Advice, Community & Common Sense

Notice the absence of "First Time" in front of "Home Buyer Tax Credit" -- the credit has been expanded to all buyers fitting the criteria outlined below.  Use it wisely!

Remember, this is your tax money being used.  Using it responsibly is the best way to neutralize the effects of the long-term increased debt load of our country, and keep the effects to our children minimal.

Below are the initial details, hot off the presses today for you to review:

Home Buyer Tax Credit Signed

November 6, 2009

Tax Credit for Home Buyers

First-Time Home Buyers ("FTHBs"): First-time home buyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount. Check with your tax advisor for full details, of course, in addition to the initial income guidelines below. 

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Tax Credit Versus Tax Deduction

It’s important to remember that the tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time home buyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the home buyer can receive a check for the credit if he or she has little income tax liability. For example, if a first-time home buyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to  $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

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Remember, the new tax credit program includes a number of details and qualifications. For more information or answers to specific questions, please call or email me today.

In addition, you may be able to benefit from additional housing related provisions, including the following:

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Tax Incentives to Spur Energy Savings and Green Jobs

This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings

This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing

This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance

This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

As always, if you have any questions about your specific situation or would like to discuss how you may benefit from this program, please call or email me.

The colors of the seasons are changing, it's that time of year again.  As most of you know, I am based in Southern California, so unfortunately, I don't get to enjoy the splendor of the autumn foliage in New England, or the beauty of the midwest's rolling plains.  The trade out is I don't have to shovel snow.

For those of us in SoCal at this time of year, we get to enjoy the drop of the Pacific from 69F to 60F, the daytime temps from 85F to 70F.  But the only color changes we see here to tip us off to autumn....the appearance of Holiday Starbucks cups.  They're out en masse here as of Sunday.  Along, of course, with Rogers Gardens' annual display of Christmas lights here in Newport Beach, also starting each year the day after Halloween.

So get your own $5 gift card for Starbucks, and help yourself at the same time.  How? Update your info here and we can alert you to savings possibilities as they happen for your specific situation.

Happy Autumn, to you and yours.

It is one of my goals to share quality insights about what is going on in today's "New Normal" economic climate, a term coined this year by the brilliant folks at PIMCO. 

Today's piece on "Quantitative Easing" comes from Custom House analyst, Karl Schamotta.  This term is tossed about in the financial media, and sounds big and scary initially.  Indeed, it can have impressive consequences and carries significant risks.  Mr. Schamotta provides an excellent summary of what it can mean to you and the global economy of the New Normal we're all living in today.

If the link above does not work through your browser or ISP, cut and paste this url into your browser, be sure to get it all, it's long:

http://now.eloqua.com/es.asp?s=930&e=9881&elq=0f56dabca7394e1f9f2dc0ccf3f72209

Until next, time -- Enjoy!

2 Topics, 1 posting - MHA 2009 Update & 

$729,750 Loan Limits are finally coming!

For MHA 2009:  Just a brief note to let you know we're analyzing the details of the latest "RefiPlus" plans by Fannie Mae, rolling out this week, and allowing for 80.01% to 105% Loan-to-Values ("LTV").  We'll be in touch with any of our current clients fitting the guidelines.  We've received many inquiries on this topic, so we're watching very closely and are focused on providing accurate information, not just the headlines.

The Obama Administration unveiled the final details of its "Making Home Affordable Program" on March 4, 2009.  We are summarizing key parts of the plan, and busy reviewing the ongoing details.  The plan, affectionately known as "MHA 2009", is designed to help up to 9 million American families refinance or modify their loans to a payment that is affordable now and into the future.  Details are still being released in stages, as are roll-out dates for the various refinancing options.  As of the update date indicated below, this represents what we know so far, with links to more details for each topic, either refinancing or modification. 

For Key Reference documents on both topics, click here.

As always, if you have any questions or would like to discuss how this may specifically impact you, leave a comment on the Blog, or email me to set up an appointment.

2009 Economic Stimulus Plan (aka, American Recovery and Reinvestment Act, or "ARRA")Benefits to the Housing and Mortgage Industries

Updated February 17, 2009 - Major contributions and thanks to Barry Habib & MMG.

Just signed and sealed…a $787 Billion Stimulus Plan made up of tax cuts and spending programs aims at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II.

Home owners and potential homebuyers stand to gain from key provisions in this stimulus plan. Full text of the Act is available by clicking here, and runs almost one page per Billion dollars....roughly.

Here is what we know as of today...

Tax Credit for Homebuyers

First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit.  Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income. Additionally, the final version is a true tax credit, versus a hidden and repayable loan against future tax years.

