Top Real Estate News

Page under construction 1/25/2010

For the week of 01/25/10

Top Real Estate News

In our top news, the Federal Housing Administration is planning to increase the amount of up-front cash paid by all new borrowers and to require higher down payments from those with the poorest credit. Recently, the agency has made efforts to bolster its ailing finances, which have been worn by the recent economic and housing crisis , stemming from rising defaults in its always popular mortgage insurance program.

How important is this to the average American? Well, the FHA currently backs about 30% of all loans for home purchases and 20% of refinanced loans, so of the millions of aspiring home buyers out there, this could have serious ramifications. Under the plan, the agency would increase the up-front insurance premium that borrowers pay at the closing table from 1.75% to 2.25% of the loan’s value starting this spring. The really big change is that while most FHA borrowers can continue to make down payments of as little as 3.5% when they take out a loan, those with a credit score of less than 580 will have to make a down payment of at least 10%, possibly starting in the early summer.

In other news, there’s a little more good news on the homebuilder front as KB Home said this week it made money in the fourth quarter. Like Lennar last week, KB’s fourth quarter profit came about not because it was selling and building at an unexpected pace, according to an article in the Los Angeles Times. Rather, they received a huge tax credit that pushed them into the black for the first time in more than two years. KB’s chief executive, Jeffrey Mezger, called the company’s performance in the last quarter of 2009 “heartening.“ But he did also warn that the outlook in the short term might be rocky for a while. Mezger pointed out the housing market is stabilizing in some regions. But how things shake out depends on a lot of factors such as unemployment, the foreclosure rate and federal policies that have created incentives for homebuyers.

Still, there are good signs out there. Builders broke ground on new residences at a faster clip in November than in October, up by 8.9%. And both KB Home and Lennar are buying land again.

The federal government issued a report on its program designed to help stave off more foreclosures by getting borrowers into loan modification. Since the Home Affordable Modification Program started last spring, more than 900,000 borrowers have entered into trial modifications. So far, though, only 66,465, or about 7%, have successfully transferred into a permanent modification, according to the Wall Street Journal. In addition, 46,000 trial mortgage modifications were approved and awaiting only the homeowner signatures before they were made permanent as well. Borrowers must make three months of payments on the trial modifications to be eligible to get a permanent fix. According to the Treasury Department, as many as 545,000 borrowers have been in trial modifications for at least three months, but have not been converted.

Mortgage servicers have been slow to turn the trial modifications into permanent ones. The pace did pick up in December after the administration increased scrutiny and threatened banks with fines. The federal government has stressed that the paced needs to speed up because modifying loans may help the foreclosure rate, which will have a huge impact on the housing market in the year to come.

IRS 5405 e-File Glitch?

These last couple of months have seen thousands, maybe even a million, taxpayers that have been in limbo and haven’t got the chance to claim the home buyer’s tax credit — and get the money back as quickly as they would have liked.

According to Amy McAnarney, executive Vice President of the Tax Institute at H&R Block, there are likely 2 reasons for that:

The IRS wants to ensure people are claiming these credits for the right reasons. The rules have changed from the first time homebuyers credit — there are 3 key points with the new form that people should know.

1. You’ll need to attach a settlement statement, as you need to show proof that you bought the home. So, when you go to the title company to sign the settlement statements, make sure you make a copy because you’ll need to send that into the IRS.
2. If you are a repeat buyer, you need to have records that prove you’ve owned your previous home for 5 consecutive years out of the last 8 years. These can be property tax records; homeowner insurance records; or even electricity or water company statements. You don’t have to file these, but the IRS will do some compliance checking so just be prepared and have those things in order.
3. Mail in your return. Many people file online to get their return fast; however, since we have to send in the settlement statement, you need to actually send the paper return.
5. 

Helping Haiti

It’s amazing when you think of it, how in just a few seconds, so many thousands of lives, homes and businesses can be lost. And, it’s also amazing to think about how many years the rebuilding effort will take.

But news reports this week indicate that so far, Americans have contributed more than $100-million dollars towards Haiti’s recovery, and rebuilding. Talk about amazing — Americans are second to none, when it comes to giving what they can to people in need.