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Fudging Homebuyer Tax Credit
Some homebuyers are angling to claim the $8,000 tax credit even though they missed the deadline. To claim the credit, buyers had to sign contracts by April 30 and close the sales by June 30. But real estate agents say some buyers are demanding quick closing dates to meet the June 30 deadline, even though they failed to meet the April 30 deadline. And because the IRS doesn’t require paperwork specifically proving the contract date, they might get away with it. Claiming the credit does require more than sending in your taxes and asking for the money. Buyers have to fill out a special form and attach a copy of their settlement statement, which they receive at closing.
“People do have to submit documentation,” said an IRS spokesman. But, the settlement statement does not require the contract date — just the “date of purchase,” which is the closing date. “It’s just illegal,” said Tara-Nicholle Nelson, a real estate broker, attorney and an accredited buyer’s agent and a spokeswoman for Trulia, the real estate Website. “But if everyone in the transaction is colluding, it would be difficult to catch.” Along with the IRS, even the Treasury Inspector General is keeping quiet, despite releasing a report on Tuesday about other abuses of the homebuyer tax credit – including prisoners claiming the benefits. “Even if we did know about it, we probably wouldn’t comment,” an IG spokesman said.
U.S. Lawmakers arrive at New Finance Rules
Lawmakers early Friday finished melding the House and Senate Wall Street reform bills, bringing Congress closer to passing the most sweeping changes to the financial system since the New Deal. The new bill will redefine U.S. financial markets and firms. After many months of negotiations between House and Senate lawmakers, the White House, banks, brokerage firms and consumer groups came to an end as 43 lawmakers agreed to send to their respective chambers a final bill that aims to strengthen consumer protection, shine a light on complex financial products, create a new process for taking down giant, failing financial firms, and make them stronger to prevent such failure.
The breakthrough came after conference members reached compromises on controversial derivatives language; new limits on banks’ ability to invest in hedge funds and using their capital for trading; the contours of a new consumer protection agency; and the government’s ability to handle the failure of a large financial institution. A key part of the legislation is overhauling the way government officials assess and respond to systemic risks to the economy. The legislation would empower the Fed to supervise the large, most complex financial firms, and couples that with the creation of a Financial Stability
Oversight Council made up of federal financial regulators.
Fannie Mae gets tough on homeowners who walk away
The courts will now come to the mortgage giant’s plans to take on those who decide not to make their payments. It also will limit their access to future loans. Foreclosures continue at a rate of 2.5 million a year, Federal Deposit Insurance Corp. Chairwoman Sheila Bair said, and some 11 million households owe more on their mortgage than their home is worth. Taking aim at homeowners who are able to pay their mortgage but decide it’s not worth it, Fannie Mae plans to go after them in court and to limit their access to home loans for seven years. It was a clarion call to companies servicing its loans to recommend, engaging in a so-called deficiency judgment — a court order requiring a defaulting borrower to pay any remaining unpaid portion of the loan after a seized home is sold.
Under California state law, lenders who opt for court proceedings can obtain a deficiency judgment if the mortgage was used to refinance a home, but not if it was used to finance a purchase.
Fannie Mae also said it would make new mortgages harder to obtain for borrowers if it can be proved that they engaged in a “strategic default” — abandoning a home to foreclosure not because the required payments are unaffordable but because the mortgage is larger than the value of the residence. For such a borrower, Fannie said it would not buy or guarantee another home loan for seven years. Borrowers who are slightly underwater — owing just a little more than their homes are worth — are unlikely to stop paying their mortgages if they have the resources, according to studies by research firm CoreLogic. But if the home’s value is at least 25% less than the loan amount, borrowers are far more likely then to walk away. Last March, 31% of foreclosures were described as strategic by the borrowers themselves, compared with 22% in March 2009, researchers at the University of Chicago and Northwestern University reported.
Diana Olick – Fannie Mae: Walk Away and You Will Pay
“Dare I say it? “What took you so long??” An announcement from government-owned mortgage giant Fannie Mae warns: “Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.” I have to ask: Why only seven years? Up the ante! Look, I understand that a lot of folks are sitting on overwhelming bundles of negative equity in the form of four walls. A very credible argument can be made that a bad investment should not be a jail term. However, a lot of the housing crash was based on a fundamental change in attitudes toward home ownership, i.e. that a home is an investment before a dwelling.
