hit a record late last year, amid rising delinquencies and late payments.

Most ominous was the data on “subprime” borrowers — a euphemism for people who received loans with no collateral or without anyone checking their incomes or credit.

More than one in eight sub-prime mortgages was reported delinquent at the end of 2006 — the highest rate in four years.

National news story link