Keane Loans » Real Estate News

Keane — Mon, 06 Sep 2010 21:16:05 +0000

For years, it has been standard for a mortgage company to request an IRS 4506-T request from their clients. This form allows the mortgage company to order the consumers tax transcripts with the consumers consent. Lenders would keep these forms in closed loan files in the event a transcript would be needed. Lenders did not actually send the request unless they felt there was something they needed to verify. Not anymore.

One of the changes we’ve seen in the mortgage industry is lenders requiring the actual transcripts in a loan file before they’ll close. This means that the tax return filings must be filed and ample time must be given for the IRS to update their database with the filed returns before a consumer can close on the loan. This process can take several months AFTER the IRS actually receives the tax returns! This has caused issues with consumers buying or refinancing who do not have filed tax returns due to extensions or the tax returns are filed but they’re simply waiting for the IRS to show them in their system. What happens if they can’t get the transcript? Simply put, most mortgage lenders will not let the consumer close on a loan. This is not an issue for many consumers but for the few who have late filings or amended returns, this could be disastrous.

I’VE SENT MY MORTGAGE COMPANY MY TAX RETURNS…WHY DO THEY NEED MY TRANSCRIPTS?

For those who haven’t seen a transcript, it’s basically a summary of everything you would see on a 1040 tax return filing. 1040 tax returns are typically requested for a mortgage application and along with all schedules/worksheets, gives all detail as to how the tax return was filed. So why would a mortgage company need a transcript? It’s a good question that I hear often from my clients. Here are several reasons why lenders request IRS transcripts:

WAS THERE SOMETHING WE WERE MISSING?- Transcripts will show figures from all applicable schedules that may not show on the 1040 tax returns. For instance, a Schedule C shows a breakdown of business income and expenses. Also, a Schedule E shows a breakdown of all investment real estate income and expenses. Many consumers will only send the 1040 returns and not include schedules. These figures affect a loan application and the way a lender sees a consumers portfolio.
DID YOU AMEND YOUR TAX RETURNS?- A consumer may be giving their mortgage company a tax return, but what if their accountant did a small amendment that the consumer forgot to disclose? The transcripts will show the correct figures as received by the IRS including any updates.
WE HAVE TO USE THE “F” WORD, BUT HOW DO WE KNOW THE TAX RETURNS AND TAX FORMS AREN’T FRAUDULENT?- Maybe not the “F” word you were thinking of, but in our industry, this word is a million times worse. One of the reasons lenders now request these transcripts is because when they did order transcripts on OLDER loans that defaulted, they found many of them had fraudulent documents including fraudulent tax forms and returns.
ARE YOU BEHIND ON YOUR TAXES?- You can buy a home with taxes due, but you can’t if the IRS files a lien. The consumer transcripts will show if the consumer had a large tax bill due. If there was, the lender is likely to ask for proof that the taxes were paid.

This is one of the reasons it’s so important that both the client and lender follow due diligence and collect ALL documentation prior to committing to a closing date on a loan. Especially on a home purchase where there’s a seller involved. Lenders should be requesting these transcripts at the beginning of the loan process, not the end. I’ve heard too many horror stories of “Approved” consumers who are turned down at closing because the tax transcripts are not available. It’s fairly new, so more mistakes will be made now than later.

I NEED A MORTGAGE AND MY TRANSCRIPTS ARE NOT RECEIVED BY THE IRS…WHAT CAN I DO?

Every lender policy regarding tax transcripts will vary but for the most part, most lenders want these to close. on a loan If you need a mortgage now and haven’t filed your returns, be sure to disclose this to your lender and prepare your returns for filing as soon as possible. When they’re completed and ready to be filed, you can get your returns expedited to the IRS through their local Taxpayer Advocate Service (TAS) office. For those that don’t know who TAS is, here is an excerpt from their website:

The Taxpayer Advocate Service is Your Voice at the IRS!

Taxpayer Advocate Service (TAS) Mission: As an independent organization within the IRS, we help taxpayers resolve problems with the IRS and recommend changes that will prevent the problems.

