Mortgage Relief Expanded

Obama expands mortgage modification effort
By Tami Luhby, senior writer March 26, 2010: 3:44 PM ET


NEW YORK (CNNMoney..com) -- Under fire to do more to stop the foreclosure crisis, the Obama administration announced new mortgage modification steps on Friday to help the unemployed and those who are "underwater" with a bigger loan than their home is worth.

The centerpiece of the expanded program addresses the steep decline in property values by requiring banks to consider reducing loan balances, a move a growing chorus of experts say is essential to righting the housing market. Banks, however, have been very reluctant.

Also, lenders will now be required to temporarily reduce -- or even suspend -- payments for eligible unemployed borrowers. The forbearance assistance would last up to six months, after which the borrower would be evaluated for a loan modification.
The expansion of the president's signature $75 billion loan modification program will begin in the fall and be paid for with money from the Troubled Asset Relief Program.

Expanding assistance
Principal reduction: The new initiative encourages servicers to reduce loan principal for delinquent borrowers when that is more advantageous to mortgage investors than reducing interest rates.

While lowering balances would remain optional, many servicers are required by contract to do what is in the investor's best financial interest.

Servicers and second-lien holders would receive financial incentives to write down principal.
Principal reduction would be available for HAMP-eligible borrowers who owe more than 115% of their home's current value. The balance would be forgiven as long as the homeowner makes timely payments for three years.

FHA refinance: Some borrowers who are current on their mortgages but have seen their property values drop could refinance into Federal Housing Administration loans worth no more than 97...75% of their home's price. If the borrower has a second lien, the total mortgage debt could not exceed 115% of the property's value.

Homeowners, however, must meet FHA's qualifications and have a credit score of at least 500. Their new monthly payments would be no more than 31% of their monthly income.

Some $14 billion has set aside to provide incentives to encourage servicers and second lien holders to participate in the FHA program.

The unemployed: Servicers would be required to offer forbearance plans to all qualified jobless borrowers for at least three and as long as six months. Under the plan, the unemployed could see their monthly payments reduced to 31% of income or less -- or even suspended entirely.

Borrowers must meet HAMP eligibility requirements as well as submit evidence that they are receiving unemployment benefits. They must also be in their first 90 days of delinquency.

After the assistance period ends, homeowners would be evaluated for a loan modification or foreclosure alternatives, such as short sales, in which a bank agrees to sell the property for less than what is owed.

An administration official declined to comment whether interest or fees would be charged during the forbearance period.

Separately, the government will double the incentive to servicers to complete a HAMP modification, to $2,000, and provide more funds to second-lien holders that release borrowers from their debt. It will also double relocation assistance to borrowers who cannot afford to stay in their homes to $3,000.

While banks have steadfastly avoided reducing mortgage principal, Bank of America has taken the first tentative step to cutting balances. It announced Wednesday it would lower the mortgage principal of a limited number of borrowers if they remained current for five years.

The new Obama administration initiative follows a smaller effort announced last month that would provide $1.5 billion to housing finance agencies in five states to develop programs to assist the unemployed and underwater.

Reducing loan balances, however, is very controversial. Some experts fear the benefit will go to those who don't truly need or deserve it, the so-called "moral hazard" argument. And it's likely to anger those who continue to make timely mortgage payments every month.

Faltering loan modifications
The expansion of the president's loan modification effort comes on the heels of two blistering government watchdog reports, which slammed the administration for poor implementation of the program, and raised doubts that it would reach the initial goal of helping 3 to 4 million troubled borrowers stay in their homes.

The program, which calls for reducing borrowers' monthly payments to 31% of their pre-tax income, has led to only about 170,000 long-term modifications so far.

The low figure has prompted consumer advocates and industry experts to call the program -- which focuses on adjusting interest rates and loan terms to bring monthly payments to affordable levels -- a failure.

Meanwhile, the nation is sinking deeper into the mortgage crisis. The share of seriously delinquent loans in the fourth quarter jumped 21% over the previous quarter, regulators said Thursday.

