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REALTORS® want to ensure the nation’s 75 million homeowners continue to receive the mortgage interest deduction as it is today. It’s a very important benefit for all homeowners, especially the middle class homeowners. On Wednesday, the California Association of REALTORS® placed an open letter advertisement in California’s six largest daily newspapers, calling on President Obama and Congress to preserve the mortgage interest deduction in its entirety during their “fiscal cliff” discussions.
The letter was placed in a full-page ad in the Los Angeles Times, San Francisco Chronicle, San Jose Mercury News, Sacramento Bee, U-T San Diego, and the Orange County Register, and states any proposal that eliminates or attempts to alter in any way the mortgage interest deduction undermines a century-old commitment to the American Dream of homeownership.
The letter also asks the public to visit www.KeepTheMID.com to learn how they can contact their Member of Congress and ask them to protect the mortgage interest deduction. View the open letter.
The Silicon Valley Association of REALTORS® is asking the public to call their Member of Congress directly and urge them to preserve the mortgage interest deduction (MID).
Congress, as part of negotiations on avoiding the “fiscal cliff,” has made direct references to “closing loopholes” and “limiting deductions” as a way to raise revenues. Clearly, the MID is high on this list of revenue raisers. Losing the MID will disproportionately affect the middle class because a larger proportion of the middle class takes the deduction.
The MID benefits primarily middle- and lower-income families. According to the IRS, more than 70 percent of the mortgage interest payments claimed as deductions is on returns filed by people with incomes between $60,000 to $200,000. Only about 1.4 percent of the total is claimed by taxpayers earning $1 million or more.
In California, 89 percent of those who took the MID earned less than $200,000. Losing the deduction would cost the average California taxpayer over $3,900.
Congress may decide to reduce or limit the MID at any time, which is why it is vital that you call your Member of Congress TODAY and ask that they preserve the mortgage interest deduction. Limiting the MID impacts ALL homeowners, not just those who take the deduction, by decreasing the value of all housing. The MID facilitates homeownership by reducing the carrying costs of owning a home. This makes a real difference to hardworking families. Homeowners already pay 80 to 90 percent of U.S. federal income tax, and this share could rise to 95 percent if the MID is eliminated.
REALTORS® urge all homeowners, including family, friends, colleagues and clients to get involved by calling Congress and ask that the MID be preserved. The public may reach Congress by calling 202-224-3121 Monday-Friday, from 9 a.m. – 6 p.m., Eastern time. The Capitol switchboard operator will help callers identify their member of Congress and connect them.
The National Association of REALTORS® (NAR) is urging REALTORS® to contact their representatives in Congress and tell them to extend the Mortgage Forgiveness Tax Relief. The Silicon Valley Association of REALTORS® (SILVAR) is asking its members to answer NAR’s Call for Action because it is crucial to the continuation of a housing recovery that Congress extend this tax relief to distressed homeowners.
If Congress does not extend the Mortgage Forgiveness Debt Relief Act of 2007 by the end of this year, homeowners will have to pay income tax on the portion of their mortgage that is forgiven in a foreclosure, short sale or principal reduction. Homeowners should not be forced to pay a tax on money they have already lost with cash they never received.
Despite many positive signs of recovery, the U.S. real estate market is still fragile. Over a quarter of all transactions still involve distressed properties. Without an extension, families engaged in loan modifications, short sales, or foreclosures will face a big tax bill, according to NAR.
The Issue Brief about the Mortgage Cancellation Tax Relief NAR has produced will provide more information on why it is important for Congress to extend the tax relief as soon as possible.
California REALTORS® this week strongly objected to the bulk foreclosure sale program and called for a change of leadership at the Federal Housing Finance Agency (FHFA), the agency which initiated the pilot program and oversees mortgage giants Fannie Mae and Freddie Mac.
The California Association of REALTORS® (C.A.R.) released a statement on Monday objecting to the recent REO bulk sale transaction between Fannie Mae, the FHFA and Colony Capital. Colony Capital, a Santa Monica real estate investment company, has purchased 970 foreclosed homes in California, Arizona and Nevada at auction from Fannie Mae for $176 million.
C.A.R. president LeFrancis Arnold called the recent purchase of California properties “another gift to Wall Street at the expense of taxpayers.”
