First-Time Buyers Reap Recovery Act Benefits

Here is an article that I copied and pasted from an e-mail that I received from a first-class mortgage broker that I know. Enjoy.

First-Time Home Buyers in 2009 to Reap Recovery Act Benefits

Homeownership Could Unlock Variety of Additional Deductions

February 23, 2009: 02:31 PM ET

Taxpayers on the fence about buying their first home may want to consider the American Recovery and Reinvestment Act’s tax credit that could mean up to an $8,000 break on their taxes. Not only will this tax credit lower a taxpayer’s tax liability by the amount of the credit, but these first-time homebuyers may reap additional benefits when filing their tax return now and for years to come while they own the home.

According to Amy McAnarney, executive directory of The Tax Institute at H&R Block (NYSE: HRB), many first-time homeowners aren’t aware they may be eligible to itemize deductions for the first time. “Homeownership is the key that could unlock thousands of dollars of tax savings,” McAnarney said. “The taxpayer’s joy from signing on the dotted line can extend to recognizing all of the additional tax deductions they can claim on their taxes — if only they know how.”

The benefit of the Recovery Act credit can be received now because taxpayers who have purchased a home in 2009, or who will do so before Dec. 1, 2009, can claim this credit on their 2008 original or amended return. Taxpayers, who purchased a home in 2009 and already claimed the $7,500 credit that was part of the Economic Stimulus Act, should amend their 2008 return to claim the additional credit, up to $500.”The Recovery Act is doing its job of trying to stimulate the housing market,” said McAnarney. “This is one credit where taxpayers can reap the benefits almost immediately.”

To qualify for this year’s first-time homebuyer credit, the homebuyer must not have owned a home in the previous three years and the home must be the primary residence. Unlike last year’s credit, if the property remains as the homeowner’s primary residence for at least three years, then the payback requirement is waived. However, if a taxpayer bought the home in 2008, when the maximum credit was $7,500, the payback provision still applies and the credit must be repaid to the government over 15 years starting in 2010. There are also a number of other tax benefits to consider in owning a home.

For example, owning a home makes a taxpayer more likely to itemize deductions on Schedule A. Possible tax deductions to consider when itemizing include: — Mortgage interest — Real and personal property taxes — Charitable contributions — State and local income taxes — Loan origination fees — Qualified medical and dental expenses — Employee business expenses — Tax preparation fees — Investment interest and expenses.

There is something in the Recovery Act for existing homeowners, as well. The Act also includes increased tax credits for energy-efficient improvements such as qualified new furnaces, windows and doors to existing homes. The amount of eligible credit was increased from 10 percent of the equipment cost to 30 percent. The credit applies to 2009 and 2010 tax returns, with a lifetime cap of $1,500.

Dana Dukelow

Senior Loan Consultant Metrocities Mortgage

310-461-1893

Direct Office 323-394-1909

cell 866-201-2632

e-fax ddukelow@metrociti.com

The Great Home Bargain Sale Is Ending!

Attention all you K-Mart shoppers! The Great Home Bargain Sale is coming to an end!

When things are just chugging along, we tend to think that they will just keep chugging forever. This has been the case with the foreclosure market, which has, in turn, depressed the regular real estate market. But now, even though Freddie Mac and Fannie Mae are stumbling off the blocks in an effort to alleviate the nation’s foreclosure woes rather than making confident strides to clear up the mess, there is an end in sight. Soon, there will not be any more surplus of foreclosures, and the real estate market, no longer depressed by a plethora of  cheap REOs, is bound to rise somewhat, and the great deals of the past will start to go away.

Last Saturday I took a client to look at 7 homes in San Pedro and Long Beach in the $350,000 range. We have looked at many properties in the past several months, and there has been no urgency in making offers; the properties have been turning over very slowly, if at all.  On Monday, after both of us doing due diligence, (researching building permits, crime stats, etc),my client decided to place an offer on the one that he liked the best. It is a nice home in a very good area, but when we saw it on Saturday, the carpet had been torn up, it was in the process of being painted, and it reeked of dog urine. It also had a non-permitted garage conversion. Not the best circumstances to show a house. However, my client is a do-it -yourselfer, and these things did not phase him. Unfortunately, we did not know that 5 offers had been received on Saturday and Sunday, and the listing agent had accepted the highest and best that Monday morning, just before my call. I then called the other 2 properties that my client was interested in, which were also located in nice areas, but did not need any major renovation. and found that one, after 8 offers between Saturday and Monday, was pending, and the other, after 10 offers between Saturday and Monday, was pending also.

The week before, I had conversations with several Realtors in the Long Beach/San Pedro area, and they were telling me that in the prior several days they had sold properties with multiple offers and above listing price, some of which had been listed only a few days. At the time, I thought it was a fluke, but my experiences last weekend make me think otherwise.

So it looks like, at least to me, that many other people are realizing that the time to buy a great home at a bargain price is ending, and they are out there making above-asking-price, multiple  offers on property in much greater numbers than before.