Maximize your Tax Returns

You’ve heard it before: Your home is probably the biggest investment you’ll ever make. It’s also probably the biggest tax write-off you’ll ever have. Follow these tax tips for homeowners to ensure that you receive all of the tax deductions and tax credits to which you’re entitled for the 2009 tax year.

Home-related tax deductions, from mortgage interest to real estate taxes, can add up. If you’re married filing jointly with taxable income of $100,000, an extra $5,000 in deductions would lower your tax bill by $1,250. Tax credits, for such things as energy efficiency and homebuying, are even more valuable because they increase your refund (or decrease what you owe) dollar for dollar.


Give yourself a day to organize paperwork and fill out tax forms. Need help? IRS Publication 17, “Your Federal Income Tax,” has the answer to just about any question you can think of, and it’s free. Basic tax software starts at $29.95, and H&R Block charges $187, on average, to prepare a tax return. Full-service accountants charge more, depending on the complexity of a return.

Tax deductions for non-itemizing homeowners
The last thing taxpayers want to hear is that the IRS has come out with yet another form. But this time the news is good, especially for homeowners. The new Schedule L allows homeowners who don’t use Schedule A to itemize returns to deduct real estate taxes and certain disaster-related losses. Only about one-third of filers itemize, according to the IRS.

Non-itemizers are usually entitled to a standard deduction, which for 2009 is $11,400 for married couples filing jointly ($5,700 for singles). Schedule L allows homeowners to increase the standard deduction by as much as $1,000 ($500 for singles and married filing separately) to account for any state or local real estate taxes paid during the year.

Losses from federally declared disasters can also be added to the standard deduction. First, affected homeowners need to complete Form 4684 to determine the amount of the net disaster loss. Then, the amount of the loss needs to be reported on Schedule L to determine the new standard deduction. Only losses from official federally declared disasters, as opposed to ordinary casualty losses suffered during non-declared disasters, can be added to the standard deduction.

Mortgage-related deductions
Generally, the interest you pay on the mortgage for your main home and a second home is tax deductible. To qualify for the mortgage interest deduction, the loan must be secured by a qualified home, and you must itemize your tax return. Even a house trailer or boat can count as a qualified home, as long as there are sleeping, cooking, and toilet facilities.

The interest you pay on second mortgages, home equity loans, and home equity lines of credit (HELOCs) can also be deducted. Generally, you can deduct the interest on up to $1 million—$500,000 if you’re married filing separately—in home loans used to buy, build, or improve a home. If a home loan was used for other purposes, such as buying a car or paying tuition, you can only deduct interest on the first $100,000 ($50,000 for married filing separately). Read IRS Publication 936.

“Points,” certain fees paid to a lender to obtain a home loan, might be deductible too. The general rule for points that you pay on refinanced loans is that those points aren’t deductible in full immediately, but are spread across the life of the new loan. In limited circumstances, if you pay the full amount of those points at the refinancing closing, you might be able to deduct the points in full immediately. The mortgage insurance premiums you pay on loans issued or refinanced after 2006 also can be deducted, though income limits apply.

Energy-efficiency tax credits
Home improvements made during 2009 aimed at lowering your energy bills could lower your tax bill as well. Uncle Sam is offering energy-efficiency tax credits equal to 30% of the cost of qualifying projects. Claim your residential energy tax credits on IRS Form 5695.

The tax credit for some energy-efficiency improvements, such as new windows and insulation, is capped at $1,500. More ambitious projects, such as solar panels and geothermal heat pumps, have no upper limit on the amount of the credit. Restrictions apply to both capped and uncapped credits—second homes may or may not qualify, and labor costs are excluded in some cases—so be sure to familiarize yourself with the energy tax credit rules.

