With the current state of our economy and housing market, many homeowners are still underwater and the stigma attached to foreclosure is steadily eroding as delinquencies are all too common forcing homeowners into strategic defaults.
A survey by the Pew Research Center found that 36% of Americans believe that it is ok to walk away from their mortgage (short sale or foreclosure) under certain circumstances.
They also found that 59% of Americans state that it is wrong to stop making their mortgage payments and return their homes to their lender, 19% feel it’s acceptable and 17% stated it depended on the circumstances.
This survey was close to the same results from CoreLogic which finds that 11,000,000 borrowers or 23% are underwater.
We have heard rumors that the Obama administration has discussed the possibility of getting rid of the Mortgage Interest Deduction (MID). “Say it ain’t so, Joe”.
According to the USA Today, the government spent about $80 billion last year to back up the mortgage interest deductions. One housing specialist says it wasn’t worth the money because the tax break only goes to the wealthy???? Does this sound familiar?
Home owners already pay 80 to 90 percent of the income tax in our country, and among those who claim the MID, almost two-thirds are middle-income earners.
The national taxpayers union tells us nearly 39 million people claimed the mortgage deduction. (Nearly 67% of Americans own homes).
For those in the $100,000 – $200,000 income range the MID claimed was almost $14,000; meaning the value of the write-off would be $3,500
For those making $75,000 – $100,000, the deduction was around $11,000; resulting in a savings of $2,800
For those making $50,000 – $75,000, the average deductions was around $10,000 with a savings of $2,500.00
Through the terms of 17 presidencies, the MID has brought remarkable stability to the housing market.
Fannie Mae “FNMA” took back 130,767 foreclosed properties in the 1st and 2nd quarters of 2010 and they were holding 129,310 single-family Real Estate Owned “REO” properties.
Fannie Mae with such a large inventory announced incentives to buyers and sellers of its REO properties.
On 9/22/10, the program announced a seller assistance incentive for properties listed on their REO website, HomePath.com. They are also expanding the initiative to offer additional incentives to real estate agents and brokers. Qualified owner-occupied homeowners can received up to 3.5% of the sales price which may be used towards the buyer’s closing costs including a home warranty. Buyer’s agents may also qualify to receive a $1500 bonus.
Eligible offers must be submitted on or after September 23, 2010 and must close by December 21, 2010. The maximum amount of days to close escrow is 60 days from acceptance of their offer.
As the recession lingers on workers are really feeling it in their pocket. Nearly eight-in- ten (77%) of workers in 2010 said they felt they lived paycheck to paycheck to make ends meet, up from 61% in 2009. One-in-five (22%) said they have missed payments on bills in the last year in a survey conducted by Career Builder between May and June, 2010.
Some workers are making ends meet by dipping into their long-terms savings. More than one-in-five (21%) say they have reduced their 401(k) contributions or savings to get by; while 33% state they do not participate in any programs such as 401(k), IRA or retirement plans. 30% also reported they don’t put any money aside into their savings each month while 28% set aside $100 or less for savings and 14% save less than $50.
As a result some workers said they have made changes to their living and spending habits as follows:
- Cut back on leisure activities – 54%
- Used coupons or shopped at discount stores – 48%
- Drove less to save on gas – 37%
- Cancelled cable and other subscriptions – 12%
- Used public transportation – 5%
This survey found that six-in-ten felt that the recession has made them more fiscally responsible.
There is a new bill introduced in the U.S. House which would give lenders a 45 day deadline to respond to short sale requests to the borrower.
This is a bipartisan bill (H.R. 6133) – Prompt Decision for Qualification of Short Sale Act of 2010 which is sponsored by Reps. Robert Andrews (D-New Jersey) and Tom Rooney (R-Florida).
The length of time it has been taking lenders to process the short sales has caused buyer’s to walk away. Many lenders are taking from 90 days to several months without a decision made on the short sale. The following states have the highest number of short sales: California – 28%, Nevada 32%, Arizona 24%, and Florida 27%.
Realtors across the country strongly support this bill and are urging Congress to pass the legislation quickly. The National Association “NAR” of Realtor President Vicki Cox believes that quicker attention to the short sales process is vital to help homeowners who are underwater and their communities, as well as the nation’s economy.
