Tax Benefits on the Way Out

Please read!!! With all the news on the government shut down and the congressional agreement to restart the government, some credits and deductions that will expire at years end got loss in the mix. Here is a quick recap of some year end tax tips that will save you some real money!! YEAR END TAX SERIES: CREDITS AND DEDUCTIONS FOR HOMEOWNERS SET TO EXPIRE

First in a series of special year-end tax tips for homeowners. The end of the year will put an end to some great tax benefits for homeowners, including: A tax credit for installing energy efficiency upgrades. The deduction for mortgage insurance (MI) payments. A temporary reprieve to a tax rule that makes homeowners pay taxes on mortgage debt their lender forgives during a foreclosure or short sale. Energy-Efficiency Tax Credit Some homeowners who install energy-efficient insulation, windows, doors, furnaces,water heaters or roofing materials will be able to take a tax credit equal to of 10 percent of the cost of those improvements. There's a $500 overall cap on the tax credit, caps on certain projects (the tax credit for windows is capped at $200, for example) and not all energy-efficiency improvements qualify. The rules are complicated and how much you can claim depends on whether you've taken the tax credit in prior years and which upgrades you install. You can read the fine print at the IRS website or the federal government's ENERGY STAR website. Mortgage Insurance Deduction The mortgage insurance (MI) and debt forgiveness tax deductions will end Dec. 31, 2013 unless Congress votes to renew them. This isn't the first time these homeowner tax benefits have been threatened. In 2012 they expired on Dec. 31 and it took Congress until January 2013 to renew them. Homeowners were left in the lurch waiting to hear if those important tax provisions would be renewed. The MI deduction allows you to deduct the cost of mortgage insurance, but there are restrictions. For example, it phases out after you earn more than $109,000 and it matters when you got your mortgage. The IRS' Mortgage Related Expenses app will tell you if your mortgage insurance is deductible. Mortgage Debt Forgiveness Mortgage debt forgiveness can happen when you lose your home to foreclosure or you sell it in a short sale. In both cases, the lender generally isn't repaid the full amount you owed on your mortgage. The difference between what you owed and what the lender actually got from the foreclosure or short sale is "forgiven debt." And the IRS says forgiven debt is taxable income. So if you have debt forgiven, you owe tax on that "income." During the housing crisis, Congress decided taxing financially troubled homeowners on income they didn't actually receive wasn't fair, so it set aside the IRS forgiven income rule until the end of 2013. For that exemption to continue, Congress has to extend it. Otherwise, starting Jan. 1, 2014, you'll owe income tax on the amount of debt your lender forgives in a short sale, foreclosure, deed-in-lieu or other foreclosure alternatives that don't result in your mortgage being completely repaid. Courtesy Al Clark's Home Again Newsletter