Homebuyer tax credits
If you bought a home in 2009, you might be eligible for a homebuyer tax credit. First-time buyers who made a purchase between Jan. 1 and Nov. 6, 2009, can get a tax credit worth up to $8,000. Income restrictions apply. Purchases made after Nov. 6 2009 and before June 30th 2010 are subject to more generous income limits as well as an $800,000 cap on home prices. A first-time buyer is defined as someone who didn’t own a home for three years prior to purchase.

The tax credit isn’t limited to first-time buyers. Longtime homeowners who’ve lived in their principal residences for five consecutive years out of the last eight can qualify too. This tax credit, worth up to $6,500, is good on home purchases made after Nov. 6. There are income and price restrictions.

Claim your homebuyer tax credits on IRS Form 5405. Because the IRS requires additional paperwork to verify the home purchase, you can’t file electronically. The homebuyer tax credits were extended into 2010. A signed contract needs to be in place by April 30, and settlement needs to occur before July 1. Credits earned in 2010 can be taken on 2009 or 2010 returns.

This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

Mike DeSenne is Online Managing Editor for taxes, finances, and insurance at HouseLogic.com, and the former Executive Editor of SmartMoney.com.

A little can go a long way...

10 Big-Impact,Low-Cost Remodeling Projects
(Article Courtesy of Realtor Magazine)


If you have some room in your budget -but not unlimited— were do you spend your cash for upgrades? Here are budget-minded enhancements to make your home stand out.



1. Tidy up kitchen cabinets.

"Potential buyers do open kitchen cabinets and look inside," says Morrissey. "Home owners can add rollout organizing trays so when buyers peek in, they feel like there’s lots of room for their stuff."


2. Add or replace tile.

"By retiling very inexpensively, you make a room look way cleaner that it was," says Javier Zuluaga, owner of Home Repairs and Remodeling LLC in Tempe, Ariz. "Every city has stores that offer $1 to $2 tile, so home owners have to pay only for the low-cost tile and labor to replace a dated backsplash or add a new one. We also use inexpensive tile to upgrade bathrooms."


3. Add a breakfast bar.

When a wall separates a kitchen from a family room, suggest cutting out an opening to create a breakfast bar. "In one home, there was a cutout in the wall between the kitchen and living room," explains Matthew Quinn, a sales associate at Quinn’s Realty & Estate Services in Falls Church, Va., who handles estate and real estate sales for family members whose loved ones have passed away. "We left the structure of the cutout, added an oversized granite breakfast bar, and put chairs in front of it. That cost about $600."



4. Install granite tile instead of a slab.

"Everybody is hot for granite kitchen countertops, but that can be a $5,000 upgrade," says John Wilder, a general contractor and owner of Fence and Deck Doctor in New Castle, Ind. "Instead, home owners can put in 12-inch granite tiles for about $300 in materials and get very high impact for little money."


5. Freshen up a bathroom without retiling.

"With a dated bathroom, I recommend putting in a new medicine cabinet for $100 to $150, light fixtures for about $100, a faucet for $50 to $75, and a vanity for $200 to $300," says Wilder. "And instead of replacing the tile, the existing grout can be lightly scraped and regrouted, which leaves a haze that can be buffed out and will make the tile look brand new. Also install glass shower doors. A French door adds a lot of panache and elegance for $250, and people will notice the door, not the tile. With all that, you’ve done a bathroom remodel for $1,000 to $2,000."


6. Freshen up the basement.

"If home owners have cement block or poured concrete walls in the basement, suggest they have a contractor fill in cracks with hydraulic cement and then paint with waterproofing paint," recommends Wilder. "They can then add a top coat to add color. They can also paint the basement floor with a good floor paint, which spiffs it up. The basement may not be finished, but it’s no longer a damp dungeon."


7. Add a room.

Look for large spaces that can be enclosed to create a new bedroom for just the price of creating a wall. "One time, we closed off a half-wall to an office and added a door to the other side of the room, thus creating another bedroom," says Quinn. "That $400 procedure, which took a contractor one day, netted about $40,000 in the sales price." Zuluaga has also added bedrooms inexpensively. "In a two-bedroom house, there was an archway that led to a third room that was used as a den," he explains. "It had a dry bar where there would have been a closet, so we took out the dry bar and created a closet so the owners had a third bedroom."


