'Stimulus' and 'Stability' Equal Help for Homeowners
Here is an overview of some benefits of the Economic Stimulus Plan for 2009 and the Homeowner Affordability and Stability Plan that may impact you.
Stimulus Plan - Tax Credit for Homebuyers
The $787 Billion stimulus bill is made up of tax cuts and spending programs aimed at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II. One of the major benefits of the plan is a tax credit for new homebuyers. According to the plan, first-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit.
It's important to remember that the $8,000 tax credit is just that... a tax credit. The benefit of a tax credit is that it's a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if you were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, you would owe nothing.
Better still, the tax credit is refundable, which means you can receive a check for the credit even if you have little income tax liability. For example, if you're liable for $4,000 in income tax, you can offset that $4,000 with half of the tax credit... and still receive a check for the remaining $4,000!
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying "homes" include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify. Buyers will have to repay the credit if they sell their homes within three years.
While details are sketchy - we will expect to get some clarity soon as to an additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans would be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard "jumbo" loan rates.
Homeowner Affordability and Stability Plan
President Obama unveiled his plan to help stabilize the housing market and keep millions of borrowers in their homes. The Homeowner Affordability and Stability Plan includes two initiatives to help struggling homeowners. One is a refinancing program for homeowners with less than 20% equity in their homes, or who owe more than their home is worth. The second program attempts to lower monthly payments for homeowners at risk of losing their home. Many of the plan's details are still being worked out and will not be announced until March 4. Here is an overview of the plan's main components.
Refinancing Initiative
Under current rules, those families who own less than 20% equity in their homes have a difficult time refinancing and taking advantage of the historically low interest rates. This initiative is open to homeowners who have conforming loans which are guaranteed by Fannie Mae and Freddie Mac, and who owe up to 5% more than their home is worth.
According to the plan, "credit-worthy" or "responsible" homeowners can refinance their mortgage into a 30- or 15-year, fixed-rate loan based on current market rates. The refinanced loan, however, cannot include prepayment penalties or balloon payments. For many families, this low-cost refinancing may help reduce their mortgage payments by up to thousands of dollars per year.
As with the rest of the plan, details about this initiative will be released at a future date--including what, if any, credit score requirements will be included.
Stability Initiative
This initiative aims at providing help to individual families as well as entire neighborhoods by helping reduce foreclosures and stabilize home prices. It is intended to help homeowners who are struggling to afford their mortgage payments, but cannot sell their homes because prices have fallen significantly.
The goal of this initiative is simple: "reduce the amount homeowners owe per month to sustainable levels." To accomplish this, lenders are encouraged to lower homeowners' payments to 31% of their income by lowering their interest rate to as low as 2% or by extending the terms of the loan. In addition, lenders can also lower the principal owed by the borrower, with Treasury sharing in the costs.
Homeowners who are current on their mortgages but are struggling can still apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment.
This initiative also includes a number of additional elements and incentives, including an extra incentive for borrowers to keep paying on time. The initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
Since the focus of this initiative is on helping families and neighborhoods, investment properties do not qualify.
Monday, February 23, 2009
Sunday, February 15, 2009
Information from Countrywide about the new stimulous package
Stimulus' real estate incentives shrink
(02-12) 17:35 PST -- The $789 billion stimulus package may have limited impact on the very industry that brought on the economic downturn: real estate.
While the bill could increase home buying, it doesn't do nearly enough to jump-start building or stem the foreclosures that are driving down prices, many real estate observers say.
The major housing addition to the Senate's version of the package, an up-to-$15,000 tax incentive for home buyers, was stripped from the bill on Wednesday. Real estate trade groups felt that provision had the greatest potential to reignite the market. The National Association of Home Builders projected it would increase sales by almost 500,000 and create more than 255,000 jobs.
The tax credit that survived was closer to a temporary one passed last year by Congress. It is capped at 10 percent of the home price or $8,000, whichever is less, and restricted to first-time buyers who make purchases before Dec. 1, 2009. After some political wrangling, it was determined the money would generally not have to be repaid, preserving a key distinction of the Senate version.
"Overall, I would say this is a mild positive," said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. "They had the provision in there that would have led to a wildfire in demand for housing and they took it out."
The National Association of Realtors, in a prepared statement Thursday, said the final tax credit provision could stimulate 200,000 home sales. But Joseph Perkins, chief executive officer of the Home Builders Association of Northern California, said $8,000 has a negligible effect in high-cost housing markets such as the Bay Area.
On the other hand, the stimulus bill does temporarily increase loan caps for Federal Housing Administration, Fannie Mae and Freddie Mac mortgages in expensive areas from $625,000 to $729,750. That effectively lowers the cost of borrowing that amount or less, providing "big help" to markets like the Bay Area, said Robert Kleinhenz, deputy chief economist with the California Association of Realtors.