Nearly 31,000 borrowers with Fannie Mae (FNMA) and Freddie Mac (FMCC) loans forfeited their homes through a short sale or deed-in-lieu of foreclosure during the 2nd quarter of 2010. This is a 27% increase over the 24,000 transactions completed during the 1st quarter of 2010.
During the same period last year there were 11,700 transactions up from 3,000 the year before.
Federal Housing Finance Agency (FHFA) also reported that loan modification and refinancing by FNMA and FMCC were up in the second quarter. The Home Affordable Modification Program (HAMP) increased 65% while refinancing under the Home Affordable Refinance Program (HARP) increased by 30%. Loan servicers completed 171,200 permanent loan modifications on these types of loans thru HAMP and nearly 88,600 borrowers in HAMP trials transitioned to permanent modifications bringing the two companies HAMP numbers to nearly 225,000. FHFA’s report also stated that approximately 202,000 of the borrowers were in a HAMP trial period at the end of the 2nd quarter, compared to nearly 448,100 at the end of the first quarter. That means minus the 88,600 permanent modifications 157,500 homeowners’ HAMP trials were cancelled as a result of missed payments or inadequate documentation.
FHFA also noted that more than ½ of the modifications completed in the 2nd quarter lowered borrowers’ monthly payments by more then 30%. During this same period the two companies initiated 275,100 new foreclosures, an increase of 12%. Completed foreclosure sales and 3rd party sales totaled 112,400, up 15% from the previous quarter.
If you have found yourself falling behind in your mortgage and debt obligations, you aren’t alone. With the loss of jobs and declining home values and the current economy, homeowners like you are forced to consider options that were unthinkable a few years ago.
The US Department of Housing and Urban Development (HUD) has established a hotline to assist homeowners who are facing a hardship. You can contact HUD at their toll free number 1-877-483-1515 to find out what options are available to you:
1) Loan Modification
2) Short Sale
3) Foreclosure
To learn more about the tax consequences of a short sale versus a foreclosure, you can visit the IRS web site at www.irs.gov. Before executing any of these options, consult with a certified public accountant or tax attorney.
Governor Schwarzenegger has instituted a statewide, 90-day halt on foreclosure proceedings for each owner-occupied home subject to a first mortgage on which a Notice of Default has already been file.
If you haven’t done so, now is the time for your annual home maintenance.
Air Conditioning Filter Change – Replace Filters Monthly to improve energy costs and air quality.
Air Conditioner Inspection – Have you’re a/C inspected by a licensed HVAC mechanic to ensure top efficiency. Don’t wait until it reaches over 100° and your system isn’t working.
Roof Insulation & Ventilation – Property insulated and ventilated attics reduce heating and cooling costs. Make sure attic, vents and soffit are running, open and clear of debris.
Gutters – Clean debris out of gutters; repair any loose or leaking gutters which cause water damage to soffits.
Grout & Caulking: Check grout around sink, tubs, showers, windows and doors. Replace if damaged to protect material behind the walls from water damage and mold growth.
Dryer Vents – Clean out your dryer vent from lint accumulation. Built up lint can keep dryers from running efficiently, drives up energy costs and can cause fires.
The U.S. Treasury released statistics the end of July, 2010 for the Home Affordable Modification Program (HAMP) program. The statistics showed that loans that have been permanently modified had a re-default rate to be around 2% – 5.9% 60 or more days past due after modification and 1.7% 90 or more days delinquent. When those statistics came out, they received a huge outcry from analysts questioning the validity of these statistics.
The Treasury pulled the numbers and re-evaluated the statistics after retaining a third-party consultant to provide independent validation. A few weeks later, they corrected the re-default assessments as follows: 10% of six month old permanent modifications are 60+ days delinquent and 6% are 90+ days delinquent.
Analysts say that’s still too low and the rates will surely go higher the longer the program is in place. Up until six months ago, permanent modifications had been offered to only about 434,716 borrowers. The Treasury has cancelled the temporary modifications of 616,839 borrowers.
The analysts at Barclays are predicting a 60% re-default rate and Fitch Ratings projects 55-75%.
http://www.dsnews.com/articles/print-view/treasury-corrects-its-math-for-hamp-redefaults-2010-08-12
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