The City of San Francisco has finally issued a revised "informational brochure" to provide buyers with notice of the requirements of San Francisco’s energy and water conservation laws, as amended. Click here for the brochure.
Saturday, October 31, 2009
Sunday, October 25, 2009
Governor Signs SB94 Prohibiting Advance Fees for Loan Modifications
No Advance Fee for Loan Modifications:
This new law, which went into effect on October 11, 2009 (and expires January 1, 2013), prohibits any person, including licensed real estate brokers and attorneys who negotiate, attempt to negotiate, arrange, attempt to arrange, or otherwise offer to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower related to mortgages and deeds of trust secured by residential real property containing one to four dwelling units to do any of the following:
No Dividing Services into Phases to Avoid Advance Fee Law:
The new language in California Business & Professions Code Section 10026 that defines "Advance Fee" has been modified to clarify that services may not be divided into phases to avoid the new law: "Neither an advance fee nor the services to be performed shall be separated or divided into components for the purpose of avoiding the application of this section."
Lenders and Loan Servicers Are Exempt from Advance Fee Law:
This law further provides that these provisions do not apply to actions taken by a person who offers loan modification or other loan forbearance services for a loan owned or serviced by that person, including, but not limited to, collecting principal, interest, or other charges under the terms of a loan, before the loan is modified, including charges to establish a new payment schedule for a non-delinquent loan.
Fees Already Collected Prior to October 11th Not Affected:
Loan modification agreements entered into and advance fees already collected on or before October 11, 2009 are not affected. Any advance fees collected after October 11, 2009 must be fully refunded to the clients. Even if the DRE issued a "no objection" letter, licensees may no longer collect advance fees despite executed loan modification agreement.
This new law, which went into effect on October 11, 2009 (and expires January 1, 2013), prohibits any person, including licensed real estate brokers and attorneys who negotiate, attempt to negotiate, arrange, attempt to arrange, or otherwise offer to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower related to mortgages and deeds of trust secured by residential real property containing one to four dwelling units to do any of the following:
- Claim, demand, charge, collect, or receive any compensation until after the licensee has fully performed each and every service the licensee contracted to perform or represented that he/she/it would perform.
- Take any wage assignment, any lien of any type on real or personal property, or any other security to secure the payment of compensation.
- Take any power of attorney from the borrower for any purpose.
No Dividing Services into Phases to Avoid Advance Fee Law:
The new language in California Business & Professions Code Section 10026 that defines "Advance Fee" has been modified to clarify that services may not be divided into phases to avoid the new law: "Neither an advance fee nor the services to be performed shall be separated or divided into components for the purpose of avoiding the application of this section."
Lenders and Loan Servicers Are Exempt from Advance Fee Law:
This law further provides that these provisions do not apply to actions taken by a person who offers loan modification or other loan forbearance services for a loan owned or serviced by that person, including, but not limited to, collecting principal, interest, or other charges under the terms of a loan, before the loan is modified, including charges to establish a new payment schedule for a non-delinquent loan.
Fees Already Collected Prior to October 11th Not Affected:
Loan modification agreements entered into and advance fees already collected on or before October 11, 2009 are not affected. Any advance fees collected after October 11, 2009 must be fully refunded to the clients. Even if the DRE issued a "no objection" letter, licensees may no longer collect advance fees despite executed loan modification agreement.
Tuesday, August 25, 2009
Caution - if it sounds too good to be true........
One of our clients contacted us last week asking if we were familiar with an FHA loan offering with a super low interest rate of 4 7/8 %. He had received a letter in the mail with government-type headings/logos, using the pretext of the government's stimulus bill as the reason behind the low interest rate.
The closing costs seemed super high so he wondered if we had heard of this program. We had not and told him to proceed with caution but only after checking with several other mortgage professionals the team had experience with and trusted.
When he called the number on the letter for more information, they finally admitted that this was not an FHA loan, and the very low rate of 4 7/8% had a point included in the closing costs.
