Feeds:
Posts
Comments

Posts Tagged ‘homestead title’

BREAKING NEWS:
On January 1, 2013, Congress extended an important law that exempts many homeowners from paying taxes on cancelled debts. As part of the “Fiscal Cliff” deal, Congress extended the Mortgage Forgiveness Debt Relief Act of 2007 until the end of 2013. This will have a positive impact on distressed homeowners.

Cancelled Debt

If you owe a debt to someone else and they cancel or forgive that debt, the cancelled amount may be taxable.

Cancelled or forgiven debts happen every day in the Real Estate world. Short sales and foreclosures result in substantial, cancelled or forgiven debts. The Bank’s loss may be considered the home owner’s gain – a taxable, forgiven debt. A short sale happens when the proceeds of a home sale are not enough to pay off the mortgage. The bank agrees to take a “short” payoff and may cancel or forgive the shortage.

For the last 5 years, most homeowners were exempt from paying taxes on that forgiven or cancelled debt. The Mortgage Forgiveness Debt Relief Act of 2007 exempted many homeowners from paying taxes on forgiven debt. But, that law was set to expire on December 31, 2012

Taxable Income

If you owe $200,000 on your home but your sale only results in $150,000 in proceeds, you will be “short” by $50,000. You would likely need to count that $50,000 as taxable income to the IRS! In this case, you might owe and additional $12,500 in tax liability. In fact, you may owe this tax even if your house is foreclosed if it results in a shortfall to the bank.

Mortgage Forgiveness Debt Relief Act of 2007

The Mortgage Forgiveness Debt Relief Act of 2007 exempts many home owners from paying taxes on the forgiven debt. On January 1, 2013, Congress extended the Mortgage Forgiveness Debt Relief Act of 2007 until the end of 2013. This has the potential to save distressed homeowners millions of dollars in “phantom” tax liability over the coming year.


Read Full Post »

Scam Alert: It’s Not A Real Bill!

Homestead Title just received a very realistic looking bill from DNS Services. The bill is for “Managed DNS Backup Business Services.” Man that sounds important. Its not – its a scam.


As with many fake bills, this one contains the hidden warning that it is “a solicitation for the order of goods or services, or both, and not a bill…” Other scams involve fake phone bills, yellow pages ads, and printer toner. Don’t fall for the scam. Throw the bill in the garbage.

Read Full Post »

If you owe a debt to someone else and they cancel or forgive that debt, the cancelled amount may be taxable.

Cancelled or forgiven debts happen every day in the Real Estate world. Short sales and foreclosures result in substantial, cancelled or forgiven debts. The Bank’s loss may be considered the home owner’s gain – a taxable, forgiven debt. A short sale happens when the proceeds of a home sale are not enough to pay off the mortgage. The bank agrees to take a “short” payoff and may cancel or forgive the shortage.

For the last 5 years, most homeowners were exempt from paying taxes on that forgiven or cancelled debt. Unless Congress acts soon, homeowners will have to start paying income taxes on that debt.

Taxable Income

If you owe $200,000 on your home but your sale only results in $150,000 in proceeds, you will be “short” by $50,000. You would likely need to count that $50,000 as taxable income to the IRS! In this case, you might owe and additional $12,500 in tax liability. In fact, you may owe this tax even if your house is foreclosed if it results in a shortfall to the bank.

Mortgage Forgiveness Debt Relief Act of 2007

The Mortgage Forgiveness Debt Relief Act of 2007 exempts many home owners from paying taxes on the forgiven debt. This law, however, is set to expire at the end of 2012. If it does, it may have a chilling effect on short sales and loan modifications. Many experts and commentators believe Congress will extend the law. It was originally effective until 2009 and Congress extended it to 2012 as part of the Emergency Economic Stabilization Act of 2008. In August, the Senate Finance committee approved a one-year extension, with bipartisan support (this was not a full vote of Congress). Others are more skeptical. A lame-duck Congress has its plate full with the looming “Fiscal Cliff.”

If the law is not extended, many believe the Real Estate market will suffer. Indeed, over 20% of Dane County sales are distressed property sales. These distressed sellers would be faced with another, “phantom” tax just to walk away from their homes.

 

 

Read Full Post »

Closing Cost Credits – Buyer Beware!

A simple contract term can cause so much confusion:

“Seller shall provide buyer with a closing cost credit of $3,000 at closing.”

