Infinite Luxury Just for You

Relief appears imminent for thousands of Sacramento homeowners hit with state tax bills for mortgage debts forgiven in 2009.

State lawmakers said Monday they plan to cancel the state tax obligations with a vote Thursday.The legislation will go before the Assembly Revenue and Tax Committee today and theppropriations Committee on Wednesday, and will receive a full vote Thursday.

A similar Senate floor vote planned Thursday would send the bill immediately to Gov. Arnold Schwarzenegger, who has repeatedly stated his support. The new bill is similar to one he vetoed on March 25. But this time it omits a part he opposed – financial penalties for businesses that routinely seek state tax refunds. Democrats removed the section despite their contention that some firms “fish” for refunds whether or not they’re owed.

The new movement means that Californians who got unexpected tax bills of $10,000 or more in recent weeks could soon be off the hook. Most are borrowers who received loan modifications last year or lost their houses in short sales, in which banks accept prices below what they’re owed. In both cases, lenders forgave some of the debts owed them, a process that exposes borrowers afterward to taxes.Many across the state have anxiously waited for the state to resolve the issue before the tax filing deadline – or have filed extensions.

Typically the state and federal governments view forgiven home loan debt as additional income and tax it. But both have backed off amid the housing crash. The federal government has suspended taxes on forgiven mortgage debt from 2007 through 2012. California suspended it for the 2007 and 2008 tax years. But disagreements over the business tax refunds stalled a bill extending it to 2009.

The bill being considered this week, Senate Bill 401, would cancel state tax obligations for forgiven mortgage debt through the 2012 tax year.

FHA Property “Flipping” Clarifications

A.                  Transaction must be arms-length:

B.        If sales price is less than 20% or more over seller’s acquisition cost then:

C.        If sales price is 20% or more over seller’s acquisition cost and:

b.        The increase in value is not due to any significant improvements/renovation:
i.        Appraiser to provide appropriate explanation of the increase in property value and provide sales comparables to support that value since the prior title transfer; OR if the appraiser cannot justify the increase in value, a second appraisal supporting value is required lower of the two will be used)

“Cherish your yesterdays, dream your tomorrows, but live your today’s. Tomorrow belongs to those who fully use today!”* – Unknown

The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.  .

California expected to cancel tax on forgiven mortgage debts

Read more: http://www.sacbee.com/2010/04/06/2657410/california-expected-to-cancel.html#ixzz0kZ03SU8SRelief appears imminent for thousands of Sacramento homeowners hit with state tax bills for mortgage debts forgiven in 2009.

State lawmakers said Monday they plan to cancel the state tax obligations with a vote Thursday.

Shannon Murphy, spokeswoman for Assembly Speaker John Pérez, D-Los Angeles, said legislation will go before the Assembly Revenue and Tax Committee today and the Appropriations Committee on Wednesday, and will receive a full vote Thursday.

A similar Senate floor vote planned Thursday would send the bill immediately to Gov. Arnold Schwarzenegger, who has repeatedly stated his support. The new bill is similar to one he vetoed March 25. But this time it omits a part he opposed – financial penalties for businesses that routinely seek state tax refunds. Democrats removed the section despite their contention that some firms “fish” for refunds whether or not they’re owed.

Monday, Schwarzenegger spokesman Mike Naple said the governor “hopes the Legislature fully addresses the concerns raised in previous versions of this bill.”

The new movement means that Californians who got unexpected tax bills of $10,000 or more in recent weeks could soon be off the hook. Most are borrowers who received loan modifications last year or lost their houses in short sales, in which banks accept prices below what they’re owed. In both cases, lenders forgave some of the debts owed them, a process that exposes borrowers afterward to taxes.

“We want to get it done before the (April 15) tax deadline,” said Alicia Trost, spokeswoman for Sen. President Pro Tem Darrell Steinberg, D-Sacramento. “We don’t want to have people jump through hoops.”

Many across the state have anxiously waited for the state to resolve the issue before the tax filing deadline – or have filed extensions.

Typically the state and federal governments view forgiven home loan debt as additional income and tax it. But both have backed off amid the housing crash. The federal government has suspended taxes on forgiven mortgage debt from 2007 through 2012. California suspended it for the 2007 and 2008 tax years. But disagreements over the business tax refunds stalled a bill extending it to 2009.