He asked that we let other clients know there are still unscrupulous loan folks out there trying to take advantage so remember….
If it sounds too good to be true, it probably is! Be careful out there.
Questions? Concerns? Contact us and we’ll help. That’s what we are here for.
The closing costs seemed super high so he wondered if we had heard of this program. We had not and told him to proceed with caution but only after checking with several other mortgage professionals the team had experience with and trusted.
When he called the number on the letter for more information, they finally admitted that this was not an FHA loan, and the very low rate of 4 7/8% had a point included in the closing costs.
He asked that we let other clients know there are still unscrupulous loan folks out there trying to take advantage so remember….
If it sounds too good to be true, it probably is! Be careful out there.
Questions? Concerns? Contact us and we’ll help. That’s what we are here for.
Saturday, August 8, 2009
How to Get the First-Time Home Buyer Tax Credit
This article is from the Realtor.org Essentials for August, 2009:
You've decided to purchase a home and take advantage of the 2009 First-Time Home Buyer Tax Credit. Here's what you have to do to get your benefit:
Close on your home purchase by November 30, 2009,
Ensure that you are a qualified first-time buyer under IRS guidelines,
Decide which year to file under, 2008 or 2009,
File an amended 2008 return or choose to apply the credit to your 2009 tax return.
Deciding When to Apply the Credit
If you want the benefits of your credit as soon as possible:
You might choose to file under your 2008 tax year. Since April 15 has already passed, you would have to file an amendment to your return. However, if you've already filed for an extension of your 2008 return, then you can simply claim the credit when you submit your return.
If you anticipate a drop in income next year:
You can wait to claim the credit as part of your 2009 filing. In some cases the value of the credit might be higher, particularly if in 2008 you qualify for only a partial credit because your income is over $75,000 (single) or $150,000 (joint).
Your Next Steps
Once you have determined which year to apply the tax credit, you will need to do two things to claim the credit:
1. Fill out Form 5405 to determine the amount of your available credit, and
2. File an amended return for your 2008 taxes, or wait and apply to credit when you file your 2009 tax return.
You've decided to purchase a home and take advantage of the 2009 First-Time Home Buyer Tax Credit. Here's what you have to do to get your benefit:
Close on your home purchase by November 30, 2009,
Ensure that you are a qualified first-time buyer under IRS guidelines,
Decide which year to file under, 2008 or 2009,
File an amended 2008 return or choose to apply the credit to your 2009 tax return.
Deciding When to Apply the Credit
If you want the benefits of your credit as soon as possible:
You might choose to file under your 2008 tax year. Since April 15 has already passed, you would have to file an amendment to your return. However, if you've already filed for an extension of your 2008 return, then you can simply claim the credit when you submit your return.
If you anticipate a drop in income next year:
You can wait to claim the credit as part of your 2009 filing. In some cases the value of the credit might be higher, particularly if in 2008 you qualify for only a partial credit because your income is over $75,000 (single) or $150,000 (joint).
Your Next Steps
Once you have determined which year to apply the tax credit, you will need to do two things to claim the credit:
1. Fill out Form 5405 to determine the amount of your available credit, and
2. File an amended return for your 2008 taxes, or wait and apply to credit when you file your 2009 tax return.
Saturday, August 1, 2009
San Francisco Real Estate Market is Stable and Improving!
This just in from the SF MLS:
As reported earlier, the nationally recognized real estate economic consulting firm of Rosen Consulting Group has been retained by the Association to prepare monthly reports on the condition of the San Francisco economy and the residential real estate market and to issue them to the press with accompanying press releases. The monthly reports will include the following:
Analyses of various for-sale housing statistics, utilizing housing data provided by Terradatum:
Median home price and change in home prices;
Average days on the market;
Month’s supply of inventory; and
The number of homes for sale on the market.
Rosen Consulting Group’s view of the current housing and mortgage markets.