Closing cost credits are often used to help buyers cover their costs or to address contract issues prior to closing. When Buyer’s and Sellers agree on this credit, everyone should be happy. Unfortunately, it is not that simple.

The buyer’s lender must approve all closing credits and they must appear on the HUD-1 Settlement Statement. Problems arise when lenders reject these credits.

Contract Language and Communication

Realtors must draft good contract language and communicate with their Buyers. First, Realtors may provide for a “closing cost and prepaid” credit. Lenders will only allow credits up to the amount of the Buyer’s actual closing costs. Including “prepaids” allows many lenders to increase the allowable credits to include prepaid mortgage interest and tax escrows. Realtors should also avoid excessively large closing cost credits. In Dane County, for instance, it is unusual for closing costs to exceed $3,500. A closing cost credit of $8,000 is virtually certain to be denied. It is also important to communicate with your Buyers and warn them that the closing cost credit requires lender approval. Prepare them for the possibility that the credit may be limited or even rejected.

Avoiding Lender Rejection of Credits

Many Realtors or attorneys include provisions that reduce the purchase price by the amount of any rejected credits. Beware: this can cause delays and the need to re-underwrite a loan. The seller may also credit “prepaid” items to increase the allowable credits. Check with the lender prior to drafting the “closing cost and prepaid credit” provision to make sure it is acceptable. The best practice is to avoid closing cost credits that exceed actual closing costs.

Most importantly, if a lender rejects a credit, there are certain things that are not acceptable:

  • Do NOT have the Seller write a personal check to the Buyer at closing
  • Do NOT ask the title company to write a check to the buyer, and reduce the seller’s proceeds by that amount.
  • Do NOT have the Realtors write a check to the Buyers.

Each of these “solutions” may constitute loan fraud. It is never worth risking a Realtor’s license or an attorney’s practice to assist or instruct their clients in the commission of loan fraud (no matter how unlikely it may seem that there would be any real consequences).

This information is provided by attorney Pete Zarov. This is not intended to constitute legal advice and should not be relied upon in place of individualized legal advice. For more real estate tips, check out Homestead Title’s blog.

Read Full Post »

New Rates In Response To OCI Bulletin

Wisconsin title companies recently revised rates in response to State regulatory pressures from the Office of the Commissioner of Insurance (the OCI). There has been a lot of confusion over the recent rate changes. Indeed, there have been suggestions that the new rates have nothing to do with the OCI’s recent Bulletin and that title agents can continue to offer any rates or discounts they wish.

In fact, an OCI Bulletin sent a clear warning about rates and when discounts are allowed. The OCI warned title companies that:

  • Discounts must be made pursuant to a filed rate program.
  • Discounts can only be offered for risk-based reasons.
  • Discounts may not be made for purely competitive reasons.

This is a significant change in how the OCI regulates title rates. The result, however, has not been significantly higher rates. Title companies have filed new rates that are actually lower than previously filed rates. And they filed rate-discount programs that allow rates to remain competitive.

A Short History Leading Up To The New Rate Filings

The state has always required title companies to file their rates. The filed rates must be approved and cannot be “excessive or inadequate.” Over the last two decades, however, stiff competition led title agents to discount their charges from the filed rates on every single closing.  For instance, the filed rates on the sale of an average home ranged between $900 – $1,300. Yet, local title companies in Dane County and Milwaukee discounted from these filed rates, charging anywhere from $400-575. Title companies offered these substantial downward deviations from filed rates for strictly competitive reasons.  Arguably, the discounts were excessive and the rates inadequate.

The OCI Bulletin Set Limits on Discounts

The OCI signaled a significant change in enforcement of the law. The Bulletin reminded title companies that they must charge filed rates and these must be neither excessive nor inadequate. The OCI outlined when and how companies could offer discounts from filed rates, emphasizing that discounts could only be made based upon a “rate deviation program” that is based upon risk factors.

The OCI has made clear that it will no longer allow downward deviations (discounts) from any company’s filed rate based upon “market competition.”  Now, any discount must be (1) documented, (2) based on a filed “deviation program,” and (3) made for risk or actuarial reasons. This is a significant change in policy and enforcement.

New Rates – Lower than Previously Filed Rates

Most underwriters responded to the OCI’s actions by filing new rates that are lower than previously filed rates. They generally allow discounts if the title agency is provided with an older (prior) title insurance policy for the property. The filed discounts range from 10% to 20% of the rate and reflect the lower risk in insuring a property where there is already a policy in place.