Here are seven things every taxpayer should know about TAS:

1. TAS is your voice at the IRS.

2. Our service is free, confidential, and tailored to meet your needs.

3. You may be eligible for TAS help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn’t working as it should.

4. TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.

5. TAS employees know the IRS and how to navigate it. We will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.

6. TAS has at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. You can call your local advocate, whose number is in your phone book, in Publication 1546, Taxpayer Advocate Service — Your Voice at the IRS, and on our website atContact Your Advocate. You can also call our toll-free case intake line at 1-877-777-4778.

7. You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www.taxtoolkit.irs.gov

From my experience, a local TAS office can rush the filing, provide receipt of the filed tax returns, provide accurate dates as to when the transcripts will be available and sometimes even write letters in behalf of the consumer stating the returns were filed and received by the IRS. This can be very helpful if you need to close on your home loan quickly.

All Changes for the Home Buyer Tax Credit are in Effect November 7th, 2009

Keane — Mon, 09 Nov 2009 22:39:41 +0000

Until the end of this month, it’s important that we know the effective date of the Home Buyer Tax Credit (HR 3548) change.

The changes took effect on November 7th, 2009 which was the day after President Obama signed the bill into law. This means that any transaction closed AFTER November 7th, 2009 will include all of the changes. This includes the provisions for Move-Up Buyers and the income limits which were raised from $75,000 single/ $150,000 married to $125,000 single/ $225,000 married.

Other details of the new bill can be found at the National Association of Realtors announcement.

Tax Credit Bill Extended and Expanded

Keane — Fri, 06 Nov 2009 22:44:19 +0000

It’s official. President Barack Obama signed the bill that includes an extension and expansion of the popular First-Time-Home-Buyer tax credit. which will now include some move up buyers.

In the coming days, I will be discussing all of the details. In the mean time, here are the details I currently have.

The extension and expansion of the tax credit was included in an unemployement benefits bill that also includes assistance for businesses (HR 3548).

The extension will continue until the end of April to have a COMPLETED CONTRACT. This means you do not have to close by the end of April, but at least have a mutually accepted contract between the buyer and seller.
After the transaction has been mutually agreed upon by all parties, the transaction must be closed and finished by the end of June.
The tax credit will remain at $8,000 for First-Time-Home-Buyers
The income limits for the tax credit have been raised to $125,000 for single and $225,000 for married couples, expanding the credit to higher income buyers
The bill also includes a $6,500 tax credit for Move-Up-Buyers, which I believe includes a provision that the Move-Up-Buyer have lived in their current resident for at least 5 of the last 8 years (I will confirm this later)

First Time Home Buyer Tax Credit Extended Through April- Now Includes “Move-Up” Buyers

Keane — Thu, 29 Oct 2009 01:45:18 +0000

CNBC reported on October 28th that the $8,000 First-Time Home Buyer Tax credit will be extended through April 30th, 2010 and will include a credit for “Move Up” buyers.

The reports were given by Senate Majority Leader- Harry Reid’s office to CNBC.

Earlier this week, negotiations of the credit included multiple variations of an extension as mentioned in a related blog post. The new bill is different than any of the previously mentioned bills.

The credit is to extend through April 30th for first time home buyers. Early news reported the credit would reduce to $7,290 but more recent reports state it will remain at $8,000.

The new bill also includes a $6,500 credit to “move-up buyers”. This is designed to motivate existing homeowners to sell and buy new homes. Spencer Rascoff, COO of Zillow.com, talked in his interview on Bloomberg about how approximately One-Third of all home-owners would consider selling under the right circumstances. These homes are what he called “Pent Up Supply.” Giving a tax credit to move-up buyers may help boost the market further.

The current plan is to include the tax extension in the Unemployment Extension Benefits Bill scheduled to be voted on in the next few days.

UPDATE

The bill has already been voted on and has passed through the senate. The details of the bill are finalized and I expect the bill will be signed by President Obama in the upcoming weeks.

$8,000 Tax Credit Extension Approved by Democratic Party

Keane — Wed, 28 Oct 2009 04:16:28 +0000

We have one half of the bill makers in agreement. Senate Banking Committee Chairman Christopher Dodd reported Tuesday that top Democrats in Senate have reached an agreement to extend the $8,000 first-time homebuyer tax credit.

We’re now just waiting for the Republican and Democratic party to agree to the terms of the extension, which may be reached by the end of this week.

