Tips for Taxpayers

“Short sale” is when the lending institution is willing to accept the sale of the property at a sales price which is less than the outstanding debt on the property.  The debt that is forgiven is considered cancellation of debt (COD) and has been historically taxable income to the taxpayer.  You will receive a Form 1099-C reporting the amount of cancelled debt when the property sells that, failing an exception, will be taxable.   Under The Emergency Economic Stabilization Act of 2008, taxpayers can exclude (subject to limits) from gross income the discharge of qualified principal residence indebtedness which is debt secured by the principal residence incurred in acquiring, constructing, or substantially improving your principal residence.  It also includes any debt resulting from refinancing of debt incurred to acquire, construct, or substantially improve your principal residence but only to the extent the amount of debt does not exceed the amount of the refinanced debt.   The taxpayer must file form 982 to exclude the allowable portion of COD income.  You must do ananalysis of the use of equity line proceeds to determine if forgiveness of this debt qualifies.  Note that there are other ways to avoid COD income (bankruptcy, insolvency, certain farm and qualified real property business debt).This memo is not designed to answer specific questions.  Contact your tax advisor to get details on your specific situation. Please visit our website at www.thebosmagroup.com.

An amazing new piece of legislature on Nevada Foreclosures which will go into effect July 1st and will truly help people stay in their primary residences. This is Assembly Bill No. 149 which specifies that when a Notice of Default is sent by the lender, they must also send a certified notice of mediation that gives the borrower the right to negotiate a modification of their loan prior to the foreclosure.

This will be an amazing task for lenders since they will be required to provide the original or certified original copies of the loan docs, deed, etc. and must have a principal representative physically present or by telephone that has the authority to negotiate the modification with an assigned mediator of the court and borrower.

If the lender blows off the mediation the mediator can file a petition to modify the loan since the lender did not act in good faith and the court can proceed to do a modification.

This is going to be an incredible hammer for those loan modification professionals that have been blocked by deaf banking negotiators and for Realtors that are trying to desperately process short sales while walking the plank to foreclosure with their clients.

It’s all very exciting and as I have reported before the rules of are constantly changing in this epic saga of the Banks vs the People. And yes, if you look up on July 1, 2009 you will see pigs flying and doing U-Turns.

Thank you Assembly people; Buckley, Oceguera, Conklin, Leslie, Smith, Aizley, Anderson, Atkinson, Bobzien, Claborn, Denis, Dondero, Goicoechea, Grady, Kovisto, Loop, Manendo, Mastruluca, McClain, Munford, Ohrenschall, Parnell, Pierce, Segerblom, Settlemeyer, Spiegel, Stewart and Senators Horsford and Coffin.

Facing a problem in the future with your home and need to discuss your options? Give me a call for a confidential consultation. I think that there’s a solution out there that you will want to know about.

 All the best,

Michelle D. Plevel - 775.850.5900

mplevel@chaseinternational.com

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT    WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSING  FEDERAL HOUSING COMMISSIONER

www.hud.gov espanol.hud.gov

May 29, 2009

 

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.

2

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:

3

• 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

 

Here’s a few details for the week. The market is heating up and this is obvious with the interest rates increasing. If you were thinking of waiting for the bottom of the market to hit before you purchased that dream home for half the cost of construction, you may want to jump now. There are instant sales going on below the $400K range and we haven’t seen this type of aggressive market since the days of 05′ when people were standing all night with checks in hand to put multiple offers on homes that were not even built yet! Double Diamond and Damonte Ranch are slammed with listings that go pending in just days. It’s an indication that the market is hot again for buyers that is, sellers are loosers but at least they get out of the debt cycle. Give me a call to track your deal, instant notification via the MLS to you when a new listing get’s in the system. You know before the realtor knows because they are busy showing property and not watching the daily new inventory.   Cheers, Michelle   775.750.5777   mplevel@chaseinternational.com BankRate.com Online News for the Week