According to the C.A.R. statement, “The implementation of the ill-conceived program highlights the failure of FHFA to appropriately address this issue despite C.A.R. and others outlining alternatives. The botched execution of the REO bulk sales, and Home Affordable Foreclosure Alternatives (HAFA) and Home Affordable Refinance Program (HARP) under FHFA’s oversight and leadership has demonstrated a lack of understanding of the housing market. Given these and other missteps, C.A.R. believes it is time for a change in leadership at the FHFA.”
The bulk foreclosure sale is a pilot program of the FHFA intended to help clear the large numbers of foreclosed homes on the books of Fannie Mae and Freddie Mac. The National Association of REALTORS® has objected to the program. California and Florida REALTORS® have also deemed the program unnecessary since housing inventory in their markets is now at an all-time low, prices are rising, and demand for homes is up.
C.A.R. data indicates the median home price in the Inland Empire is up 15 percent from $172,000 in February 2012 to $198,270 in September, and unsold inventory is down from 5.3 months to 3.8 months during the same period. The median home price in Los Angeles has risen 37 percent from $272,920 in February 2012 to $373,020 in September, and inventory is down from 5.7 months to 3.7 months.
Although Silicon Valley properties are not included in the bulk sales program, Suzanne Yost, president of the Silicon Valley Association of REALTORS®, said the region is also experiencing a shortage of inventory. She noted the housing market has greatly improved statewide and buyers are having a difficult time getting into the market because there are not enough homes to meet demand.
“By going forward with bulk sales of foreclosed properties, investors will be buying homes and holding them until prices appreciate further. These are homes that are affordable now for first-time buyers but may not be when prices have gone up. It is sad that FHFA is choosing to support investors instead of people that want a home to own and live in,” said Yost.
Along with the 970 properties in California, Arizona and Nevada bought by Colony Capital, the first round of bulk single-family home sales included 699 Florida properties sold to Pacifica Companies LLC and 94 Chicago properties purchased by The Cogsville Group.
The latest California Association of REALTORS® Lender Satisfaction Survey report says lenders have made some progress in their short sale processes from a year ago. Sixty-four percent of California REALTORS® said they still experienced difficulty in closing short sales, down from 77 percent in August 2011 and 70 percent in 2010. The percentage of REALTORS® who reported short sales as “extremely difficult,” dropped from 56 percent in 2011 to 34 percent in 2012.
C.A.R.’s Lender Performance Index (LPI), which measures REALTORS®’ lender satisfaction levels, rose to 23 in 2012, up from 17 in 2011 and 16 in 2010. The increase in the LPI is positive, but the index is still below the median of 50.
According to the C.A.R. report, communication issues continue to be the biggest stumbling block to the process:
* Lenders’ slow response time to a short sale package, cited by 67 percent of REALTORS® in 2012, up slightly from 66 percent last year;
* Poor communication with lender representatives, cited by 55 percent of REALTORS®, unchanged from 2011;
* Repeated requests for documentation, cited by 50 percent of REALTORS®, down from 51 percent a year ago.
* Eight percent of REALTORS® reported the lender foreclosed on the home before the short sale transaction could be completed, down from 15 percent in 2011.
However, overall satisfaction in working with lenders in short sales improved, with 59 percent expressing dissatisfaction, down from 75 percent in 2011.
REALTORS® believe a more standardized process may be the best way to facilitate the sale of homes that qualify. “The Federal Housing Finance Agency’s decision to align Fannie Mae and Freddie Mac short sale guidelines will allow lenders and servicers to quickly and more easily qualify eligible borrowers for a short sale,” says Richard Miller, who is chief banking officer of Ratecomb and serves as affiliate chair of the Silicon Valley Association of REALTORS® (SILVAR). “We are seeing progress as all parties involved strive to maintain better communication and are proactive with solutions.”
SILVAR President Suzanne Yost adds, “Whether a struggling homeowner chooses the path of foreclosure or a short sale, the experience is both financially and emotionally difficult. We hope lenders will continue to make improvements so the process is both easier and quicker for homeowners.”
SILVAR REALTORS® received an upbeat message about the housing market from California Association of REALTORS® Vice President and Chief Economist Leslie Appleton-Young at Wednesday’s Los Gatos/Saratoga District tour meeting. Appleton-Young told REALTORS® the housing market is “the bright spot of the economy” and the fundamentals are sound.
“Yours is the strongest regional economy by far,” she told SILVAR REALTORS®.