A brief description of the employment situation in San Francisco, using employment data from the Bureau of Economic Analysis.
The July report is imbedded within this blog.
As reported earlier, the nationally recognized real estate economic consulting firm of Rosen Consulting Group has been retained by the Association to prepare monthly reports on the condition of the San Francisco economy and the residential real estate market and to issue them to the press with accompanying press releases. The monthly reports will include the following:
Analyses of various for-sale housing statistics, utilizing housing data provided by Terradatum:
Median home price and change in home prices;
Average days on the market;
Month’s supply of inventory; and
The number of homes for sale on the market.
Rosen Consulting Group’s view of the current housing and mortgage markets.
A brief description of the employment situation in San Francisco, using employment data from the Bureau of Economic Analysis.
The July report is imbedded within this blog.
Saturday, June 6, 2009
HUD provides more details on how the $8,000 tax credit can be used.
May 29, 2009
MORTGAGEE LETTER 2009-15
TO: ALL APPROVED MORTGAGEES
SUBJECT: Using First-Time Homebuyer Tax Credits
The American Recovery and Reinvestment Act of 2009 (Recovery Act) provides for as much as an $8000 tax credit to qualified first-time homebuyers. FHA supports this important initiative to promote homeownership. This mortgagee letter provides:
· Basic information on the first-time homebuyer credit obtained from the Internal Revenue Service (IRS) website. Complete information on how the first time homebuyer tax credit works, including the eligibility requirements for the tax credit, the amount of the tax credit that a first-time homebuyer may be eligible to receive, and how a homebuyer may claim the tax credit is available on the IRS website at http://www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet7.
· Guidance on how FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local government agencies or instrumentalities may assist homebuyers that are eligible for the tax credit.
I. About the First-Time Homebuyer Tax Credit
Please check the IRS website to ensure you have up-to-date information. A brief overview of the tax credit from the IRS website and a copy of IRS Form 5405 (including instructions) are attached for reference.
Pursuant to 31 U.S.C. 3727 and 26 U.S.C. 6402, a refund of the first-time homebuyer credit will be made by the IRS only to the taxpayer, not to a third party. In other words, any refund issued in response to a claim for this credit cannot be assigned by a taxpayer to a third party.
II. FHA Tax Credit Guidance
Secondary Financing
Consistent with existing FHA policy, FHA will permit entities covered by Section 528 of the National Housing Act to use the current authority to offer tax credit advances with second liens in a manner consistent with the requirements in 12 U.S.C. 1709(b)(9). Eligible government agencies and instrumentalities of government are described in handbook HUD-4155.1 5.C3 and 5.C4.
Conditions:
· The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower.
· The second lien may not exceed the total amount needed for the down payment, closing costs, and prepaid expenses.
· Secondary financing may be “soft” (silent) or require a monthly repayment.
· If payments are required, they must be included within the qualifying ratios and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.
· Payments must be deferred for at least 36 months to not be included in the qualifying ratios.
· If the tax credit advance loan has a short term for repayment, it must also provide that if the borrower fails to repay by the designated deadline, principal and interest payments begin automatically or the loan converts to a “soft” second.
· The secondary financing may not require a balloon payment before ten years.
Purchase of Tax Credit
FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local governmental agencies and instrumentalities thereof may purchase the tax credit anticipated by the homebuyer.
Conditions:
· The proceeds of the sale of the tax credit may not exceed the anticipated tax credit due the homebuyer based on the computations of form IRS 5405;
· The borrower must submit a signed certification that the tax credit is not subject to offset due to other indebtedness.
· A copy of the borrower’s tax refund and/or the IRS 5405 must be collected and retained in the FHA case binder.
· Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer. In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive. (Example: $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)
· Pursuant to 12 U.S.C. 1709(b)(9), the homebuyer’s downpayment required for eligibility for FHA insurance may not consist of any funds (including funds derived from a sale of the homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction (or by any third party or entity that is reimbursed, directly or indirectly, by the financially benefiting person or entity). Accordingly, the proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefiting person or entity), may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs.
