Senators Push to Increase Home Purchase Tax Incentive to $15,000
margerybrown | 14 June, 2009 16:25
Senator Johnny Isakson-Georgia Republican, introduced a bill that would increase the tax credit to $15,000 and remove other restrictions on who can qualify.
The legislation Co-sponsored by Senator Christopher Dodd, would extend the homebuyer credit to multifamily properties used as the borrower’s primary residence. It would also remove income caps of $75,000 and $150,000 on individuals and couples seeking to claim the credit.
The bill would extend the tax credit, which now applies to homes purchased from Jan. 1 to Dec. 1, 2009, to one year after the new measure is signed into law, according to Watson. Isakson’s bill would make the credit available to all borrowers, not only borrowers who haven’t owned a home in the previous three years as is the case under current law. It would also let borrowers divide the credit over two years. The legislation wouldn’t be applied retroactively to purchases completed before the date of enactment, Watson said.
The bill is co-sponsored by Republican Senators Lamar Alexander of Tennessee, Saxby Chambliss of Georgia, David Vitter of Louisiana, James Risch of Idaho, Lisa Murkowski of Alaska, John Ensign of Nevada and Jim Bunning of Kentucky. Senator Joseph Lieberman, a Connecticut independent, has also signed on to the bill, according to the statement.
North Carolina: Citizen South Bank Uses TARP for Buydowns
margerybrown | 07 February, 2009 18:28
Citizen South Bank in North Carolina has wisely decided to use $20.5 million received from TARP to offer a rate "buydown" program for home purchasers. Story.
The program will be a 30 year fixed loan program bought down for two years to a rate of 3.5%. After two years the rate will adjust upwards to 5.5%. This type of loan is called a temporary mortgage rate buydown. Read more about buydowns here.
Temporary buydowns are a terrific program and an excellent use of TARP funds. This program, as long as CSB commits to it and doesn't attach too many strings should be a boom to the bank. The market is hungry for just such a program and many of the bloggers at this website have been calling for this type of incentive for months.
I commend their efforts and wise use of TARP funds to stimulate the local housing market. I only hope that more banks will follow suit. Hopefully coming to a town near you!
Banks Not Passing Mortgage Rate Savings To Consumers
margerybrown | 12 January, 2009 18:23
The Fed started to buy Mortgage Backed Securities approximately two weeks ago, yet consumers have not started to feel the full effect. These are your tax dollars that the Fed is using to purchase Mortgage Securities for the specific purpose of freeing up the mortgage market and decreasing mortgage rates. Most of the experts on this site have been calling for more direct effort on behalf of mortgage borrowers and NEW home buyers, and still consumers are being treated with contempt. IT'S A SENTIMENT THAT ESSENTIALLY IMPLIES THAT THE AMERICAN PUBLIC IS STUPID. are you, am I?
A plausable rumor continuing to echo around the mortgage water cooler is that the big banks ( Chase, Bank America, Wells and Citi ) are using the improved credit spreads and the increased demand for refinances to quickly pump up their profits. The big banks set the tempo and the smaller regional banks follow suit. Not sure how you feel about this perspective but it upsets me to no end. We as consumers have a short window of opportunity to take advantage of low rates to improve our balance sheets and the banks find a way to suck all the air of hope out of the room.
These banks have taken all the money that our mutual fund and retirement dollars can give through the stock market, they've taken hundreds of billions of taxpayer bailout dollars, and now they hord the increased profit from mortgage rate spreads that are a direct result of taxpayer sponsorship visavie the Fed.
My nerves are raw by what I continue to hear and see.
TARP Money To China
margerybrown | 19 December, 2008 09:18
Many of America's subprime mortgage backed security pools were also "insured" by what were called Credit Default Swaps. Learn more about this financial product at: CDS blog or Google Credit Default Swap.
In order to sell these high risk, essentially junk mortgage pools, Lehman, Bear, Citi, B of A, Chase, Wells, Goldman, AIG chose to offer with or sell an "insurance" policy on these bundles. It's like selling a used car to someone and simultaneously offering a warranty to cover the cars longevity. Well, the car broke down in a bad way and now the dealer ( banks ) have to pay up on the warranty. The problem is that the dealer ( bank ) didn't put enough money in reserve for these occurences. The reason these investment banks called them SWAPs was specifically so they could avoid reserve requirements hence leveraging to criminal levels.
Christopher Cox see bio, another failed Bush appointee and chief regulator in charge of the Securities and Exchange Commission allowed over 60 trillion in SWAPs to originate without any oversight. Christopher Cox and the SEC also completely missed the warning signals for the 50 billion dollar MADOFF scandal.
Back to Where our TARP/tax money is now going. Starting in 2008, the obligation on the CDS's started coming due because these pools turned sour quickly and the banks didn't have the money to pay. Now the Federal government and taxpayer must fund the banking industry's CDS obligations. $62 trillion in CDS's were issued between 2004 and 2007- 30 times the U.S. Federal budget. Your tax dollars are being paid out to foreign investors but it is also indirectly going to the executives that caused these problems. The government has not put one person in jail or issued a required clawback for executive compensation.