Consumer confidence, though uneven, is getting better. Unemployment is heading down. The state, which lost 1.3 million jobs during the recession, has added 485,000 jobs since January 2010.
There is a shortage of inventory for various reasons. Homeowners with equity are still unwilling to sell at today’s prices. Others may want to sell but do not have enough equity in their homes for a down payment and closing costs for their next home. Then there are those who are stuck and cannot sell their home because they are underwater on their mortgage.
Appleton-Young said 29 percent of California borrowers are underwater and 4.4 percent are within 5 percent of being in negative equity. These performing loans may not be sustainable for the long-term. Despite this, Appleton-Young said it is an urban legend that lenders will flood the market with foreclosures after the election.
Mortgage rates are still at 50-year lows and the Federal Reserve has promised they will remain this way until 2015. Fifty percent of people living in the state can afford to buy a home, however many buyers can’t buy because investors are outbidding them; they are “living in the gray” due to a recent short sale, foreclosure or bankruptcy; or their credit scores are low and can’t meet lending requirements because banks continue to practice “defensive lending.”
Due to an improving economy and shortage of inventory, California home prices are snapping back slowly, said Appleton-Young. The California median home price increased 15.5 percent from August 2011 to $343,820. The statewide median home price is forecast to increase a moderate 5.7 percent to $335,000 in 2013. For this year, C.A.R. projects the California median home price will climb 10.9 percent to $317,000.
Strong demand is reflected in August 2012 home sales, which shot up 6.5 percent from August 2011. Appleton-Young said it has been a strong year without tax credits, government programs or stimulus. Of total sales of existing single-family homes in August, 62 percent of sales were traditional equity sales, 14.4 percent REOs and 23 percent short sales.
Appleton-Young projects home sales in 2012 will increase 5.1 percent from the 497,900 existing, single-family homes sold in 2011. The C.A.R. forecast sees sales in 2013 gaining 1.3 percent from this year’s sales.
“The market is working itself through,” said Appleton-Young.
A viral email continues to circulate indicating that the 3.8 percent tax on some investment income is a tax on all home sales. To help educate REALTORS® and homeowners regarding the 3.8 percent tax passed as part of health care reform in 2010, the National Association of REALTORS® (NAR) has developed the following top 10 list:
1. When you add up all of your income from every possible source, and that total is less than $200,000 ($250,000 on a joint tax return), you will not be subject to this tax.
2. The 3.8% tax will never be collected as a transfer tax on real estate of any type, so you’ll never pay this tax at the time that you purchase a home or other investment property.
3. You’ll never pay this tax at settlement when you sell your home or investment property. Any capital gain you realize at settlement is just one component of that year’s gross income.
4. If you sell your principal residence, you will still receive the full benefit of the $250,000 (single tax return)/$500,000 (married filing joint tax return) exclusion on the sale of that home. If your capital gain is greater than these amounts, then you will include any gain above these amounts as income on your Form 1040 tax return. Even then, if your total income (including this taxable portion of gain on your residence) is less than the $200,000/$250,000 amounts, you will not pay this tax. If your total income is more than these amounts, a formula will protect some portion of your investment.
5. The tax applies to other types of investment income, not just real estate. If your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).
6. The tax goes into effect in 2013. If you have investment income in 2013, you won’t pay the 3.8% tax until you file your 2013 Form 1040 tax return in 2014. The 3.8% tax for any later year will be paid in the following calendar year when the tax returns are filed.
7. In any particular year, if you have no income from capital gains, rents, interest or dividends, you’ll never pay this tax, even if you have millions of dollars of other types of income.
8. The formula that determines the amount of 3.8% tax due will always protect $200,000 ($250,000 on a joint return) of your income from any burden of the 3.8% tax. For example, if you are single and have a total of $201,000 income, the 3.8% tax would never be imposed on more than $1,000.
9. It’s true that investment income from rents on an investment property could be subject to the 3.8% tax. But: The only rental income that would be included in your gross income and therefore possibly subject to the tax is net rental income: gross rents minus expenses like depreciation, interest, property tax, maintenance and utilities.
10. The tax was enacted along with the health care legislation in 2010. It was added to the package just hours before the final vote and without review. NAR strongly opposed the tax at the time, and remains hopeful that it will not go into effect. The tax will no doubt be debated during the upcoming tax reform debates in 2013.