The bill being considered this week, Senate Bill 401, would cancel state tax obligations for forgiven mortgage debt through the 2012 tax year. The Assembly planned Monday to rewrite SB 401 from a bill regarding tax shelters to one that aligns much of California’s tax law with that of the IRS. That includes canceling taxes on forgiven mortgage debt and on recipients of federal renewable energy grants.

“We haven’t done a tax- conforming bill for four years, so it’s important to get that done,” Trost said Monday.

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I have had some people ask me about the rules relating to flipping property and through

a newsletter I recieve on a monthly basis I came across an article which listed what you

should do if you are considering flipping houses for investment purposes.  I hope this

answers some of your questions but if I were you I would suggess you do some

research as well on your own.

A.                  Transaction must be arms-length:

a.        Seller can be an LLC, Corporation or Trust as long as it was established  in              accordance with applicable state/federal law

 
i.        Multiple title transfers in the past 12 months require additional review and may require additional documentation and/or may not be eligible for FHA financing. (Deeding the property to or from an individual(s) and an LLC, corp or trust may be allowed if the owners of the LLC, corp or trust are the same as the individual(s) that deeded it)
b.        Property has to have been marketed openly and fairly.  
i.        Properties listed on MLS meet this requirement.

B.        If sales price is less than 20% or more over seller’s acquisition cost then:
a.        Normal appraisal underwriting policy applies

C.        If sales price is 20% or more over seller’s acquisition cost and:

a.        The increase in value is due to improvements/renovation:
i.        Appraiser to verify what renovation, repair or work was done to the property to substantiate the increase in value.  Dollar for dollar improvements are not required, however, the underwriter should review and analyze if the scope of work performed to the property would justify the increase in value; OR if appraiser cannot warrant that legitimate work was done to the property to substantiate the increase in value, a second appraisal supporting the value is required. (lower of the two will be used)
ii.        In addition to the above appraisal requirements, the broker/borrower must obtain a home inspection report prior to loan approval.  Until further guidance or a mortgagee letter is issued from FHA, additional requirements may apply.

b.        The increase in value is not due to any significant improvements/renovation:
i.        Appraiser to provide appropriate explanation of the increase in property value and provide sales comparables to support that value since the prior title transfer; OR if the appraiser cannot justify the increase in value, a second appraisal supporting value is required lower of the two will be used)

“Cherish your yesterdays, dream your tomorrows, but live your today’s. Tomorrow belongs to those who fully use today!”* – Unknown

The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.  .

Per the Market Composite Index, a measure of mortgage loan application volume, increased 14.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 15.5 percent compared with the same time a year ago.

“Mortgage applications rebounded last week, particularly in regards to refinance transactions, as rates dropped back below five percent,” said Michael Fratantoni, MBA’s vice president of research and economics. “Purchase activity remains subdued, with application volume’s remaining within the narrow range seen in the last few months.”

The Refinance Index increased 17.2 percent from the previous week and the seasonally adjusted Purchase Index increased nine percent from one week earlier. The unadjusted Purchase Index increased 11.7 percent compared with the previous week, and was 9.8 percent lower than the same week one year ago.

The refinance share of mortgage activity increased to 69.1 percent of total applications from 68.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 4.8 percent from 4.7 percent of total applications from the previous week.

Ability for Lenders to Foreclose in Florida Just got Tougher

A pair of Florida court rulings will now make foreclosures much more painful for lenders.

The state Supreme Court said last month that before foreclosing, a lender must verify that it has all the proper documents, including proof it owns the mortgage in question  !!!.

This isn’t as easy as it may sound, since during the securitization boom of the last decade, mortgages were typically sold several times over. If, when pressed by the borrower, a lender cannot produce such papers, the institution could be fined for perjury, the court said.

I should note that attempted foreclosures in other states have been dismissed for lack of such proof, ergo the ‘would be’ borrower owns the home free-and-clear.

On top of the above documentation that is now required, the same court said all Florida foreclosure cases must go through mediation, a process that has been gaining popularity in other states and that bankers say makes foreclosures expensive for them.

I will note here that according to RealtyTrac Inc., one in every 187 homes in Florida received a foreclosure filing in January of this year.

 “Cherish your yesterdays, dream your tomorrows, but live your today’s. Tomorrow belongs to those who fully use today!”* – Unknown

The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.  .