Mortgage rates surged for the second straight week. The average 30-year fixed rate jumped 20 basis points, to 5.65 percent. A basis point is one-hundredth of a percentage point. The 30-year fixed has increased 41 basis points over the past two weeks. This week’s average 15-year fixed-rate — a popular option for refinancing — also surged 20 basis points, to 5.06 percent. The average jumbo 30-year fixed rose 8 basis points, to 6.68 percent. Adjustable-rate mortgages were split. The one-year, adjustable-rate mortgage fell 2 basis points, to 5.01 percent. The popular 5/1 ARM jumped 26 basis points, to 5.2 percent. Mortgage application activity fell 16.2 percent for the week ending May 29 when compared to a week earlier, according to the Mortgage Bankers Association. Refinancing activity plunged sharply for the second straight week, down 24.1 percent. The recent climb in mortgage rates appears to be taking a bite out of refinance activity, with the MBA’s four-week moving average now down 12 percent. In other mortgage news: Pending home sales increased for the third straight month in April, according to the National Association of Realtors. Sales rose 6.7 percent, to a reading of 90.3, the biggest monthly jump since October 2001. Mortgage delinquencies and foreclosures reached record levels during the first quarter of 2009, according to the MBA. The delinquency rate was a seasonally adjusted 9.12 percent of all loans outstanding at the end of the first quarter. In addition, foreclosure actions began on 1.37 percent of all first mortgages during the first three months of the year.

Thanks to an attorney in California and here’s his contact information you may want to  be advised of your position in a short sale with Countrywide these days as well as knowing if your Realtor is giving you the correct information such as “see your attorney and CPA before signing the final docs at escrow.” Call me for a local attorney referral and CPA that knows the ropes. Nevada rules are slightly different from Calfornia but the negotiations are the same.

John McConnin, Attorney  McConnin & Company Realty

450 B Street, Suite 1430 San Diego, CA, 92101

Office: 760.431.0485 jmcconnin@gmail.com UpsideDownRealEstate.com  

This new template is a significant departure from Countrywide’s previous short sale approval templates.

Going forward, sellers can look forward to tough negotiations with Countrywide.  People with “Purchase Money - non recourse” loans may not wish to complete their short sale and people with recourse loans may want to stay current on their first loan until they speak with an attorney.   

If countrywide is your lender, make sure your Short Sale negotiator knows how to gain some leverage against them.  Dealing with Countrywide is no longer safe for amateurs.  Even top short sale realtors are likely to hear excuses such as - we can’t change the wording.  Or, we only seek a deficiency if it is legal and we can not seek a deficiency in this situation. Don’t believe it, unless it is in writing or you have talked it over with counsel. 

Imagine what you will be saying when a collection law firm calls you and says you owe for the entire balance of your second loan.  Are you going to say - “hey the negotiator at countrywide told my Realtor that countrywide could not collect the deficiency under California law.  Therefore, please cease your collection activity and stop dinging my credit…”

Update: March 03, 2009, Countrywide is even using this template on some of their senior liens.  Before you begin the short sale process you should make sure you know all your options.

If you have loans with Countrywide or Bank of America, you may wish to consider RESPA requests and loan lender liability audits.

 Here is their new approval letter:

——————————————-

This letter will serve as Countrywide’s demand for payment and advises you that Countrywide and/or its Investors and/or Insurers have agreed to accept a short payoff involving the above referenced property and the referenced account(s).  This demand should be used by the closing agent as our formal demand statement.  No additional statement will be issued.  This approval is exclusive to the offer from the buyer referenced in this letter. 

   

what this means to the seller

 

Countrywide and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above.  In addition, if this loan is covered by mortgage insurance, the mortgage insurance company may reserve the right to pursue the seller for the deficiency based on the terms of the mortgage insurance policy Furthermore, there may be tax consequences associated with entering into a short sale. The seller is encouraged to seek the guidance from an independent tax advisor, and/or an attorney, before proceeding with the short sale.

   

If this short sale is contingent upon Countrywide and/or its investors receiving a promissory note, we will reserve the right to collect the full amount on the new promissory note which may lead to us pursuing a deficiency on that balance should the need arise.  If the short sale does not close, then we will pursue all remedies under our note and mortgage.  

 

The conditions of the approval are as follows:

 

1. Closing must take place no later than            or this approval is void.
2. The approved buyer(s) is/are the sales price for the property is
3. Another buyer cannot be substituted without the prior written approval of Countrywide.
4. Closing costs including realtor commission is not to exceed $           . This figure includes the payoff in the amount of $3,000.00 to the 2^nd lien.
5. Proceeds to Countrywide to be no less than $3,000.00
6. The property is being sold in “AS IS” condition.  No repairs will be made or be paid out of the proceeds, unless specifically stated otherwise.
7. Seller is to contribute $0.00, to assist in the closing of this transaction.  This contribution will be in the form of:

 

PROMISSORY NOTE (Signed and returned prior to closing):  $0.00

CERTIFIED FUNDS CONTRIBUTION (Due before closing):  $0.00

 

If a promissory note is required, it must be signed and returned to Countrywide prior to the close of escrow.  It is the responsibility of the closing agent to ensure that the promissory note is signed and returned to Countrywide.

