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You can maximize your earning potential with more tools for emerging markets by enrolling in the National Association of REALTORS® (NAR) At Home with Diversity® certification course which SILVAR is offering on Thursday, September 12, 9 a.m. to 3 p.m. at the Menlo Circus Club, 190 Park Lane, Atherton.
This six-hour course taught by NAR certified instructor Jennifer Tasto will teach agents how to access and analyze demographic data to assess cultural attributes in your local market; how to attract and serve multicultural and international clients in your local market; and how to develop a business plan to address specific needs of those clients.
Earn six hours DRE continuing education credits in fair housing. Earn the confidence of your potential buyers and obtain this certification. You will also obtain a pin and logo to add to their website and business card.
Cost of the course is $49 for all AOR members. A continental breakfast and lunch will be provided.
Registration is for a limited time only and on a first-come first-served basis. There is a limit of 15 students. Registration deadline is September 4, so register now at ims.silvar.org (for members) or call (408) 200-0100 to register.
Home with Diversity®
Thursday, September 12
9 a.m. to 3 p.m.
Menlo Circus Club
190 Park Lane, Atherton
Cost: $49 for all AOR members
Continental breakfast and lunch provided
Members of the Silicon Valley Association of REALTORS®, Santa Clara County Association of REALTORS® and San Mateo County Association of REALTORS® met with U.S. Representative Anna Eshoo.
Members asked their representatives in Congress to:
1. Restructure Fannie Mae & Freddie Mac and Encourage the Return of Private Capital. Members requested that the chairmen of the House Financial Services Committee and the Senate Banking Committee hold hearings that focus on restructuring the secondary mortgage market, and that the emphasis of these hearings be the crafting of comprehensive bipartisan legislation that resolves the conservatorship of Fannie Mae and Freddie Mac. They stressed an efficient and adequately regulated secondary market is essential to providing affordable mortgages to consumers; that the federal government must clearly, and explicitly, offer a guarantee of some mortgage instruments; and that the government’s guarantee should ensure a wide range of safe, reliable mortgage products for creditworthy consumers.
2. Preserve homeownership tax policies. As Congress considers proposals to reform the federal tax code, SILVAR REALTORS® said lawmakers should consider the vital role that real estate tax provisions play in the nation’s housing markets and economy, as well as the financial well-being of Americans and their families. As real estate markets continue to recover, Congress must first do no harm to the following:
• Mortgage Interest Deduction: Oppose efforts to change or eliminate the mortgage interest deduction for primary and second homes.
• Property Tax Deduction: Property taxes paid are properly not considered “income” that should be subject to federal income tax. Congress should not tax “income” that doesn’t exist and oppose elimination of the deduction for property taxes.
• Capital Gains Exclusion for Sale of Principal Residence: Individuals can exclude the first $250,000 (and married couples the first $500,000) of gain from the sale of their principal residence from capital gains tax. This provision allows homeowners to build equity and save for retirement and should be maintained.
3. Preserve the Mission and Purpose of the FHA Program. SILVAR REALTORS® asked their representatives to ensure that the Federal Housing Administration (FHA) single-family
program has the tools and policies in place to meet its mission of access to safe, affordable mortgage financing to qualified borrowers nationwide. They said FHA’s single-family mortgage insurance program helps preserve private financing options for homebuyers regardless of local, regional or national economic conditions. They asked that the legislators continue support for H.R. 1145 (Waters (D-CA), Capuano (D-MA)), which provides FHA with the flexibility to make necessary changes to the program, provides taxpayer protections against lenders who make errors of material fact, and improves program oversight. They asked that Congress provide FHA with tools, but also protect FHA from any further restrictive requirements that keep more people out of the program.
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Just back from meeting their state legislators in Sacramento early this month, SILVAR’s leadership team is in Washington, D.C. this week, joining more than 9,000 REALTORS® and guests from across the nation at the National Association of REALTORS® (NAR) Midyear Legislative Meetings & Trade Expo May 13-18. They are meeting with regulators, lawmakers and industry leaders to address critical real estate issues affecting individuals, communities, and the nation.