It is amazing how the whole face of Real Estate has changed over the past 20 years first we had the Resolution Trust Company set up in the 1980’s for REO’s, which swept the nation for 10 years and is still with us today, now we have the National Short-Sales era upon us.  It is a always changing Market and contracts as well as rules and regs have changed so much we have an ever changing face of Real Estate as we know it.  Longer contracts more complicated contracts with more and more paper work which no one seams to want or most don’t know how to fill out correctly.  We as realtors must alway be vigilent and cross our T’s and dot our I’s for if we don’t then it will be us who pays the price not the Banks or Title Companies.The national short sale program surged 407% this quarter. According to the TARP Quarterly Report to Congress, the HAMP program resulted in only 166,000 permanent modifications from the 3.3 million homeowners who requested help.  With the focus now shifted toward short sales, real estate professionals are registering to assist in the nation-wide initiative to reach out to homeowners in need of short sale assistance. We as professionals need to be sure we are up to date on the process of short sales and the forms that go along with them there are not short cuts.

Let’s see, if I were a U.S. Senator or part of the new Obama Administration, my number one action would be to relieve the stress on the mortgage crisis by readjusting mortgages with major lenders to match the current home fair market rates.  My number two action would be to stimulate the housing industry by giving a $15,000 to $25,000 tax credit to new home buyers depending on the sales price of new or resale home.  Along with this, I would immediately recognize that the current proposed $7,500 tax credit is symbolic and political rhetoric.  My third action would be to stimulate jobs at the state and local level compared to the federal level.  Guess who will bear the costs at the Federal level?  Well, it might have something to do with wealth redistribution.  Sorry, Joe, no tax breaks for your small business this year, next year, the following year and so on.  My fourth action would be to instill economic confidence at the state and national levels–spreading the “doom and gloom” at the National level does not help and only hinders the recession we are in.  My fifth and constant action, until my reelection, would be to get us out of the recession we are in.  Lastly, and, yes the most important action would be to never let the Obama Administration and the National Security Team waver on our National Security of the homeland.  It is easy for Americans to forget 9/11 but there is a 9/11 waiting to happen every day so we must never let our guard down, ever.  We all know that New Year resolutions often fall by the wayside after the first 30 days into the new year but if I don’t carry out my first two resolutions on this list as a U.S. Senator (if you or I only were one), then I have failed to help my constituency in time of need that got me elected (same goes if I were a State Governor). 

     Where are the Bailout Initiatives for the Individual Home Owner?  From Wall Street Investment Firms, Banks, to the Auto Industry, everyone is getting bailed out except for the one individual that matter the most in our economy—“Joe” the home owner.  We hear the sad stories every day.  The other night on one of the local news channel, a homeowner had to move out of their home on Christmas Eve based getting foreclosed.  Who is his advocate on the steps of Washington Capital building? 

     The $7,500 tax credit given to first time homeowners is not enough to stimulate the housing industry—the U.S. Congress needs to double or triple this tax credit.  What about mortgage debt relief?  Homeowners “upside down” on their mortgage and facing bankruptcy with a $100,000, $200,000, or $300,000 deficit with regard to what their home is worth compared to their current mortgage is not concerned about the tax credit.  Yes, there needs to be a stimulus initiative to “kick start” the home sales industry again, but, the tax credit is only one side of the economic relief that is needed.  Immediate action needs to take place to help current homeowners facing crisis with an “upside down” mortgage.  Congress needs to pass legislation that will immediately correct current mortgages with current market appraisal home values and monthly mortgage payments should mirror the current home market value of the individual home.

     For the way forward, the tax credit should be built in to a dual purpose congressional package that considers both the current homeowners and future home owners.  The median price of a new home in Las Vegas dropped 10.8 percent from a year ago ¹ and since last month, there was a 180 percent increase in home sales from the same month a year ago. ²   So, it is true that there are some amazing deals for new and qualified home buyers, but, the foundation of an economic stimulus plan should include current home owner’s mortgage adjustment value that matches the current market appraisal as well.  I am not saying anything new here but it is time for our congressional leaders to take real action to help our individual homeowners in need.  We are a Nation that can unite in time of need as we have proven on many previous occasions throughout our history.  You can’t build a business without focusing on your business’ “bottom line—i.e., the customer.”  The “customer” in turning around our economy is “Joe, the individual homeowner.”  

     There is a lot of undisclosed content with regard to President Elect Obama’s stimulus package but if this stimulus package does not include the foundational element I highlighted above, we all need to write our congressional leaders and ask why.

¹.Las Vegas Review Journal, online edition, 24 Dec 2008. 

^2. Las Vegas Review Journal, online edition, 11 Nov 2008.