Eileen Smith's Blog

Earlier this week the Obama Administration announced a series of changes to the Home Affordable Refinance Program (HARP). The new HARP is by no means a game changer, but the media’s attention has sparked a lot of questions.

Here are the basics about the revamped government mortgage refinancing program:

HARP 2.0, as the media has started to refer to it, has some advantages for some people, but as with the programs that preceeded it, will have little or no impact on foreclosures or the estimated 6.4 million homeowners nationwide who are behind on their mortgage payments. The new HARP just expands the net of those who were eligible for help under the original version.

HARP was created in 2009 to help borrowers whose loans were backed by Fannie Mae, Freddie Mac or the FHA, but did not have enough equity or negative equity to refinance. Under the original version of HARP, borrowers who were current on their payments and owed up to 125 percent of the current value of their homes could refinance their mortgage.

The original HARP fell short of expectations. Over the past two and a half years, only 838,000 homeowners have benefited from the program. The new HARP has broadened the base with looser eligibility requirements.

Now borrowers with FHA, Fannie Mae or Freddie Mac mortgages that were sold to Fannie or Freddie before May 31, 2009, will be able to refinance, no matter how far underwater they are. Banks will only have to verify that borrowers have made their last six payments, that they’ve haven’t missed more than one payment over the past year, and that they have a job or another source of regular income.

Other key changes:
? Appraisals are no longer required if there is a reliable automated valuation model (AVM)–a significant issue with the previous plan.
? Risk-based fees have been eliminated for borrowers who refinance into 15-year mortgages.
? Existing mortgage insurance coverage can be transferred much easier than under the original HARP.

While the new HARP won’t help homeowners who are behind on their payments and at risk for foreclosure, it is a welcome relief for homeowners who have been caught in the Catch-22 of not being able to refinance because they owe more on their mortgage than their home is worth, and at the same time, don’t qualify for a short sale or a loan mod because they are current on their payments and still have income and assets.

The goal is to put more money into the homeowners pockets which will in turn put more dollars back into the economy, potentially heading off strategic defaults and keeping and stemming the tide of homes entering the foreclosure pipeline.

Need to check whether you clients’ mortgages are guaranteed by Fannie Mae or Freddie Mac?

Go to:
http:loanlookup.fanniemai.com/loanlookup/
https:ww3.freddiemac.com/corporate

Time is running out!  

If you haven’t filed the paperwork to received the Homestead Property Tax Exemption in your county, you have to do so by April 1, 2011.   The Homestead Exemption is a significant discount for property owner/occupants that you don’t want to ignore!

Contact your Realtor if you have any questions!

The following is a copy of the letter I sent to all of my Client’s in 2010 who sold a property with the approval of their lender as a short sale.   If you sold your home under similar circumstances, this information might be helpful to you.

We had many conversations last year when I had your property listed for sale as a short sale  concerning what you would need to do when it came time to file your 2010 State & Federal Income Tax Returns.      

The first thing I probably told you was to hire an accountant to do your return.   Do not try to use a storefront tax preparer, or use a computer-based  tax return  software program in a box, if this has been your typical form a filing in the past.   There is nothing wrong with using any of these methods under normal circumstances, but 2010 was not a normal year for you.  

The second thing I probably told you was that the lender(s) that approved your short sale might or might not send you a Form 1099-C to document what occurred.   If you do not receive a Form 1099-C by January 31, 2011,  that does not exempt you from filing as though you did.   That 1099-C might also be incorrect.   Your accountant will be able to help you with this.   You will need to provide them with the HUD-1 Settlement Statement from your closing, as well as the short sale approval letter(s) from your lender(s) that you signed at the closing table.   If you cannot locate these documents, or if any other documents related to the sale of your home are need, I can email them to you or your accountant.   Just let me know!

This is a reportable transaction that may or may not result in taxes owed or credits due.   Properly reporting this transaction will  help determine your protection from additional taxes as defined in the Mortgage Forgiveness Debt Relief Act.

You are eligible for the protection provided under the guidelines of the Mortgage Forgiveness Debt Relief Act.  

Finally, I want to thank you for allowing me to help you during may have been the most difficult time in your life so far, and if there is anything I can do for you, or someone you know, in the future, do not hesitate to call.