 

If a promissory note has already been signed and agreed to between the seller, investor and the Mortgage Insurance Company, a signed certified copy must be provided to Countrywide prior to the close of the short sale transaction.  It is the responsibility of the closing agent to ensure that Countrywide receives the copy.

 

*** Sales proceeds will be returned if the note has not been received.  This will result in a delay of the transaction and/or possible cancellation of this short sale transaction. ***

 

8. The sellers will not receive any proceeds from this short sale transaction.  If there are any remaining escrow funds or refunds, it will not be returned to the seller; it will be sent to Countrywide to offset the loss. 
9. The property must be free and clear of liens and encumbrances other than those recognized and accounted for in the HUD-1 approval, on which this approval is based.
10. Countrywide does not charge the borrower for statement, demand, recording, and reconveyance fees on short payoff transactions.  Do not include them in your settlement statement.  Countrywide prepares and records its own reconveyances. 
11. Other:  All funds must be wired.  Any other form of payment of funds will be returned.  Payoff funds must be received within 48 business hours of the HUD-1 settlement date.
12. Other:  Should the closing be delayed and the Investor/Insurer agree to an extension of the original closing date, the Borrower(s)/Seller(s) will be responsible for any per diem fees through the new date(s) of closing, extension fees and foreclosure sale postponement fees.  The Borrower(s)/Seller(s) will be responsible for any additional costs or fees over the stated approved amounts.
13. Realtor’s commission, paid from proceeds, not to exceed $
14.  

If the seller is entitled to receive any proceeds based on a claim for damage to the property under any policy of insurance, including homeowner’s, lender-placed, casualty, fire, flood, etc., or if seller is entitled to receive other miscellaneous proceeds, as that term is defined in the deed of trust/mortgage (which could include Community Development Block Grant Program (CDBG) funds), these proceeds must be disclosed before we will consider the request for short sale.  If we receive a check for insurance or miscellaneous proceeds that were not previously disclosed, Countrywide will have the right to keep the proceeds and apply them to Countrywide’s loss after the short sale.  We similarly would have the right to claim the proceeds to offset our losses if it were not previously disclosed and it was sent directly to the borrower.

Amazingly enough, these fraudulent notes are being used to purchase real estate too….

---

The U.S. Department of the Treasury (Treasury), Office of Inspector General, is investigating incidences whereby individuals are using fraudulent Treasury-related financial obligations or accounts to attempt purchases or pay debts.  Fraud perpetrators across the nation have recently begun to use fraudulent promissory notes and/or private bonds as vehicles to defraud investors out of hundreds of millions of dollars. 

The Department of the Treasury is also aware of several fraudulent schemes that involve what are claimed to be securities issued or backed by the Treasury Department or another part of the U.S. Government.  These scams have been directed towards banks, charities, individuals, and companies which seek payment on the fraudulent securities.  

Recently, Treasury OIG has become aware of a different variation of this scheme.  Individuals are obtaining routing numbers from two Treasury bureaus, the Financial Management Service (FMS) and the Bureau of the Public Debt (BPD).  Fraudulent seminars are being held throughout the United States, which teach attendees how to create the aforementioned fictitious documents and how to use federal routing numbers.  Individuals are now creating false checking accounts with the federal routing numbers, using their social security number as the checking account number, and listing the bank as either the FMS or the BPD.  Be advised that as Treasury bureaus and the Treasury Direct Program do NOT offer checking accounts for the public,  they will NOT honor any of these checks.

Sample fraudulent documents, which falsely utilize names of Treasury bureaus and/or officials, are provided below for reference.  These documents are NOT valid negotiable financial instruments and recipients should NOT respond to, nor act upon, such documents.  In addition to browsing the documents below, you may visit the official website of the Bureau of the Public Debt for more information on this topic and how to avoid becoming a victim of this type of fraud.

WASHINGTON, May 27, 2009

Existing-home sales rose in April with strong buyer activity in lower price ranges, according to the National Association of Realtors^®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 2.9 percent to a seasonally adjusted annual rate¹ of 4.68 million units in April from a downwardly revised pace of 4.55 million units in March, but were 3.5 percent below the 4.85 million-unit level in April 2008.

Lawrence Yun, NAR chief economist, said first-time buyers continue to influence the market but there also is a seasonal rise of repeat buyers. “Most of the sales are taking place in lower price ranges and activity is beginning to pick up in the midprice ranges, but high-end home sales remain sluggish,” he said. “The Federal Reserve needs to help restore liquidity for the jumbo mortgage market by buying these loans under the TALF program.”