The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.  Buyers will have to repay the credit if they sell their homes within three years.

Additional Housing-Related Provisions

Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization.  According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

More Help for Homeowners in the Future

Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.

According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.  At this time, we anticipate much, if not all, of the focus on the foreclosure prevention effort will be for loan amounts in the Conforming loan area.  We are checking into any benefits and effects to Jumbo loan holders, especially those whose businesses have suffered severely in this downturn.

While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.

The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.

As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.

Inside Story: False Illusions and What You Need to Know

The Fed has been at it again, offering words that sound encouraging at first blush, confirming that their buying program of Mortgage Backed Securities is in full swing and will continue as needed. Of course, the media will pick this up and offer their own interpretation, usually saying "Good news, the Fed's purchasing program means that rates will continue to drop lower, and remain low into the summer..."  But is this really what it means?  Not so fast...

Here's the truth.

Yes, the Fed has been buying Mortgage Bonds, and continues to do so.  But if you look at what they are purchasing, they are buying a lot of FNMA 30-yr 5.5% and 5.0% Bonds...which won't have much of an impact on present interest low rates.  Why?

First, see the Fed's actual purchases for yourself by hitting this link: Direct Link to View Fed Mortgage Bond Buying - http://www.newyorkfed.org/markets/mbs/index.html.

So why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding and performing mortgages (the ones you and your neighbors have) with rates of 5.75% - 6.50%, which are precisely the loans being refinanced at today's great interest rates.

Stay with me here...

With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary.  Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.

Here's the most important part.

Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example.  But after hearing the media throw around constant teases of lower rates ahead, they hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where the market stands presently.  Now, clearly, rates could turn higher, and this window of opportunity could pass them by entirely.  Worth considering:  During the previous "rate bottoms" of 1993, 1998 and 2003-04, using every tool and indicator available at those times, less than 1% of ALL borrowers across the country hit the absolute bottoms of those cycles.

The kicker is this:

Even if some clients ultimately are correct in timing the market within the 1% chance, and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting, and risking the bird in their hand.  While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited.  So even if they do get lucky and obtain the rate they were looking for, it could take years to make up what they lost by waiting.  Each day delayed wastes over $8 to save almost $1 more, so you're getting behind the savings curve by $7/day!

I don't want anyone to miss an opportunity by either waiting, or not understanding what is at stake.  Let's talk further on this - call or email us and let's discuss what this might mean for you and see if you are a good fit for great savings!

Make it a great week! 

These days, it is very tough to know where to begin when trying to bring quality and reliable information to my clients.  There are so many timely and important topics to cover.  This will be a longer post than usual, to review many current issues in mortgages, and their varying implications for all of my clients.  If you can't read it all now, I hope you'll at least skim through it and save the link to refer back to later.

As you have heard, there are “rescue plans” and “bailout plans” to save housing and the U.S. economy, approved by the Senate and House, and some even signed by the President. There are also rumors and speculation about new plans and future plans that the federal government, through the Treasury and/or the Federal Reserve, intend to do.  Rescue plans approved and signed, intended for one purpose, have already altered course, and are already not being used for “what we were told they were for”.

Recently more rumors circulated that mortgage rates would be driven down to 4.5% on the 30yr fixed in the next month or so.  This is our greatest desire -- to see much lower rates in the near term for homeowners.  Rumors last week and this week have driven rates down some, and we have locked many of you that were already in process, and those primarily with loans at $417,000 or less. 

Rates continue to remain unstable at this time.  Earlier this week LENDERS RAISED RATES AS MUCH AS 1/2% on fixed programs one morning without any economic reason.  Why?  Because of 2 reasons.  #1 - they took too many sudden locks.  Which led to #2 - they want to protect their portfolios of good loans which are still on their books and performing well.  They can't afford to lose those well-performing assets in this credit crisis! 

The Mortgage Backed Securities market (MBS) trading, not the 10-year Treasury bond as many reference, is what actually determines mortgage rates on conforming loan amounts up to $417,000 and "jumbo conforming" loan amounts up to $625,500 (in some counties).  Jumbo conforming loans, as they were called in 2008 following the first Mortgage Reform Act, HR 3915 passed in November 2007, provisioned for loan amounts up to $729,750 to be backed and bought by Fannie Mae and Freddie Mac in an attempt to get the frozen Jumbo loan secondary markets moving again.  This level will officially end on December 31, 2008.  Many lenders have pulled the plug on these already, some in late November and most of the rest in early December.  The 2009 'jumbo conforming' loans will be referred to as "2009 High Balance" conforming loans, and be capped up to $625,500, depending up each county as set by HUD, and aligns FHA, Fannie Mae and Freddie Mac's loan limits.