There is talk of opening up the credit to all buyers, which I believe could be helpful in moving first-time homebuyers to purchase as well as homeowners who need an incentive to sell their house.

A full article can be found here on www.CNBC.com

First-Time-Home-Buyer Tax Credit Extension Info

Keane — Fri, 23 Oct 2009 03:09:11 +0000

UPDATE October 26th

The most recent proposal for the tax credit to be phased out over time instead of extending may be agreed upon as early as the end of today as reported by Bloomberg.com

The current $8,000 tax credit for first time home buyers is set to expire in approximately a month. Since then, there has been a rush for buyers to find a home and close before the December 1st, 2009 deadline.

In a related CNBC interview, several industry experts discuss whether extending the tax credit is a good idea and some details of some of the bills currently in Congress.

Finding information of the current bills being proposed to Congress isn’t the easiest thing to find. Kudos to Jay Thompson from www.phoenixrealestateguy.com who posted details of the bills last June.

Here are some details of the 6 proposals currently being discussed in Washington as mentioned in his blog. 5 were discussed in a post in June and the 6th on a blog posted last month.

Here is an excerpt from Jay’s June blog post:

Currently there are FIVE bills flitting about Washington, D.C. that would, assuming they are signed into law, either extend or expand the currently existing $8,000 homebuyer tax credit due to end on December 1, 2009.

Senator Johnny Isakson (R-GA) introduced Senate Bill S1230 – the Home Buyer Tax Credit Act of 2009 – on June 10. Senator Isakson created the original $15,000 homebuyer tax credit that morphed into the current $8,000 first-time homebuyer tax credit that became law when the Stimulus Bill was passed. This bill proposes a non-refundable tax credit up to $15,000, that can be split equally over two years, for all primary residence purchases – not just purchases by first time home buyers. The bill has been referred to the Senate Finance Committee for further debate. It has 12 cosponsors, notably including Senator Chris Dodd (D-CT), the Senate Banking Committee Chairman. It would expire one year after enactment.

Representative Kenny Marchant (R-TX) introduced House Bill HR 2619 on May 21. This proposes to extend the existing $8,000 tax credit to July 1, 2010 and adds provisions for a tax credit of up to $3,000 for homeowners who refinance. This bill has been referred to the House Ways & Means Committee for further debate. There are currently no cosponsors.

Representative Eddie Bernice Johnson (D-TX) introduced HR 2606 – the Home Buying Credit Expansion Act – on May 21. This bill proposes to remove the first-time homebuyer requirement (allowing all principle residence purchases to qualify for a tax credit) as well as extends the bill through Jan 1, 2010. It has one cosponsor (Rep Timothy Bishop D-NY) and has been referred to the House Ways & means Committee.

Representative Howard Coble (R-NC) introduced HR 2801 – the Home Ownership Move the Economy (HOME) Act – on June 10. From the Department of Redundancy Department, this bill appears virtually identical to Rep Johnson’s in that it opens the tax credit up to all primary residence purchases and extends the credit to Jan 1, 2011. It has no cosponsors yet and has also been referred to the House Ways & Means Committee.

Representative Dan Burton (R-IN) introduced HR 2655 on June 2. It has picked up six cosponsors, four Republicans and two Democrats. It joins its cousins in the House Ways & Means Committee and also eliminates the first time home buyer requirement while extending the credit to Jan 1, 2011. CLICK HERE TO READ THE ENTIRE POST

Here is an excerpt from Mr. Thompson’s recent post discussing the 6th proposal:

…a sixth bill to extend the tax credit was introduced in the Senate last week. Senate Bill S1678 extends the existing first-time homebuyer tax credit to June 1, 2010. It makes no changes to the requirement that one must be a first time buyer (defined as not owning a home in the last three years) or to income limits that currently exist in the current law. CLICK HERE TO READ THE ENTIRE POST

In the most recent news, Senate Majority Leader Harry Reid is proposing a counter to Senator Johnny Isakson’s Bill S1230. His proposal would extend the credit through December 31, 2010 with a plan to phase the credit down to $6,000 in April through the end of June, $4,000 from July through the end of September and $2,000 from October until the end of the year.