Mortgage Matter...OCT 21 Update

Keeping you updated on the market! For the week of  October 21, 2013 MARKET RECAP Time to Exhale It appears a disaster was averted: The debt ceiling was raised and the federal government won't default on its debt. We can't say we were surprised at the outcome. We mentioned last week that we thought a default was unlikely. The money was always there to make interest payments and to pay off maturing debt. In addition, there are too many politically connected constituents – banks not the least of them – for politicians to allow a default. We also noted that “shutdown” was a misnomer. Over 80% of the federal government was still up and running. Unfortunately, the portion furloughed impacted the mortgage market. Applications for government-sponsored loans dropped by more than 7% last week. Conventional activity was similarly limited due to delays in verifying income with the tax collectors. With everyone back to work, mortgage lending should ramp up and loans should be approved in a more timely manner going forward. When the political imbroglio began a few weeks ago, we noted that we expected the rate on the conforming 30-year fixed-rate loan to hold within a 4.25%-to-4.50% range. That's been the case. This week, Bankrate.com's survey showed the rate on the 30-year loan averaged 4.42%, while Freddie Mac's survey showed it averaged 4.28%. We expect rates to remains staid for the next week or so. Some of the government departments furloughed were responsible for producing economic data. Since the furlough, there's been a dearth of insight into the state of the economy. That will soon change over the next week, and we should begin receiving an influx of scheduled data in short order. In the meantime, the Federal Reserve offered some insight into the state of the economy this past week. Not surprising, nothing has really changed: Economic growth remains sluggish. In the Fed's Beige Book, a report released every six weeks, worlds like “modest” and “moderate” peppered the text, as they have in previous releases for much of 2013. Of course, the private data providers continued to function. On that front, FNC's Residential Price Index shows housing prices moved higher by 0.6% in August to post the 18 th month of consecutive gains. We've been warning over the past month that the strong price gains we've seen over the past two years will soon abate. Looking ahead, we expect price data providers CoreLogic, Case-Shiller, and Zillow to start reporting slower month-over-month gains. A point worth emphasizing is the hotter the market, the greater the likelihood of reduced price growth. Another point worth emphasizing – one we've emphasized previously – is that slowing price growth isn't bad. We want to get back to the way real estate has historically functioned in most markets – slow, steady, with low volatility. Economic Indicator Release Date and Time Consensus Estimate Analysis Existing Home Sales (September) Mon., Oct. 21, 10:00 am, ET 5.35 Million (Annualized) Important. Increased inventory and stabilizing price increases will help maintain the long-term upward trend. Mortgage Applications Wed., Oct. 23, 7:00 am, ET None Important. With the federal government back to work, application activity will begin to trend higher. FHFA Home Price Index (August) Wed., Oct. 23, 10:00 am, ET 0.5% (Monthly Increase) Important. The data will likely show signs of slowing price growth. New Home Sales (September) Thurs., Oct. 24, 10:00 am, ET 427,000 (Annualized) Important. Softer pricing is lifting new-home sales. Another Reason to Embrace the Slowdown   Whenever we buy an asset, our natural desire is for that asset's value to appreciate. The faster it appreciates, the better we like it. There is something to be said for slow and steady, though. When prices appreciate at a slower pace, they, in turn, lead to a wider, more stable market. We say that because the faster an asset's value appreciates, the faster it reduces the pool of potential buyers. The market, in short, becomes less inclusive, and frequently more volatile. In addition, double-digit annual price gains have significantly lowered affordability. The Wall Street Journal reports that h ousing affordability hit a four-year low in August. The strong price gains we saw during spring and early summer pushed more homes out of the reach of more people. This latest data suggest we could see a temporary slowdown in new and existing home sales in the waning months of 2013. Slower sales growth and lower price-appreciation should help recalibrate the market with more realistic exceptions. This is a good thing. As we noted last week, a return to a normalized market is the goal, and the sooner we get there the better.

And How the Government Shutdown Impacts Your Home!!

Default On U.S. Debt Could Hurt Homeowners


The federal government shutdown has slowed some  housing programs and closed others, although several important programs, including FHA's loan program, have stayed open.

Unfortunately, if the government defaults on its debt, interest rates could go up, the National Association of Realtors (NAR) warned a Senate panel.

When interest rates rise 1 percent about 450,000 middle-class homeowners are priced out of the real estate market, NAR says.

Rising rates could also push up payments for adjustable-rate mortgages, home equity lines, credit cards and auto loans. 

Meanwhile, the federal government shutdown has closed some housing programs, while others continue to operate. Here's the latest on what's open and closed:

FHA: Lenders can continue to make single-family home loans. Make sure your Social Security number, name and address are correct on your loan application because the Social Security Administration system that verifies that data is operating on autopilot. A mistake can stop your loan application in its tracks.

Fannie Mae and Freddie Mac: Fannie Mae and Freddie Mac are open, but there's a catch. With the IRS shut down, lenders can't verify your tax and income information--something they have to do before they sell your mortgage to Fannie Mae or Freddie Mac. Lenders are using their own funds to make mortgages that they'll sell to Fannie Mae and Freddie Mac when the shutdown ends.

VA: Veterans can get mortgages, but expect delays.

FEMA Flood Insurance: The National Flood Insurance Program is open. However, engineering surveys for flood insurance certificates generally rely on U.S. Geodetic Survey readings and that website is closed.

USDA Rural Housing Loans: This program is not running during the shutdown. If your lender had a commitment for your mortgage and the funds were set aside, you can close your loan. Otherwise you'll have to wait until the government opens again to get your loan closed.

Programs for Troubled Homeowners: The federal Making Home Affordable programs are open to help homeowners avoid foreclosure. 

Department of the Interior, Bureau of Indian Affairs: Transactions on leased Indian Tribal Land won't be processed or recorded during the shutdown.

Photo source: U.S. Capitol Visitor Center

Courtesy of Al Clark HomeActions Newsletter

Interest Rates: Latest Projections

  With the hubbub now present with the government shutdown, every one has heard about how Fannie Mae, Freddie Mac, USDA Loans etc. are being hindered by the shutdown and lack of staff and lack of funds.

Yet, it is interesting that the rate expectation remain constant for about a year out in 3rd Quarter 2014.

Though the expectations are constant for now.  I wouldn't hold my breath if I were you that this is the final word.   

Besides any impacts of the government shut down of the markets, the improving housing market may increase pressure on interest rates.  So it is no time to wait if you need to move.