Due Diligence
FHA expects that entities purchasing tax credit assets will employ appropriate due diligence measures including, but not limited to:
· Require the homebuyer to draft and provide the IRS form 5405 “First-Time Homebuyer Credit.”
· Contact the borrower’s employer and review pay stubs to confirm there are no outstanding garnishments.
· Review the homebuyer’s credit report to ensure there are no unpaid student loans, or other obligations that could be offset against the credit.
· Validate that all of the eligibility requirements for the tax credit are fulfilled
· Review previous tax returns and IRS tax assessment letters, if any, to determine that the borrower does not have unsettled obligations to the IRS
III. Monitoring
In order to track the tax credit monetization activities, FHA will require FHA-approved mortgagees to input into FHA Connection the following data:
· Name and EIN of the party who purchased the tax credit,
· The amount of the anticipated credit, and
· The amount the homebuyer paid for the monetization services.
The lender must also collect and maintain in the FHA case file the documentation that validates all of the tax credit monetization data submitted via FHA Connection.
FHA will monitor the purchase of tax credit transactions closely. Charging of excessive fees or costs in the purchase of the tax credit or increasing other fees or charges in the transaction without FHA approval may result in referral to the Mortgagee Review Board, and particularly with respect to entities that are not FHA-approved mortgagees, referral to the Federal Trade Commission, or referral to the appropriate State Attorney General office, as may be applicable.
If you have any questions regarding this mortgagee letter, please call FHA’s Resource Center at 1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).
Sincerely,
Brian D. Montgomery
Assistant Secretary for Housing-
Federal Housing Commissioner
Attachments
IRS Form 5405
IRS Tax Credit Summary
MORTGAGEE LETTER 2009-15
TO: ALL APPROVED MORTGAGEES
SUBJECT: Using First-Time Homebuyer Tax Credits
The American Recovery and Reinvestment Act of 2009 (Recovery Act) provides for as much as an $8000 tax credit to qualified first-time homebuyers. FHA supports this important initiative to promote homeownership. This mortgagee letter provides:
· Basic information on the first-time homebuyer credit obtained from the Internal Revenue Service (IRS) website. Complete information on how the first time homebuyer tax credit works, including the eligibility requirements for the tax credit, the amount of the tax credit that a first-time homebuyer may be eligible to receive, and how a homebuyer may claim the tax credit is available on the IRS website at http://www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet7.
· Guidance on how FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local government agencies or instrumentalities may assist homebuyers that are eligible for the tax credit.
I. About the First-Time Homebuyer Tax Credit
Please check the IRS website to ensure you have up-to-date information. A brief overview of the tax credit from the IRS website and a copy of IRS Form 5405 (including instructions) are attached for reference.
Pursuant to 31 U.S.C. 3727 and 26 U.S.C. 6402, a refund of the first-time homebuyer credit will be made by the IRS only to the taxpayer, not to a third party. In other words, any refund issued in response to a claim for this credit cannot be assigned by a taxpayer to a third party.
II. FHA Tax Credit Guidance
Secondary Financing
Consistent with existing FHA policy, FHA will permit entities covered by Section 528 of the National Housing Act to use the current authority to offer tax credit advances with second liens in a manner consistent with the requirements in 12 U.S.C. 1709(b)(9). Eligible government agencies and instrumentalities of government are described in handbook HUD-4155.1 5.C3 and 5.C4.
Conditions:
· The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower.
· The second lien may not exceed the total amount needed for the down payment, closing costs, and prepaid expenses.
· Secondary financing may be “soft” (silent) or require a monthly repayment.
· If payments are required, they must be included within the qualifying ratios and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.
· Payments must be deferred for at least 36 months to not be included in the qualifying ratios.