8. Spruce up cabinet fronts.

Suggest home owners update tired-looking kitchen cabinets. Reconditioning is the least expensive move for under $1,000. "If the wood is starting to look shabby from use or contaminants in the air, we take out the nicks and scratches, recondition it with oil, and put new hardware on," explains Heidi Morrissey, vice president of marketing and sales at Kitchen Tune-Up in Aberdeen, S.D. For $1,500 to $4,000, owners can replace the cabinet doors and drawer fronts, and for $4,000 to $12,000, they can have all the cabinets refaced. "With refacing, owners can change the color of the cabinets by replacing the door and having a new skin put on the boxes," says Morrissey. "If they have oak cabinets today, they can have cherry the next day."


9. Replace light fixtures.

"In a foyer and in bathrooms and kitchens," says Wilder, "replacing overhead light fixtures provides a lot of pop for a little money." If the kitchen has track lighting, Zuluaga suggests the home owner spend $450 to $600 to have an electrician replace it with recessed canned lights on a dimmer switch to add ambience. For about $700, Zuluaga also suggests installing pendant lights over a kitchen island or peninsula.


10. Tech-up the garage.

"Sometimes we replace the garage door opener with a remote touchpad entry system," says Zuluaga. "That costs about $425 and makes it look like a high-end system."


G.M. Filisko is a freelance writer for REALTOR® magazine. You can contact magazine staff at narpubs@realtors.org.

Don't sell yourself short!

I wanted to highlight an article which represents a huge problem that still exists in the lending industry and taxpayers need to realize what is really going on in the private and public sectors of finance.

Robert G Hertzog
Is The FDIC Killing Short Sales?

IndyMac Bank (now OneWest Bank), is holding one of my clients hostage, demanding a $75k promissory note, or they will proceed to foreclosure. For the life of me, I couldn't figure out why they were doing this. The BPO came in at the contract price of $275k, with a net to IndyMac of $241k.

What advantage could there possibly be for them to proceed to foreclosure?

Yesterday, I figured it out. You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009. Guess who the investors are behind OneWest? George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire).

Now, listen to the deal they got from the FDIC....

They purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts). They purchased all current HELOCS at 58% of Par Value!!!

Next, the FDIC stepped in and guaranteed the following: For any residential mortgages where OneWest experiences a loss, the FDIC will cover anywhere from 80%-95%of the loss (for OneWest not for you the original owner/taxpayer). The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan. Let's use a real clients situation as an example:

Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200

OneWest pays $334,600 for the loan

We have an all cash offer of $241,000, net to OneWest.

So, let's do the math, shall we? The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer. In this case, $485,200-$241,000, or $244,200. Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called "net loss". So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).

Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360. Remember, OneWest paid $334,600 for the loan. So, OneWest puts $101,760 in their pocket, thanks to the FDIC. Folks, that is over $100k of our hard-earned tax dollars!

So, you ask...Why does this program hurt short sales? Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure? And we wonder why nobody can get a Loan Modification? Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? And, to add injury to insult, they have held this loan for 6 months! Not a bad ROI, huh?

What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE! Imagine if they could make $100k, then get a deficiency judgement! Talk about making some big bucks!


The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc.

This entire agreement between the FDIC and OneWest can be found here, on the FDIC website. It's all there, for the world to see! They have it all layed out. All of the formulas, worksheets, etc.

Now, it's up to us to bring it to the attention of our elected officials and the media. Enough is Enough!

Wait, it gets better...The FDIC just announced that it needs to start borrowing money from the U.S. Treasure in order to replenish it's deposit insurance fund (the same fund being used to pay all of these banks in the Loss Share Agreements).

Additional Article -

http://mandelman.ml-implode.com/2009/09/liberal-billionaire-george-soros%e2%80%a6-major-shareholder-in-indymacone-west-bank/