The result will be a modest increase in prices in the Dane County market and a drop in rates in many areas of the state. In 2011, for example, a typical $200,000 title policy might have cost about $575. Today, that same policy will cost $665 – $750 (assuming the property had been insured previously). This represents an overall increase of less than 1% of the typical seller’s closing costs. Buyer title costs remain unchanged and refinance rates remain fairly static with lower prices on high end properties.

Overall, rates in Wisconsin are still very low compared to regional and national averages. Homestead Title writes for three underwriters and continues to have competitive rates and incredible service. For a rate sheet, contact us at Home@HomesteadTitle.net.

Read Full Post »

February might have been a great month! The National Association of Realtors will release its existing-home sales data tomorrow and many analysts are already predicting strong numbers. Bloomberg reports that home purchases climbed in February to the highest level in almost two years. New construction, on the other hand, shows a more mixed message. Today, the Commerce Department reported that housing starts fell in February but permits for future construction jumped to their highest level in over 3 years.

Unsold Inventory, Low Prices and The Drag on the Economy

Unsold inventory and lost equity continue to be a drag on our economic recovery. Despite steady improvement in both new construction and existing homes, an oversupply of unsold homes continues to keep prices down and slow the recovery. (U.S. Housing Report Shows Uneven Growth, N.Y. Times, March 20, 2012). This oversupply also includes the vast “Ghost Inventory” of distressed properties, such as short sales, foreclosures, and REOs.

These depressed prices and the loss of homeowner’s equity both caused the economic crisis and is slowing the recovery. The decline in home values (prices) has restricted borrowing power, further slowing the recovery. Indeed, many people are unable to tap the value of their home by refinancing or selling. As an unexpected consequence, our economic recovery has been strongest in areas that did not have severe price drops, reports Amir Sufi, professor of finance at the University of Chicago. (Measuring Housing’s Drag on the Economy, New York Times, February 24, 2012). Likewise, the recovery has been weak in states like Arizona, California, Florida, and Nevada – states hit with the larges housing price declines.

Thus, the improvement in home sales is the first piece of good news. A full economic recovery, however, may require more than strong numbers in new and existing home sales. It will likely require more robust recovery in home prices.

Read Full Post »

Short Sale Escalation With Social Media

Challenges arise in almost every short sale. Frustrated and running out of options, Realtor Nicole Charles of Keller Williams in Madison, Wisconsin, turned to twitter:

@Ask_WellsFargo Can anyone please help me with a short sale issue? Getting the run around an am about to lose the Buyer due to delays. HELP

Wells Fargo responded! First, in tweets, they asked for more information and direct contact. After a few more tweets and correspondence, a representative promised to escalate the matter and have answers that day. She had revived a dying sale through social media!

Escalation

Creative and persistent agents understand the importance of escalation in short sale negotiations. This can be as simple as contacting a manager or supervisor. It can also include contacting the investor or mortgage insurance company directly. The goal of escalation is to reach an individual with more authority and the ability to move the transaction towards closing. Often, the biggest challenge is simply finding contact information for that escalated individual. Some agents call Fannie Mae or Freddie Mac directly, when they know they are the investor. Others manage to glean investor contact information from hints or clues in correspondence. And this creative agent discovered the newest way to get things done – social media and twitter!

Thank you Nicole Charles for this fantastic tip!

Read Full Post »

Free Legal Help for Homeowners Facing Foreclosure in Dane County

Dane County Foreclosure Prevention Taskforce
http://www.daneforeclosurehelp.org
For more information contact:
Dan O’Callaghan (608) 283-0117or Ellen Bernards (608) 576-8658

  

What:            FREE LEGAL HELP!  For homeowners facing foreclosure. Help available in English and in Spanish Ayuda disponible en español también.

Who:              For homeowners who have received a Foreclosure Summons and Complaint

When:           11:00 am – 1:00 pm, Thursday, March 1, 2012 & Every 1st and 3rd Thursday of the month.

Where:          City-County Building, 3rd floor, 210 Martin Luther King Jr. Blvd.

THIS IS A RECURRING EVENT, 1ST AND 3RD THURSDAY OF EACH MONTH.