So, what does all this mean to you?  Do you wait or do you take the lower rates now?  Real Estate Values are becoming one of the major problems for refinancing at this time. Because values have not stabilized fully, and foreclosures have continued, today’s values are not guaranteed tomorrow. By waiting for even lower rates, many will lose the ability to refinance, solely because of the drop in values.  And much of it is not in their control.

I do NOT recommend chasing the market and waiting for lower rates in 6 months. If the rates really do come down further in a few months, and your home value holds at or above levels required, you will be able to refinance again, even if you take today’s rates.  That would be a win-win situation for you:  you get the low rates of today and are able to take advantage of even lower rates in 6 months.  So the bottom line is don’t let these opportunities slip by.  There are no guarantees that rates will fall for certain, especially with inflation pressures likely increasing next year and for years after from all the money being printed now.  You could completely miss out by waiting too long.

Many months ago a plan was put in place, already approved and signed by the President, to rescue housing and give a “blank check” to Fannie and Freddie for funding or purchasing home mortgages.  But it has not been implemented. You might remember the “blank check” talk circulating in the news at that time. Then more recently there was the “700 Billion Dollar Bailout Plan” that we were told would help buy troubled mortgages ("TARP") and do many other wonderful things for the credit crisis. Unfortunately, after it was passed, the plan, which really had no specific definition, has “CHANGED” and now the Treasury thinks it is not a viable option to buy troubled mortgages from banks. Therefore, we have a 700 Billion Plan, which now in actuality is “No Plan at all”.  Yet everybody now wants part of the 700 Billion: Automakers, cities, states and other businesses all would like the money that was designed for one thing but now may be used for something else as Mr. Paulson or the next administration see fit.

All of that basically leads to one thing: the only thing you can count on is that you cannot count on all of these programs fixing things right away.  And, you cannot count on all of the promises that you hear saying the “Plans and Programs” will work right away, because they have not been implemented as expected, or even as sold to congress (or to the public!).

Mortgage rates are very volatile and therefore unpredictable today because traditional economic factors are not working for forecasting rate direction as they have in the past. Lenders continue to “tighten” credit requirements, wanting higher credit scores and lower loan to values, or wanting borrowers to pay fees or higher rates for perceived 'increased risk'.  They're basically trying to make up for past mistakes in today's market.  Another reason not to wait is because should lenders continue tightening credit requirements, fewer people will qualify for the very best rates.  Eventually they will have to pay more to get the rates they want, or they can get blocked altogether by even tougher guidelines.

The 4.5% rate rumor from last week started with the National Association of Realtors' lobby, hoping to nudge government and homebuyers to get off the fence, and came from a meeting talking about saving housing. The Treasury has dampened the hopes that this is their immediate goal at this time. The reality is if rates were to fall 1% on mortgages overnight, many banks and lenders would be ruined due to the hedging vehicles in place, and the resulting damage from prudent short positions by large mortgage and bond investors.  However, if they rolled back the requirements for qualifying to 2007, save for the never-wise 'no equity and no income' loans, the housing slide would most likely stop and the stabilization process begin.  So it is in everyone’s best interest for mortgage rates to fall another 1% to 1.5%, but to do so safely and over a gradual timeframe.  The bottom line for today is that if we can get you a better program, such as 30 year fixed over an ARM or Interest-Only payment product, or lower your fixed rate, you should absolutely take it - NOW.  Waiting for lower rates could eliminate some borrowers' ability to refinance because of falling values and continually changing guidelines.

My purpose of posting this is to keep you aware of what is happening in the Mortgage Market at this time.  I have over 20 years experience in the lending industry and have watched many up and down cycles.  I was around during the run up in home values during the 70s, and 15%-18% mortgage rates of 1980-82.  I'll get you through these times safely.

If you have any interest in refinancing at this time, please email us, or start an application now on this site.  If you prefer, we can email you an application and assist you in pre-completing much of it by phone.  Please feel free to send a link to this post to any friends or family that may benefit from this information.  We're here to help!

Rick Geary

This week we honor the men and women of the armed forces who serve(d) to protect our freedom and liberties.  This Veterans' Day is particularly relevant in the wake of an historic General Election and continuing conflicts in Iraq and Afghanistan.  We thank all those who stand strong in service to our country, and we appreciate your sacrifices.

If you or a member of you family are a Veteran, please send a note to my Coordinator, David before noon this Thursday, November 13 at: drooney@emeryfinancial.com.  We'd like to mail a "thank you" to show our appreciation for their service.  Please include the name and address of the Veteran, branch of service and anything else you want to share about their story.  Thank you for all that you have done, and continue to do for this nation.