What’s interesting is how much these tax credits differ. Personally, I don’t think making the credit larger will help much. Will a buyer really say, “$8,000 isn’t enough to get me excited. However, $15,000 would do the trick!” Every buyer I’ve talked to is throughly pleased with the amount.

I do think that raising the qualifying income limits, extending it to all home buyers and extending the deadline will. The goal for the tax credit is to incentivize home buyers into making a decision. I’ve found that many of the most undecisive buyers are ones who currently own a home. They know they’re going to lose money when they sell which often hampers their decision. I think an incentive for existing home owners is a great idea. This will help move inventory of sellers who are waiting for the market to turn, which may slow the growth of the real estate market for many years as mentioned by Spencer Rascoff on Bloomberg (Related Blog post here).

UPDATE:

Senate Majority Leader- Harry Reid’s office has reported to CNBC that an agreement has been made to extend the credit through April 30th of 2010.

You can find all the details on this related blog post:

http://www.keaneloans.com/2009/10/28/first-time-home-buyer-tax-credit-extended-through-april/

Technorati Tags: $8000 tax credit extended,$8000 Tax Credit Extension,First Time Home Buyer Tax Credit

Fraud Inquiries Could Be Bad News For a First Time Home Buyer Tax Credt Extension

Keane — Wed, 21 Oct 2009 05:30:19 +0000

Fri. Oct. 23 2009 | 8:15 AM ET
Discussing extending the homebuyer tax credit, with Howard Glaser, former HUD secretary counselor; Shari Olefson, Fowler White Boggs; and CNBC’s Trish Regan.

The IRS (Internal Revenue Service) is reporting there are more than 100,000 suspicious claims involving the $8,000 first-time-home-buyer Tax Credit. Currently there are 167 criminal cases regarding the tax credit.

As the December 1st, 2009 deadline for the tax credit nears, many hope Congress will extend and even potentially increase the tax credit. With over one million claims submitted, there’s no question of it’s success.

Abuse of the tax credit may affect whether Congress decides to extend the credit. Here’s an excerpt from a related article on the Wall Street Journal.

“I am concerned about recent reports that there have been fraudulent schemes involving the credit,” Rep. John Lewis (D., Ga.), chairman of a House Ways and Means oversight subcommittee, said in a statement. The subcommittee is planning a hearing on the problems on Thursday.

READ THE COMPLETE ARTICLE HERE

It’s sad to hear news of this sort. Many of my clients have told me that the tax credit weighed heavily in their decision to buy a home. Most first time home buyers said it’s an influence that’s originated from their parents, who are usually the first ones to mention the credit to them.

Let’s hope that these inquiries aren’t as negative as they appear. 100,000 of one million claims is 10% of the current tax credit claims submitted. That’s an overwhelmingly high percentage. Hopefully the tax payers simply made small mistakes when amending their 2008 returns, which is likely. First Time Home Buyers have the option of amending their 2008 returns or applying the credit to their 2009 returns.

When Will Mortgage Rates and Home Values Hit a Bottom? Basically, When Should I Buy?

Keane — Fri, 16 Oct 2009 20:27:03 +0000

I just finished watching Spencer Rascoff’s interview on Bloomberg where he shared data with regard to mortgage rates and real estate values.

LINK TO INTERVIEW HERE

He felt that we won’t hit the floor for values until late 2010, but it varies by region. He gave an example, showing that Boston had hit it’s floor in early 2009 and is already rising. This is an important factor for homeowners to consider when looking to buy or sell a home

Another point he makes, which I’ve been dreading for months, is rates will likely not stay as low as they are right now without another intervention from the Federal government. Currently, inflation appears to be under control and the government is still purchasing mortgage backed securities. This helps the price of mortgage backed securities stay high which keeps mortgage rates low. However, the government’s current commitment to buying mortgage backed securities will end soon. We also should expect many of the government funded programs to increase inflation. As the price of mortgage backed securities drop and inflation kicks in, mortgage rates will start moving up.

Let’s do a review. Rates are low, but are expected to go up soon. Values are low and are expected to hit their rock bottom (nationally) in 2010. This leads to the question of many first time home buyers, “When is the right time to buy?”

It’s hard to pinpoint the best time to buy a home, but it is easy to make a decision if you want to base your decision on facts alone.