The pendulum needs to shift back, not all the way, but more toward the traditional use of home: A place to live, not an A.T.M. “Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments,” notes the press release. I’m wondering why they haven’t been doing that all along? My guess is they simply don’t have the legal resources available to handle such a huge job…which brings me to my final thought: If the mortgage walk-away issue is big enough for Fannie Mae to get this tough, then why have Administration officials been telling me over and over that “it’s just not that big an issue.” Seriously, I’ve done several interviews over the past year, bringing it up over and over, and they just seem to want to sweep it under the rug. I guess the rug is getting a bit too bumpy.”
Nearly 1 Million lose jobless benefits
Nearly a million people have lost their unemployment benefits because the Senate failed for the third time Thursday to extend the deadline to file for this safety net. The Senate trimmed down the bill yet again on Wednesday night so that it would only increase the deficit by $33.3 billion over 10 years, instead of $55.1 billion. The main changes were to scale back additional Medicaid funding for the states and to reallocate some stimulus and Defense Department spending.
As the bill will be pulled, many groups will be left in a flux, including the jobless who have lost their safety net, companies who are waiting to learn what tax breaks are extended, and governors who were counting on the additional funds to balance their budgets. The grab-bag legislation pushes back the deadline to file for federal unemployment benefits until the end of November, renews expired tax provisions, lengthens a small business lending program and adds to infrastructure investments. More than a million people are expected to run out of benefits this month, according to the National Employment Law Project.
DSNews.com – 70% of Modifications in May Were Non-HAMP: Report
Mortgage servicers completed 112,088 loan modifications through their own proprietary programs in May, according to a report released this week by HOPE NOW. That compares to 47,724 new permanent modifications under the government’s Home Affordable Modification Program (HAMP) during the same month. Altogether, just over 159,000 mortgage modifications were completed in May, bringing the total number of mods for the year to 800,536, HOPE NOW’s data shows.
In addition, HOPE NOW says private-sector servicers completed 213,000 other workouts in May, such as repayment and forbearance plans. Faith Schwartz, senior advisor for HOPE NOW, said, “The latest results continue to support the industry’s unprecedented efforts to assist borrowers across the country using myriad foreclosure prevention programs.” However, Schwartz noted that 3.77 million borrowers are currently 60 or more days late on their mortgages. HOPE NOW’s data shows that foreclosure actions were started on 205,479 properties in May alone. Foreclosure sales during the month totaled 98,963. Mortgage servicers have apparently offered distressed borrowers more than 9.5 million total workout solutions, including more than 3.2 million loan modifications.
Now for our real estate education section…
Friday File – 15 Minute Resolution
Are you fully recognizing the full potential that real estate has to offer as an investment? Find out with this week’s 15 minute resolution. Take this quick quiz to see if you are missing one of the many ways to turn a tidy profit with real estate investments:
1. Fix and Flip. Short sales are great ways to make thousands or even tens of thousands of dollars in a very short period of time.
2. Buy and Hold. Now is one of the best times to purchase real estate rentals or as long term buy and hold investments; prices are low, interest rates at rock bottom and many new homes with extended lifespan are available.
3. Tax Liens & Certificates. Recognize returns of 10 to 18 percent without ever stepping foot on a property.
4. Be the Banker. Buying bank notes, owner financing, holding a full or partial note, reselling notes, factoring…there are many ways to “be the bank” without over-extending your personal resources.
5. Diversify. Even if you participate in each of the above, it might be time to take it to the next level by purchasing commercial properties, multi-family, raw land, developments or other forms of real estate such as agricultural, commodity or even international holdings.
6. Syndication. Not for the novice, syndication has long been used by many of the most savvy real estate investors in the industry.
7. Surplus Land Sales. One of the most overlooked yet lucrative ways for beginners to get started…not to be confused with tax liens or certificates.
So, how did you score? Are you using real estate to its fullest? If not, it’s time to get serious about your portfolio. Sign-up for a free daily newsletter or join one of our free webinars to learn how to maximize profits, minimize efforts and make the most out of all that real estate has to offer.
See you at the top!
Chris McLaughlin
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
400 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building
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