At the moment, there is still a large inventory of foreclosed homes out there, but it is dwindling rapidly,  and it will go away, sooner or later.

If you are in the market for a first-time home, or are looking for investments, I would suggest that you immediately get your credit in tip-top shape, get pre-approved, not pre-qualified for a loan in the amount that you can afford, be prepared to offer above asking price for properties, and above all, both you and your realtor must act fast! Do not be shy about making an offer on a weekend. Others certainly aren’t, and they are getting the prizes.

The Next 2 Weeks Will be Amazing!

The next two weeks will be fast and furious for West Hollywood. The Creative City will be celebrating Halloween with a series of events during the week prior to the spooky day.

The Halloween Youth Carnival will be held on Saturday, October 25 from 6PM – 9:30PM at the Softball Field at West Hollywood Park. Check with the city for specifics.

WEHO will again host the Annual Doggy Costume Contest on Sunday, October 26, 2008 starting at 1 p.m. at West Hollywood Park, 647 N. San Vicente Boulevard (south grass area). Please check with the city for registration details and prizes.

Also on Sunday, October 26, from 4 p.m. to 6 p.m. in the West Hollywood Park Library parking lot, the Annual Halloween Drag Race and Beauty Pageant will take place. The Drag Race awards prizes to 1st through 3rd place finishers. High-heel shoes with a minimum of a two-inch heel are required to participate. Following the Annual Halloween Drag Race, the City will also host the 2nd Annual Beauty Pageant beginning at 6 p.m. Prizes will be awarded in the following categories: Best Hair; Most Outrageous; Best Pumps; Most Creative; and Best Overall. Please check with the City of West Hollywood for more information.

To wrap up the festivities, on Friday, October 31the city hosts the infamous Halloween Carnival, attended by hundreds of thousands of revelers. The Carnival, which will take place on Santa Monica Blvd. between 6-11PM is a must-see for people watchers. Please contact the City of West Hollywood for parking and other information.

Don’t forget to set your clocks back one hour to Standard Time on November 2 at 2 AM. If it seems like we’re a little later than usual in setting back the clocks, you’re right. Daylight Saving Time was actually extended by an entire month this year as a result of the Energy Policy Act, enacted in 2005.

And then there is the Most Important Election of Our Lives on Tuesday, November 4th! Besides electing Obama to the white house and starting to heal this country financially and emotionally, there are California issues that we all must address, most importantly Proposition 8, which would eliminate the right of same sex couples to marry. Rational people, no matter what their sexual orientation, cannot allow this kind of bigotry to become law. Please vote no on Proposition 8.

OK. I’m done stumping. Have a great two weeks.

An In Depth Look at Causes of the Crisis

Many of us are baffled and confused as to what really caused the present financial crisis, so I turned to Jeff Cook, one of the Senior Account Managers at Metro Sunset Mortgage for some enlightenment. Here is an article that he wrote today and published on the web. I copied the entire thing and dropped it in here, because he does a better job explaining things than I can.

An In Depth Look

My clients, co-workers, referral partners, family and friends are all asking “what the heck is going on?” And it’s truly a question I am getting hourly. Here’s an in-depth look at some of the cause of the current situation we are in so you have an overview.

We ALL are learning more and more about our economy and how it “really works” daily.
Whatever the political posturing, a plan needs to be passed – and passed soon. Credit markets are frozen and banks are going bust every day. This is not totally because of so-called “toxic” mortgages as the media has portrayed. This has a lot to do with new legislation and rules passed last year by the SEC (Securities and Exchange Commission) and the FASB (Financial Accounting Standards Board) with the SEC’s elimination of the uptick rule for Wall Street and the FASB’s 157 ruling, also known as “mark to market”.

Uptick rule: The uptick rule was a securities trading rule used to regulate short selling in financial markets. The SEC eliminated the uptick on July 6, 2007 causing short-selling to be at record levels by early 2008 and wild swings of the markets. The problem with the elimination of the uptick rule is that without it, short sellers were devaluing perfectly solid stocks. On September 19, 2008 the SCE halted short-sales temporarily of 799 financial stocks.

FASB 157: http://www.fasb.org/st/summary/stsum157.shtml Each day lenders must mark their assets to the marketplace. It’s like you having to appraise your home everyday and if your neighbor was under duress because they got very ill, divorced, lost their job and was forced to sell their home quickly they may have sold it super cheap. Now, does that mean your house is worth that super cheap price? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But “mark to market” does not allow for this, which creates a vicious cycle.

Why is this so bad? Because as lenders mark down their assets the amount that they have loaned previously becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to “mark to market” requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio…at cheap prices. And this makes the vicious cycle continue. And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages, are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn’t just A paper or B paper etc. it’s everything. Its got some A paper, B paper, C paper, and even what looks like toilet paper. An “A” investor buys the whole pool but because they are an “A” investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.

Now add to all this the opportunistic shorting that was done, while the uptick rule was eliminated, on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem.Thank goodness for the recent temporary ban on shorting in the financial sector mentioned above.