At a general meeting on Wednesday morning, NAR CEO Dale Stinton told REALTORS® current NAR membership is at 990,000 and that it should exceed one million soon. There are 1,400 local associations; 1,100 have 300 members or less.
During their meetings with legislators on Capitol Hill REALTORS® are urging action toward preserving the mission and purpose of the Federal Housing Administration’s single-family mortgage program, encouraging the return of private capital to mortgage markets, restructuring government-sponsored enterprises Fannie Mae and Freddie Mac to guarantee affordable mortgage financing is available to creditworthy consumers in all types of markets, and maintaining current tax policies for homeownership and real estate investment. They also are participating in sessions with a number of government officials and industry experts, including representatives from the Consumer Financial Protection Bureau, Fannie Mae, Federal Emergency Management Agency, Federal Reserve Board and Freddie Mac.
“The NAR Legislative Meetings & Trade Expo is an enormous gathering of REALTORS® from every state in the country. We are here to remind our country’s elected officials that home ownership has value for all families,” said SILVAR President Carolyn Miller.
SILVAR members are meeting with Anna Eshoo, U.S. Representative for California’s 18th congressional district, which includes parts of San Mateo, Santa Clara and Santa Cruz counties; Jackie Speier, U.S. Representative for California’s 14th congressional district , which consists of portions of San Mateo County and San Francisco; and Mike Honda, U.S. Representative for California’s 17th congressional district, which includes western San Jose and Silicon Valley.
Accompanying Miller in Washington are SILVAR President-elect Dave Tonna, NAR Director John Tripp, Past President Suzanne Yost, board director David Barca, Jeff Barnett, Carole Feldstein, SILVAR PAC Chair Barbara Williams, Government Affairs Director Jessica Epstein and Executive Officer Paul Cardus
The Federal Housing Administration (FHA) is raising its mortgage insurance premiums (MIP) and changing MIP cancellation policies. These changes may impact first-time home buyers, but they are needed to mitigate risk and strengthen the solvency of the mortgage insurance fund.
FHA faces financial problems stemming from losses on reverse mortgages and forward loans sustained during the housing crisis and low home values, causing a shortfall in its reserves. There is talk that FHA may need a government bailout of $943 million in tax payer funds.
Traditionally, FHA loans should make up between 10 and 15 percent of the market. In 2012, due to the economic downturn and absence of a robust private lending market, FHA insured over 25 percent of all homes purchased in that year. The National Association of REALTORS® (NAR) says had FHA not stepped in to fill the market void, many families would have been unable to purchase homes, housing values could have dropped an additional 25 percent, and the country would be much further from a recovery.
Facing multibillion dollar losses, FHA has taken a number of steps to shore up funds. Beginning April 1, 2013, FHA’s annual mortgage insurance premium for all new loans that are less than or equal to $625,500 and with a loan-to-value (LTV) ratio greater than 95 percent will be 1.35 percent of the loan amount. The loan to value ratio is calculated as the percentage of the value of the house that is paid for by the loan.
FHA will also require most borrowers to continue paying annual premiums for the life of their mortgage loan. Effective June 3, 2013 FHA will require borrowers who take out a new FHA loan with an LTV ratio of greater than 90 percent to pay the MIP until the end of the mortgage loan term or for the first 30 years, whichever comes first. With an LTV equal to or less than 90 percent, the MIP will be assessed until the end of the mortgage term, or for the first 11 years, whichever occurs first. Previously, once the loan was paid down to 78 percent of the original value of the house or after five years, whichever came later, the borrower would no longer be required to pay the MIP.
FHA insured loan limits are currently calculated at 125 percent of the local area median home price, up to a maximum of $729,750 in highest cost markets like Silicon Valley. The limits are temporary and set to expire at the end of 2013 to 115 percent of local area median home prices with a cap of $625,500. There are discussions in Washington of lowering this amount further, however nothing has been established yet.
In Silicon Valley, where home prices are some of the highest in the nation, many buyers are borrowing at the top of the FHA limits. The MIP can amount to hundreds of dollars each month, in addition to their regular mortgage payment. For instance, buyers with a $600,000 FHA-backed mortgage who put 8 percent down will pay at the 1.35 percent rate, which comes out to well over $600 per month in mortgage premiums. Whereas previously, this additional payment would have been eliminated once the LTV ratio hit 78 percent or five years, whichever was later, now this payment will be assessed for the life of the loan.