Here are some facts to consider:

30 year Fixed mortgage rates have stayed between 4.5%-5.25% for almost a year.
Home Values have continued to decline but recent signs show the value reductions are slowing
First time home buyers have a $8,000 tax credit that is currently set to expire on December 1st of this year

Is there a chance that values will continue to drop? Depending on the area, absolutely. Can interest rates maintain these levels for a little longer? Sure they can. Will the government extend the first time home buyer tax credit? Potentially, and maybe even likely.

That said it’s hard to imagine that all three factors will continue to exist in perfect harmony as they do now. Whether it is rates, values, or the tax credit; something will give eventually. My guess is that rates will be the first thing to change. In any event, every buyer must consider the consequences of sitting on the sidelines for too long. Buying a house for 5% less in price next year at an interest rate 1% higher will raise the cost of home ownership considerably.

I can’t tell anybody when the right time for them is. Personal, financial and professional factors are different for everyone. One thing we know for certain - there will be thousands, if not millions of Americans wishing they had made a different decision

What that ultimately means is if you can, you should start asking yourself “When?”

How to Find HUD Foreclosed Homes and Special FHA Loans

Keane — Thu, 01 Oct 2009 03:57:58 +0000

I’ve always found it interesting that there are so many websites that claim to have a listing of foreclosed homes. Many of them claim they have HUD (US Department of Housing and Urban Development) foreclosures which are foreclosed homes that had FHA loans.

Though many of these listings may be accurate, there is only one real source to find HUD foreclosures. HUD contracts different management companies to handle their listings, meaning the websites that list real HUD foreclosures haven’t been easy to find. For instance, Ten Management is the company that lists HUD foreclosures for Washington state, as well as many other states.

Luckily for home buyers, HUD has recently updated their site and they now include a directory that directs the borrower to the proper management company. You can find this website here.

I chatted with Derek Eyring who is the owner and broker of John L. Scott- Lake Tapps office. Derek is also a HUD registered agent. Derek told me to buy a HUD home, you must use a real estate agent who is a HUD registered agent or works for a HUD registered agent. Since Derek is a broker for his office, all of his agents can make offers on HUD Foreclosures. Derek told to me that many borrowers didn’t buy HUD foreclosures in the past, but there is more listings than previously and they’re great for first time home buyers.

Many people who are looking for special loans for first time home buyers can also benefit from buying a HUD foreclosure. Here are some benefits of buying a HUD foreclosure using FHA financing.

Potential lower price on home
$100 down
Most homes are 203k eligible (FHA rehabilitation loan)
Properties include a free inspection and appraisal (inspection is on the listing websites to review)

Here are a few tips you’ll want to look into prior to buying a HUD foreclosure

Your real estate agent must be a HUD registered agent or work for a broker who is a HUD registered agent to make offers in your behalf
HUD will not pay for any of the title insurance policy unless it’s included concessions agreed upon on contract
There is usually only one escrow company per area that handles HUD foreclosures. For example, the escrow company for HUD foreclosures in Western Washington is GBS Partners LLC. Make sure your loan officer and real estate agent contact the local HUD escrow office and find out how long the process is. When I contacted GBS, they told me that the transaction cannot close for 10 days after the borrower signs! It’s important you plan accordingly so you know when you’ll be moving and how long you should lock your mortgage rate for.

Doug Stokes, a John L. Scott- Tacoma South agent who has specializes in HUD foreclosure transactions for years, told me in 2008, there would usually be only 1-3 listings in King county at any given time and 2-4 in Pierce County. Doug has since told me that the available listings are usually more than double than last year. At the time I spoke with Doug, King County had 8 listings and Pierce County had 7.

What is My House Worth?

Keane — Sat, 26 Sep 2009 19:17:30 +0000

Whether you’re looking to sell your house or just take a glance, this is a question that many homeowners are wondering.

The first place to check is Zillow, which is a real estate website designed to aid consumers in finding information on real estate and home loans. The site was originally created to tell consumers what the estimated value of any given property was.

I also recently found a calculator fron the Federal Housing Finance Agency that estimates the value of a home by the average increase or decrease in value over a period of time. It uses 4 variables to determine your value:

What area your house is (State or City)
When you purchased your house
A Valuation time
the price you paid for the house

Here is a link to the Federal Housing Finance Agency’s calculator.