Also scaled back in the final bill was a provision that would have allowed industries, including home builders, to use 2008 and 2009 losses to offset tax liabilities going back five years, a considerable benefit for a sector that is currently cash-strapped and highly unprofitable. In the end, it was limited to small businesses with losses in 2008.
Other real estate proposals pushed by the housing industry and consumer groups - including lowering mortgage rates to around 4 percent and protecting struggling homeowners from foreclosures, respectively - never made it into final versions of the bill in either the House or Senate. In general, many were surprised that the stimulus package didn't do more to prop up the industry at the heart of the downturn.
"I don't see how we can do an economic recovery package that gives short shrift to housing," Perkins said. "The meltdown in the financial sector was driven by the collapse in housing."
It's been widely reported, however, that the Obama administration plans to push additional legislation aimed at bolstering the housing industry, probably focused on preventing foreclosures. The plan would seek to lower interest rates for struggling borrowers through government subsidies.
Chris Thornberg, economist with Los Angeles research firm Beacon Economics, said the stimulus package is necessary to help revive the economy, but that the home building industry doesn't require or deserve any special consideration.
"The housing industry broke first, but it was only a symptom of the underlying problem in the U.S. economy ... a 12-year spending binge based on overinflated values of our homes," he said.
The reconciled stimulus bill, which still must pass both houses of Congress and be signed into law by President Obama, also provides billions of dollars for renovating public housing and foreclosed homes and similar projects.
(02-12) 17:35 PST -- The $789 billion stimulus package may have limited impact on the very industry that brought on the economic downturn: real estate.
While the bill could increase home buying, it doesn't do nearly enough to jump-start building or stem the foreclosures that are driving down prices, many real estate observers say.
The major housing addition to the Senate's version of the package, an up-to-$15,000 tax incentive for home buyers, was stripped from the bill on Wednesday. Real estate trade groups felt that provision had the greatest potential to reignite the market. The National Association of Home Builders projected it would increase sales by almost 500,000 and create more than 255,000 jobs.
The tax credit that survived was closer to a temporary one passed last year by Congress. It is capped at 10 percent of the home price or $8,000, whichever is less, and restricted to first-time buyers who make purchases before Dec. 1, 2009. After some political wrangling, it was determined the money would generally not have to be repaid, preserving a key distinction of the Senate version.
"Overall, I would say this is a mild positive," said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. "They had the provision in there that would have led to a wildfire in demand for housing and they took it out."
The National Association of Realtors, in a prepared statement Thursday, said the final tax credit provision could stimulate 200,000 home sales. But Joseph Perkins, chief executive officer of the Home Builders Association of Northern California, said $8,000 has a negligible effect in high-cost housing markets such as the Bay Area.
On the other hand, the stimulus bill does temporarily increase loan caps for Federal Housing Administration, Fannie Mae and Freddie Mac mortgages in expensive areas from $625,000 to $729,750. That effectively lowers the cost of borrowing that amount or less, providing "big help" to markets like the Bay Area, said Robert Kleinhenz, deputy chief economist with the California Association of Realtors.
Also scaled back in the final bill was a provision that would have allowed industries, including home builders, to use 2008 and 2009 losses to offset tax liabilities going back five years, a considerable benefit for a sector that is currently cash-strapped and highly unprofitable. In the end, it was limited to small businesses with losses in 2008.
Other real estate proposals pushed by the housing industry and consumer groups - including lowering mortgage rates to around 4 percent and protecting struggling homeowners from foreclosures, respectively - never made it into final versions of the bill in either the House or Senate. In general, many were surprised that the stimulus package didn't do more to prop up the industry at the heart of the downturn.
"I don't see how we can do an economic recovery package that gives short shrift to housing," Perkins said. "The meltdown in the financial sector was driven by the collapse in housing."
It's been widely reported, however, that the Obama administration plans to push additional legislation aimed at bolstering the housing industry, probably focused on preventing foreclosures. The plan would seek to lower interest rates for struggling borrowers through government subsidies.
Chris Thornberg, economist with Los Angeles research firm Beacon Economics, said the stimulus package is necessary to help revive the economy, but that the home building industry doesn't require or deserve any special consideration.
"The housing industry broke first, but it was only a symptom of the underlying problem in the U.S. economy ... a 12-year spending binge based on overinflated values of our homes," he said.
The reconciled stimulus bill, which still must pass both houses of Congress and be signed into law by President Obama, also provides billions of dollars for renovating public housing and foreclosed homes and similar projects.
Helping with all your real estate needs
I like to think of myself not as being in the real estate business, but of being in the business of helping people achieve their housing needs and life style goals. My passion for helping people drives me to the best job possible for each and every one of my clients.I know firsthand how it feels to desire excellence in agent performance. The buying and selling process can be overwhelming without a knowledgeable, experienced agent. I have made it my personal commitment to strive to make sure everything I do and every decision I make is what's best for the people I'm helping.
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