The Consumer Financial Protection Bureau (CFPB) has released a proposed rule that would require mortgage lenders to provide home loan applicants with copies of written appraisals and other home value estimates developed in connection with the application. The rule would ensure that consumers receive information prior to closing about how the property’s value was determined.
The proposed rule would require creditors to inform consumers within three days of applying for a loan of their right to receive a free copy of appraisal reports and home value estimates. Creditors would then be required to provide the reports to consumers as promptly as possible, but no later than three days before closing, regardless of whether credit is extended, denied, incomplete, or withdrawn.
The public has until October 15 to review and provide comments on the proposed rule. The CFPB will review and analyze the comments before issuing a final rule in January 2013.
The Housing Trust of Santa Clara County is asking SILVAR REALTORS® to inform their clients that money is available to help Santa Clara County residents purchase their first home.
“We have money and we want to help. There’s plenty of money for people to qualify,” Dan Lachman, director of lending for The Housing Trust of Santa Clara County, told a focus group composed of SILVAR REALTORS® meeting in Mountain View this week.
Lachman discussed The Housing Trust’s current homebuyer assistance programs and sought feedback from the REALTORS® on how the nonprofit lender can more effectively provide opportunities in Mountain View. The Housing Trust is planning to have a public outreach event for Mountain View residents in the fall. Mountain View City Council member Margaret Abe-Koga joined Lachman and the REALTORS® at the meeting, stating she wishes more people who work in Mountain View could avail of the home buyer programs, so they could live in Mountain View, as well.
The Housing Trust of Santa Clara County makes loans and grants to increase the supply of affordable housing, prevent homelessness and assist qualified individuals and families in buying their first home. Lachman specifically asked the REALTORS® to inform their clients of two programs that provide assistance to first-time home buyers – the Closing Cost Assistance Program (CCAP) and the Mortgage Assistance Program (MAP). In order to qualify for either of these programs, the household income for a four-member household cannot exceed $126,000, or the income for a single-member household cannot exceed $88,200.
The Closing Cost Assistance Program (CCAP) for first-time homebuyers provides 3 percent of the purchase price up to $15,000 towards the down payment, closing costs or other transaction expenses associated with a home purchase. No interest or principal payments are due during the term of the loan. This loan is due when the borrower sells the house or refinances the home, or in 30 years, with a 3 percent deferred interest rate.
The Mortgage Assistance Program (MAP) is an amortizing 30-year second mortgage available for moderate-income first-time home buyers. Second loans of 17 percent of the purchase price up to $85,000 are available under this program, with the interest rate at 1 percent above the interest rate of the first loan.
Lachman and his team have offered to speak to companies and business about the non-profit lender’s loan programs. See the next scheduled workshop here. For more information about The Housing Trust, its programs and program guidelines, visit www.housingtrustcc.org
In line with its global initiative to provide educational opportunities for members to succeed in global real estate markets, SILVAR is offering members and other real estate professionals the opportunity to complete classroom requirements for the National Association of REALTORS® Certified International Property Specialist (CIPS) Designation on Nov. 26-30.
CIPS courses provide training in international business issues, such as currency conversion, cultural awareness, and legal and tax requirements. The CIPS curriculum focuses on ownership and transaction principles of international real estate, including specifics on the real estate markets in Europe, the Americas, the Middle East/Africa and the world. Attend the 5-day CIPS Institute at SILVAR and fulfill the classroom requirements for the CIPS designation. You must complete the two core courses, three elective courses, and pass a multiple-choice exam at the end of each course.
The week-long courses will be taught at SILVAR by David Wyant, CIPS, ABR, AHWD, ePRO, GRI, TRC, SFR, a certified NAR faculty member, and 2009 NAR International Instructor of the Year.
SILVAR is offering an early bird registration special of $550 for the entire CIPS Institute (five courses) for any Association of REALTOR® member who registers by Oct. 15! Regular cost for the entire institute for SILVAR members is $599/$625 after Nov. 1; non-members, $625/$650 after Nov. 1.
It is also possible to take individual courses. Each course for SILVAR members is $150/$165 after Nov. 1; Non-members $175/$190 after Nov. 1. Breakfast and light lunch included each day.
Many business professionals take one or all of the CIPS courses in order to expand their knowledge and skills about international business. The invitation to attend SILVAR’s CIPS courses is open to the public.
VIEW FLYER for more details and registration form.
Silicon Valley Association of REALTORS® says ... 