As for the plan the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posture from both sides is just part of the process – and it is never, ever pretty.

This is not easy to understand for the general public. In fact most politicians don’t get this either. That’s why it is a difficult yet critical bill for them to vote on. Once this bill is done it will take some time but the markets will stabilize. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to fix our industry. We just need to be patient.

I hope that you found this ecomonic information helpful and informative – as it’s important to me that my clients, referral partners, family and friends are kept up-to-date and in-the-know! If you have any questions whatsoever, let me know.

Make it a great day!

If you have any questions or comments on the above article, please don’t hesitate to contact me at robert@lacarealestate.biz, or leave feedback here on the blog.

Freddie Mac & Fannie Mae Government Takeover – Rates Decline!

Recently, The Federal Government announced a rescue plan for the GSEs, Freddie Mac and Fannie Mae. Here are some key highlights copied from a memo that I received from Hemman Sweis and Brian Shaktah of Metro Cities Mortgage.

Major Points

• Fannie and Freddie have been placed in conservatorship. The Federal Government has taken 79.9% of common stock and all dividends in return for buying $1 billion in preferred shares.
• Treasury Department says that both are open for business with no major changes in operations.
• Top Fannie/Freddie executives have been replaced.
• Fannie/Freddie can grow their guaranteed mortgage book with no limits and grow their retained portfolio with limits. Ultimately, the government plans to shrink their portfolios 10% per year starting in 2010.
• The federal government will provide caoital to keep Freddie/Fannie’s net worth positive, (up to 100 billion). In return, the Treasury will receive new senior preferred stock and warrants on the GSEs’ common stock.
• The federal government will begin buying Fannie/Freddie mortgage-backed securities on the open market.
• Treasury Department will create a Secured Lending Credit Facility, a liquidity Backstop for GSEs.

Initial Reactions

• Rates drop half a point!
• World markets respond positively to the news: Stocks up on Monday, September 8, 2008.
• Federal Reserve Chairman Ben Bernanke: “These necessary steps will help to strengthen the US housing market and promote stability in our financial markets.”
• Investor Warren Buffett: “Secretary Paulson has made exactly the right decision for the country. He is minimizing the problem of moral hazard and maximizing the benefits for the housing market and for the smooth functioning of the financial markets.”

Anticipated Results

• Rates to possibly stabilize, due to reassurance given by government intervention.
• Increased confidence in financial markets.
• Loan term changes possible (FICO, LTV)
• More loan workouts possible due to increased government pressure on lenders to create solutions that prevent foreclosures.

If you have any questions about the Fannie Mae/Freddie Mac Takeover, please feel free to contact me at robert@lacarealestate.biz. If I cannot answer your question, I will find someone who can!

My New Website Finally Launched!

After a month and a half of building, my new website is up and running. There are still a few minor glitches, but the site is mostly running well and looking Fabulous! As compared to the old site, the content is tremendously expanded and navigation is much easier, with a few new nifty little gadgets to play with added in.  Please click it up at www.robertjonez.com and browse around. There will be more content added every so often so things won’t get stale.

New Website in the Works

Sorry that I have not been posting for the past month. Besides the fact that the current market has brought me quite a few new first-time buyers as clients who are keeping me very busy, I have been working on a new Real Estate Website with a new Web Designer, one that will better integrate this blog into the site, plus incorporate many new features that are presently unavailable on my current website. I am very excited about this step forward, and cannot wait until my Designer gets the new site up and running, and I can announce the site’s grand opening. With this project, plus my expanding business, I have let my blogging slip. I promise that I will do better in the future.

A little birdy chirped in my ear that Caffe’ Primo will be opening a location in the former Italian restaurant in the shopping strip in front of the Ramada Inn very soon. If their menu of high quality paninis, pizzettas, crepes, salads, baked goods, deserts, gelato, sorbettos, and beverages is as good as their Sunset Blvd. location, it will be a welcome addition to Santa Monica Blvd.

Sad news about Benvenuto Cafe. I went there last week with a friend who goes there several times a year, every time he comes to West Hollywood. He loves the veal there, and I am quite fond of the Antipasto Mixto. When we got there, we were seated and presented with a new menu that was so abbreviated that there could not have been more than twelve items on it. There was no veal, and no Antipasto Mixto. None of the other items looked exciting, so we excused ourselves and left.

Well, so much for the local gossip. I’ll be back real soon.

Visit Me at the Pride Festival!

If you feel like calmly taking in the Festival sights on Saturday afternoon, June 7th, before the Sunday Parade Madness, please plan on visiting me at the Keller Williams Realty Hollywood Hills booth. I will be there from 3PM to 7PM. You will find lots of information there on how to qualify for a loan, purchase a home, sell your present home, or even tips on how to invest in income property. While you are there, be sure to sign up for the free drawing for the $100.00 Home Depot Gift Card. (Keep the pen!) You need not be present to win. I am looking forward to seeing you and saying Hi!