“Because foreclosed properties will likely be released into the market over the rest of year, it is critical that distressed homes be quickly cleared from the market,” Yun said. “Fortunately, home buyers are being attracted to deeply discounted prices and are bidding up many foreclosed listings, particularly in California, Nevada, and Florida – this will set the stage for healthy market conditions going forward.”

An NAR practitioner survey in April showed first-time buyers declined to 40 percent of transactions, implying more repeat buyers are entering the traditional spring home-buying season. It also showed the number of buyers looking at homes has increased 14 percentage points from a year ago. “This is consistent with our forecast for home sales in the latter part of the year to be 10 to 20 percent higher than the second half of 2008,” Yun said.

Realtors.com

Help is on the way for many homeowners who are facing foreclosure, thanks to new details under the Making Home Affordable Program announced today by the U.S. Treasury and the U.S. Department of Housing and Urban Development.

The Making Home Affordable Program is designed to help homeowners obtain modifications to their loan so they can afford to stay in their home. Where a modification is not possible, new incentives encourage the “quick private sale or voluntary transfer of property, which will save homeowners money and protect their financial future,” according to U.S. Treasury Secretary Timothy Geithner. The National Association of Realtors® expects that a uniform process for handling short sales and financial incentives will facilitate this process. View a summary of the incentives and process (PDF)

“NAR is pleased that the government is stepping in to help prevent foreclosures by streamlining the short-sale and deeds-in-lieu process,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “NAR has been calling for uniform short sales procedures and other initiatives that will help today’s homeowners in challenging economy.”

Short sales occur when a bank agrees to let homeowners who have fallen behind on their mortgage to sell their home for less than they owe on their mortgage. Visit www.treasury.gov for detailed information on the program changes.

“Many families are finding themselves with a mortgage that is higher than their current home value, and they are struggling,” said McMillan. “As Secretary Geithner noted, and as NAR has been advocating for many months, stemming the foreclosure crisis and stabilizing the housing market are critical to our economic recovery.”

“We have heard from Realtors® that the extensive delay in the short sale process had caused many buyers to go elsewhere and have left many would-be sellers with no option but foreclosure. We are all pleased that the government has stepped in to help homeowners and those wishing to buy a home,” McMillan said.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Tomorrow if you are headed up to Lake Tahoe via the Mount Rose Highway and you see thousands of cars toodling down the road to the Galena High School, don’t panic. This is a giant fire drill for the folks of Montreux, St. James Village, Galena, Callahan Ranch, Rolling Hills and Timberline to mention a few thousand homes.

The residents are officially being asked to voluntarily evacuate their homes. This is a first time ever drill of this magnitude and I think that the experts are trying to tell us something important. We are merging into a deadly fire season and with Santa Barbara still fighting for homes, it seems like our troops here are preparing for an all out bitter scenario if it happens.

The drill is being conducted by the Sierra Fire Protection District, the National Guard, Washoe County Sheriffs department and other important medical emergency groups. It sounds like a huge project and it will be. The residents will be asked by phone to evacuate to the Galena High School based on a scenario of an “slow-moving” fire moving from Davis Creek Regional Park to the timber line.

Yikes, this could be a really beneficial exercise and I hope that all goes well. The Washoe County Emergency Management is filming the event so they can help train with the video in the near future.

Bring the kids, there should be booths that they can scoop up fun stuff and learn about why playing with fire is so dangerous.

Northgate Golf Course is having problems in finding anyone to accept the responsibility of running the now closed course. The problem is locating water rights and equipment to the tune of $5 million and that’s a lot of dough theses days to pony up for a marginal return at best. There is no hope to open up the course again.

The county is running numbers on the feasibility of turning the course into a park but until the the commission gets in gear the future of this pristine 240 plus acres is up for grabs. The original deed restrictions require the property to revert to the heirs of RJB Development if the course is not operational and since December 08, it’s been totally closed down. The beautiful greens are not alive anymore and the surrounding homes that were so lucky to view the course, now are staring at dying vegetation with very little hope of recovery.

In sixty days, RJB can move forward to dismantle the property and sell to the highest bidder. The county is scrambling to find resources to turn the property into a regional park with trails which would be fabulous but it’s going to take some serious negotiation.

Thinking that our county funds are so stretched that the next lay off of 92 workers includes 25 sheriff’s, I’m concerned about finding the money to buy Northgate. Hopefully a private donor will suddenly appear by mid June to solve this problem. Otherwise, it’s going to become a huge apartment housing development for all those poor people who are loosing their homes in Somersett. Oy…