FHA also will require lenders to manually underwrite loans for which borrowers have a credit score below 620 and a total debt-to-income (DTI) ratio greater than 43 percent. Also announced, but not yet approved, is a proposal by FHA to increase the minimum down payment requirement for mortgages with original principal balances above $625,500 from 3.5 to 5 percent.
A higher down payment requirement could impact millions of first-time home buyers. Many first-time home buyers rely on FHA-insured loans because they can require a down payment as low as 3.5 percent. In 2012, more than four out of every 10 first-time buyers purchased their homes with an FHA-insured mortgage. It remains to be seen whether these numbers will go down with the new higher rates and requirement that mortgage insurance be paid for the life of the loan.
NAR supports legislation that strengthens FHA’s fiscal solvency and that balances the need to protect the fund from tax payer risk with the need to continue providing access to safe and affordable mortgage financing. While these changes may be necessary in the short-term to help stabilize the FHA fund, NAR’s position is that higher fees make it difficult for first-time buyers to purchase a home, as well as repeat buyers who are relocating from less expensive to higher cost areas. NAR has encouraged FHA to reconsider the need for these changes when the fund returns to full capitalization.
At round table discussions, REALTORS® shared their thoughts about the future. (Photo courtesy of MLSListings Inc.)
With the changing demographic and socio-economic landscape and changing economic concerns, the real estate industry sees itself facing a transformation. NAR launched the REThink Initiative in August 2012 during its annual Leadership Summit in Chicago, Ill. The REThink Initiative will use the experiences and insights of REALTORS®, academia, consumers and others to plan for and adapt to dynamic changes in the industry.
At Friday’s workshop, REALTORS® discussed different versions of what the future holds for the industry. Workshop participants were asked to consider a focal question: In an ever-changing world, what is the future of the real estate industry in 5-10 years, and how will this affect consumers, real estate professionals, industry organizations and associations?
At the round table discussions, participants examined several scenarios for the industry and elements that are likely to impact the future of U.S. real estate, including the long-term effects of the recent recession, the global economy, technology, demographic forces like the retiring Baby Boomers, emerging Echo Boomers, increasing ethnic diversity, and population growth. Environmental concerns, like growing scarcity of energy and raw materials, and how they could affect housing patterns and design, access to owning a home, and the value of homeownership, were also explored.
Cross-country workshops are being conducted through May 2013. Insights from members will provide critical input into NAR’s future strategy and help formulate a shared vision about the future REALTORS® want to create for themselves, their association, for the industry, and for society as whole.
For more information about NAR’s ReThink Initiative, visit http://rethinkfuture.com.
Last Thursday, the Consumer Financial Protection Bureau (CFPB) released the “qualified mortgage” rule setting guidelines to ensure that home loans will be given only to qualified borrowers who can repay them, thus protecting consumers from predatory lending. Lenders who follow these rules in making a loan will be protected from liability.
While the QRM (qualified residential mortgage) overseen by the Federal Reserve has not yet been announced, the National Association of REALTORS® applauds the CFPB for creating a broadly defined Qualified Mortgage rule that establishes strong consumer protections while ensuring continued access to safe, affordable mortgage credit.
Under the new guidelines, which take effect on January 2014, lenders must obtain and verify an applicant’s financial information, including employment status, income, assets, debts, and credit history. Borrowers must have enough income or assets to repay the loans. Interest-only and undocumented income mortgages, including loans in excess of 30 years or in which the principal increases over time, will no longer be allowed.
Under the “ability to repay” rule set by the new guidelines, lenders will be required to look at a borrower’s ability to repay over the long term by looking at a borrower’s current income and assets, employment status, credit history, the mortgage monthly payment, other payments like property taxes and other debt obligations. A borrower’s total debt obligations, including the mortgage and other loan obligations is limited to 43 percent of the borrower’s monthly income.
There is no minimum down payment requirement for qualified mortgages. Earlier proposals of a down payment of as much as 20 percent in order to qualify for a mortgage raised concerns that such a requirement would disqualify potential borrowers from owning a home.