· If the tax credit advance loan has a short term for repayment, it must also provide that if the borrower fails to repay by the designated deadline, principal and interest payments begin automatically or the loan converts to a “soft” second.
· The secondary financing may not require a balloon payment before ten years.
Purchase of Tax Credit
FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local governmental agencies and instrumentalities thereof may purchase the tax credit anticipated by the homebuyer.
Conditions:
· The proceeds of the sale of the tax credit may not exceed the anticipated tax credit due the homebuyer based on the computations of form IRS 5405;
· The borrower must submit a signed certification that the tax credit is not subject to offset due to other indebtedness.
· A copy of the borrower’s tax refund and/or the IRS 5405 must be collected and retained in the FHA case binder.
· Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer. In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive. (Example: $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)
· Pursuant to 12 U.S.C. 1709(b)(9), the homebuyer’s downpayment required for eligibility for FHA insurance may not consist of any funds (including funds derived from a sale of the homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction (or by any third party or entity that is reimbursed, directly or indirectly, by the financially benefiting person or entity). Accordingly, the proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefiting person or entity), may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs.
Due Diligence
FHA expects that entities purchasing tax credit assets will employ appropriate due diligence measures including, but not limited to:
· Require the homebuyer to draft and provide the IRS form 5405 “First-Time Homebuyer Credit.”
· Contact the borrower’s employer and review pay stubs to confirm there are no outstanding garnishments.
· Review the homebuyer’s credit report to ensure there are no unpaid student loans, or other obligations that could be offset against the credit.
· Validate that all of the eligibility requirements for the tax credit are fulfilled
· Review previous tax returns and IRS tax assessment letters, if any, to determine that the borrower does not have unsettled obligations to the IRS
III. Monitoring
In order to track the tax credit monetization activities, FHA will require FHA-approved mortgagees to input into FHA Connection the following data:
· Name and EIN of the party who purchased the tax credit,
· The amount of the anticipated credit, and
· The amount the homebuyer paid for the monetization services.
The lender must also collect and maintain in the FHA case file the documentation that validates all of the tax credit monetization data submitted via FHA Connection.
FHA will monitor the purchase of tax credit transactions closely. Charging of excessive fees or costs in the purchase of the tax credit or increasing other fees or charges in the transaction without FHA approval may result in referral to the Mortgagee Review Board, and particularly with respect to entities that are not FHA-approved mortgagees, referral to the Federal Trade Commission, or referral to the appropriate State Attorney General office, as may be applicable.
If you have any questions regarding this mortgagee letter, please call FHA’s Resource Center at 1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).
Sincerely,
Brian D. Montgomery
Assistant Secretary for Housing-
Federal Housing Commissioner
Attachments
IRS Form 5405
IRS Tax Credit Summary
Friday, May 29, 2009
HUD reverses plan to allow use of $8000 tax credit for downpayment
On May 14th, HUD announced that first-time homebuyers would soon be able to access their $8,000 federal tax credit when closing on a home through a short-term bridge loan that will cover their down payment on FHA-backed loans.
HUD officials on Monday, May 18th reversed this earlier decision and details backing the 5/14 announcement were withdrawn from the HUD website.
Despite favorable reaction from the real estate industry to the bridge-loan proposal, not everyone was in favor of using the tax credit as collateral on a down-payment loan.
The loans also could have potentially created income-tax issues, according to the IRS officials who derailed HUD's plan.
This doesn't mean that HUD and lawmakers will not allow this in the future. Stay tuned - we'll keep you posted!
HUD officials on Monday, May 18th reversed this earlier decision and details backing the 5/14 announcement were withdrawn from the HUD website.
Despite favorable reaction from the real estate industry to the bridge-loan proposal, not everyone was in favor of using the tax credit as collateral on a down-payment loan.
The loans also could have potentially created income-tax issues, according to the IRS officials who derailed HUD's plan.
This doesn't mean that HUD and lawmakers will not allow this in the future. Stay tuned - we'll keep you posted!
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