Paulson hasn't been forthcoming about where the money is being allocated for the TARP because Americans would and should be completely enraged. You only have to dig a little to figure all this out. Many of the big banks issued credit default swaps on the mortgages Asian and European countries purchased.
Many of these pools were purchased by China along with other foreign investors. If the CDS's were not honored the U.S. would see (did see) a drying up of foreign investment in the U.S. which may have or would likely have spelled doom for our economy because or our reliance on foreign credit.
The verdict is still out on the long term resulting effect on our economy. Remember, our country didn't go into a full depression until two years after the stock market crash of 1929.
Interest Only Loans Are For High IQ Borrowers
margerybrown | 11 December, 2008 10:08
Interest only mortgage loans are a great loan program but they've gotten a bad reputation in that they have allowed tens of thousands of home buyers to afford a home when they otherwise could not have. As is often the case people have denied the realities or neglected the downside to these alternative finance loans.
In all paperwork and discussions, the loan should clearly be called an interest only loan. If it has been, or is presented to you as a true fixed or full amortizing loan then there is low level fraud taking place. Though IO loans can be fully amortizing and should be clearly labeled as such on the payment coupon, some lenders will send borrowers the payment coupon with only the IO payment amount printed. The naive borrower, after six months, forgets it's an IO loan and thinks they are making principle and interest payments. Whoa!
At a conference, a loan officer was describing how a real estate agent wanted a particular home buyer's disclosures to read solely the "interest only" payment (legal as of this writing). The agent was adamant about not clearly disclosing the full principle and interest payment, thinking that if the buyer knew the full payment, the buyer would realize they couldn't afford the property. The loan officer was threatened that if he didn't do as told, he would be blackballed. There are good and bad Realtors, there are good and bad Loan Agents. I will always say that birds of a feather flock together. Encourage ethical business practices.
Interest only loans seem harmless, and they are if the interest only payment is used sparingly. If you are a roofer and your business dips in the winter, then you have good reason to pay the interest only payment. If you are always paying the interest only portion, you are cheating yourself.
Let's take a quick look at how interest only loan programs work: IO loans will typically recast at a designated period. If you have obtained a 30 year loan with an interest only period of 10 years, at the 10 year mark the full principle amount STILL owed will recast to a 20 year loan. What do you think will happen to your payment then? If that's not bad enough, some of the IO loans are also adjustable rate loans. They not only recast, but recast with a then current market rate. Double whoa!
I'm not telling you to steer away from interest only loans, I like them. I like them only if the borrower is mature enough to TRULY understand the downsides. Full disclosure works if borrowers are able to handle the truth! Some borrowers, if you tell them the facts, think that you are saying something ugly. Some borrowers love you for it. Be the latter.
Ready, Set, BUY Before The Deals Go BYE.
margerybrown | 24 November, 2008 18:27
New home purchase loans can be arranged in several ways. We’ll talk about those here. Let’s look at the New Home shopping experience a bit before discussing real estate loans.
Often, home buyers will take weekends in order to tour open houses, looking through the various properties on the market. Home shoppers can view homes that are pre-existing or homes which are newly constructed.
If a home shopper is working with a Realtor, which we recommend as long as the Realtor works hard and is extremely ethical, the home buyer should take the Realtor with them during the initial viewings of builder's models.
Most builders will attempt to lock-out Realtors and outside lenders, if the home buyer is not savvy enough to register their agent with the builder on the first visit to the builder's site. The lack of ethics cuts both ways: Many Realtors haven’t earned the right to represent the home buyers in the transaction by educating the home buyer. If the buyer signs away outside representation, they are on their own.
Once a buyer has forgone their right to use a Realtor when dealing with a home builder, the home builder is now in essence both the buyer's representative and the Builders representative. Sound like a conflict? You Bet. I’ve seen home buyers get beaten up bad on fees, terms, add-ons and closing procedures because of this type of arrangement.
The home buyers will now be forced to use the builder's contract and often can’t understand the minor details within these contracts. The builder will also stipulate within the contract that the home buyer must use the builder's lender for the real estate loan.
In recent years lenders like "Cwide" and "stagecoach" have used their investment capital and relationship muscle to arrange joint ventures with these builders. These and other large lenders typically form third party corporations with builders that have a stake in the lending side of the business. Home buyers come in to the builder for a home and are then forced into a loan, both of which are large profit centers for the builder. It's a good business model- unfortuntly the way it's handled today is completely unethical, and if our government agencies weren't such dumbgods, it would probably be tagged as illegal too.
The process would not be so bad if the rates and terms on these new home purchase loans were favorable or even market competitive. But often these loans are loaded with so many extra fee's to compensate both the lender and builder, that they are priced $1000's over what the home buyer would have gotten if they used an independent competitive lender. I recently saw a loan quote by "KayBee" Home builders, working with "Countywide" Mortgage that was $13,000 over an independent lenders fee quote.
My recommendation is for home buyers to consult independent competing sources for needed service. Stop by if you're ever in Atlanta. I'll buy you a cup of coffee and get you a couple of hundred thousand dollars.
Marj Brown The Southern Source
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Marj Brown.
Mortgage Planner
AMG Atlanta. (678) 775-6818
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