No matter where you live or who you hired to sell your home, do not be afraid to contact them for assistance.

IRS Tax  Tip 2010-44

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2.  The limit is $1 million for a married person filing a separate return.

3.  You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4.  To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5.  Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6.  Proceeds of refinanced debt used for other purposes “ for example, to pay off credit card debt “ do not qualify for the exclusion.

7.  If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

8.  Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions “ such as insolvency “ may be applicable. IRS Form 982 provides more details about these provisions.

9.  If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10.  Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Homestead Exemption

Homeowners in one of Georgia’s more highly populated counties are about to see their property taxes go down.Fulton County is increasing the Homestead Exemption to $30,000 as voted in by taxpayers three years ago.   For example, if you own a $200,000 house, now you’ll only be taxed on about $50,000 of the value once all of the other exemptions are applied.

On average,  the first $75,000 of the value of a homestead property is exempted from the Fulton County tax.   Atlanta residents will get a bigger benefit since city schools will also allow the exemption to be applied to their portion.   Fulton County schools will not be allowing the exemption to be applied to their portion.  

The increased exemption is automatic if you already have a Homestead Exemption on your property.   If you haven’t filed, or just bought a new home, you have until April 1, 2011  to file.

Contact me for details!

Metro Atlanta weather forecasters have issued the first freeze warning of the season to occur tonight.    If you have not winterized your vacant property, you may want to consider doing so, or you may want to turn on the heat and open cabinet/vanity doors to keep pipes from freezing.    It™s never a good idea to leave a faucet dripping in a vacant property.   I drain pipe could become clogged, and before you know it you have a different kind of flood.  Let me know if I can help by setting your thermostat at a temperature acceptable to you, or if I need to make arrangements to have your property winterized.   Better safe than sorry!

There are many, many things you learn when you purchase your first home.   Most of them you learn the hard way, and that will almost always cost you money, and may just be plain embarassing!   My Top 5 List may save you time and money.

 1.   Water Shut-offs – There are several in almost every home, but the main one is at the Water Meter.   Sometimes it requires a special wrench to turn it off, so make sure you have that tool and keep it handy!   There are also shut-offs inside your home or crawl space, and often there is more than one!   Make sure you know where they are and whether or not they cut-off service to the whole house or just an outdoor spigot.   And remember to shut-off and drain those outdoor spigots in the winter!

 2.   Electrical Disconnects – Know where your Circuit Breaker Box is located and familiarize yourself with the Main Breaker.   It is typically the largest switch at the top of the box.   It will cut power off to every other breaker and everything electric in your home.   If you ever have an electrical fire, after you call 911, you should try to get to your Circuit Breaker Box and cut-off the power.   If you can’t, there is usually a cut-off outside at the meter that the Fire Dept. will use to cut off the power.

3.   HVAC System Switch – Have you ever gone into your attic  or basement  and seen a light switch that wouldn’t turn a light on/off?   That’s because it’s NOT a light switch!   If it’s within a couple of feet of your HVAC unit, it’s the switch that turns off your HVAC unit.   That’s an embarassing trade call!

4.   How to Light a Pilot  -  Your water heater  may have  one, your furnace  may have  one, your stove may even have one.   Do you know which of these appliances are electric and which are gas?   You need to be able to tell if the pilot is lit, and if not how to light it safely.   Those 12″ long fireplace matches are very handy for this!

5.   Your Chimney Flue, is it Open or Closed? – They sell cute little brass signs for this purpose.   If you’ve ever started a fire with the flue closed, or if you’ve ever experienced a cold breeze coming from the direction of the fireplace in the winter, you may want to invest in one of these signs.

If you have, or are going through foreclosure, deed-in-lieu, or a short sale, when you do your taxes, hire a Certified Public Accountant!  

There are tax implications that you may or may not be aware of.   Did your former lender  send you a 1099-C?   Probably not.    A CPA who is familiar with the process can help protect  you from future penalties and interest  that the IRS can say you owe, years  later!

Spend a little extra money now, save a LOT of money later.

Fannie Mae has launced a new web site that explains, in terms we can all understand, your options to Foreclosure if you have a Fannie Mae loan.

Here is the link – http://www.knowyouroptions.com/