FREE LEGAL HELP is available for Dane County homeowners in foreclosure.  Homeowners can receive basic legal information and free assistance in writing an Answer to the lawsuit at the Foreclosure Answer Clinic.  The Clinic has assisted almost 200 homeowners to understand the legal process of foreclosure and to respond their lawsuit. Homeowners who respond in writing to the lawsuit have more control over the process and a better chance for a favorable outcome.   

Homeowners have ONE CHANCE to file an Answer to their lawsuit. Filing an Answer is one of the critical things a homeowner MUST do even if the homeowner is in communication with the lender and working on options such as a loan modification or short sale.

Time is of the essence because homeowners generally have only 20 calendar days from the date they receive the initial lawsuit papers to file a formal response called an Answer.  Failing to file an Answer to the lawsuit on time significantly reduces homeowners’ control over the process and their ability to share their story with the judge. In addition, they may not be notified of important steps in the court process of foreclosure.

The Clinic is open the 1st and 3rd Thursdays of each month from 11:00 a.m. to 1:00 p.m. on the 3rd floor of the City-County Building, 210 Martin Luther King Jr. Blvd, Madison.  No appointments are necessary.  Homeowners should bring their Summons and Complaint as well as any other relevant papers about the foreclosure.  

The Foreclosure Answer Clinic is a collaborative effort of the Dane County Foreclosure Prevention Taskforce, the Dane County Bar Association and the UW Law School, with grant funding provided by the State Bar of Wisconsin and other support provided by Dane County.

Who We Are.  The Dane County Foreclosure Prevention Taskforce is a coalition of public agencies, non-profit service providers and other community partners working together to develop sustainable alternatives to foreclosure in Dane County. For more information, please visit daneforeclosurehelp.org.

Our Mission.  To develop and implement a coordinated response to the current foreclosure problem in Dane County. 

Read Full Post »

A new settlement among big banks may provide relief to many struggling home owners.  Nearly 20% of all home mortgages are underwater – the home is worth less than the amount owed to the bank. This has been the major cause of the foreclosure crisis nationally and a problem many have sought to remedy. A new settlement with big banks raises hope for many underwater home owners that they may be able to reduce their loan or refinance with better terms.

New Federal Settlement

Ordinarily, a bank will not lend to a homeowner if the home is worth less than the current mortgage because it requires the homeowner to borrow more money than the home is worth. Under the new settlement, tens of billions of dollars will be earmarked for homeowner relief. It is unclear how this money will be dolled out, but it is presumed that it will include:

  • Reducing the principle balance owed on a loan
  • Refinancing to a lower rate
  • Providing incentives to lenders to approve refinances, modifications, or short sales
  • Providing cash settlements to some homeowners who have already lost their home to foreclosure

As with previous federal programs (HAFA and HAMP), this program is not expected to provide broad reaching relief. It will only apply to about 10% of underwater homeowners. Nevertheless, this might be enough to stabilize the housing market and provide a much needed boost to the hardest hit segment of the market.

For a detailed summary of the settlement, see the New York Times Article.

Madison Realtors, lenders, and attorneys are invited to our seminar on Short Sales & Foreclosures:

Short Sale Seminar

February 23, 2012: 1pm – 4pm

City Center West
525 Junction Rd.
Madison, WI 53717-2152

REGISTER HERE

Licensed REALTORS, Attorneys and lenders are invited to attend this powerful seminar on short sales, foreclosures, and navigating distressed properties. This seminar has previously been approved for 3 Hours of Continuing Legal Education credits in Wisconsin.

Attorney Peter Zarov will be breaking down the foreclosure time line, the short sale process, and REALTOR’s risks and responsibilities. This class will cover:

  • Short sale time line
  • Foreclosure process and understanding timing and leverage.
  • How to avoid liability during a short sale (Your referral team, common scams, etc.)
  • The short sale packet and best practices to submit
  • The HAFA Short Sale Program and other new incentives
  • Transactional pitfalls and how to avoid them
  • Bankruptcy and how it affects sales

Agents will a acquire critical knowledge of the foreclosure process in Wisconsin, short sale procedures, and important trends in distressed property transactions.  Surviving and thriving in this market requires a familiarity and understanding of these topics. 

The Event is $15 and includes a 65 page packet of outlines, materials, and forms.  

 
 


Read Full Post »

2011 December Home Sales Report – Wisconsin REALTORS® Association.

Read Full Post »

« Newer Posts - Older Posts »