Banks are not required to follow either the QM or QRM rules; however, they probably will. By following the QM guidelines, lenders get a measure of protection from litigation. By following the QRM guidelines not yet announced, banks will be able to sell their loans to Fannie Mae and Freddie Mac.
NAR urges regulators to mirror the forthcoming Qualified Residential Mortgage rule after the QM rule to ensure affordable credit remains available to qualified borrowers.
On January 1 both the U.S. Senate and House passed H.R. 8 legislation to avert the “fiscal cliff.” The bill was signed by President Barack Obama.
Below is a National Association of REALTORS® summary of real estate related provisions in the bill:
Real Estate Tax Extenders
• Mortgage Cancellation Relief is extended for one year to Jan. 1, 2014.
• Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012.
• 15-year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012.
• 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.
Permanent Repeal of Pease Limitations for 99% of Taxpayers
Under the agreement, so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers. These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000. These thresholds have been increased and are indexed for inflation and will rise over time. Under the formula, the amount of adjusted gross income above the threshold is multiplied by three percent. That amount is then used to reduce the total value of the filer’s itemized deductions. The total amount of reduction cannot exceed 80 percent of the filer’s itemized deductions.
These limits were first enacted in 1990 (named for the Ohio Congressman Don Pease who came up with the idea) and continued throughout the Clinton years. They were gradually phased out as a result of the 2001 tax cuts and were completely eliminated in 2010-2012. Had we gone over the fiscal cliff, Pease limitations would have been reinstituted on all filers starting at $174,450 of adjusted gross income.
Capital Gains
Capital Gains rate stays at 15 percent for those in the top rate of $400,000 (individual) and $450,000 (joint) return. After that, any gains above those amounts will be taxed at 20 percent. The $250,000/$500,000 exclusion for sale of principle residence remains in place.
Estate Tax
The first $5 million dollars in individual estates and $10 million for family estates are now exempted from the estate tax. After that the rate will be 40 percent, up from 35 percent. The exemption amounts are indexed for inflation.
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.
SILVAR Global Business Council Chair Jennifer Tasto welcomes everyone to the association’s global heritage potluck.
Over 30 SILVAR members attended “Global is Good Business,” a heritage potluck promoting SILVAR’s global business initiative on Monday. The event featured an array of traditional California and ethnic dishes, social networking, and an education segment in which real estate professionals with international experience spoke briefly about the importance of doing business globally.
SILVAR Global Business Council Chair Jennifer Tasto and SILVAR President Suzanne Yost explained SILVAR’s global initiative and the purpose of forming a Global Business Council. They said the number of foreign and immigrant buyers has steadily grown in recent years, and SILVAR would like to provide members with the tools and resources that can help them succeed in this market.
Janet Case, CEO of Proxio, explained how the international MLS can help REALTORS® extend their market reach and gain a competitive advantage. “Silicon Valley home buyers come from many cultures and from many parts of the world,” said Case. “Proxio provides multilingual marketing services to agents and brokerages, so they can serve multicultural and foreign buyers better, and global marketing tools that gain international exposure for sellers.”
Kenneth Chan, premium mortgage consultant with HSBC, and Citi mortgage consultant Evelyn Figueira said foreign buyers experience financing challenges like meeting mortgage requirements, moving funds from their country, and foreign income and asset verification. “It’s not as simple as having the money to buy property,”said Chan.
Michael Repka, managing broker and general counsel for DeLeon Realty, said foreign investors are drawn here due to business opportunities, the stability, and appreciation potential. “Real estate is becoming increasingly global,” stressed Repka.
Zach Benjamin, Business Development and Outreach Manager for the National Association of REALTORS® Global Business and Alliances Group, identified some tools and resources from NAR that can help agents, including NAR’s Certified International Property Specialist (CIPS) designation.
SILVAR is offering the five CIPS courses required to fulfill the classroom requirements for the designation on November 26-30 at an early bird registration price of $550 for any AOR member, if they register by Monday, October 15. These courses are open to the public, as well. You don’t have to be a REALTOR® in order to enroll in these courses.
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.
Silicon Valley Association of REALTORS® says ... 