Gov’t Passes Tax Relief for Borrowers in Foreclosure

Pres Bush signed into effect H.R. 3648, the “Mortgage Forgiveness Debt Relief Act of 2007″

http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html

This law would eliminate a taxable gain on borrowers who received a forgiveness of debt from a lender in a short sale.  Normally, if a lender forgives the debt, to this extent the homeowner would have a taxable gain.  HR 3648 would eliminate this “phantom income” on a borrower’s principal residence.  The law applies to all ACQUISITION (not refi) debt forgiven from Jan 1, 2007 and on.

 This is an EXTREMELY SMART move on the part of the government, FOR ONCE!  To make up some of this income, the law also amends the capital gains rules principle residences by denying an exclusion of the gain that is allocable to a nonqualified use of such residence (i.e., use other than as a principal residence).

Fed Proposes New Loan Regulations for Subprime Borrowers

The Fed has proposed changes to Reg Z that would greatly affect “subprime” loans:

http://www.federalreserve.gov/newsevents/press/bcreg/20071218a.htm

The most significant of these changes would be no more “liar loans” for subprime borrowers, defined as those whose APR is 3% above comparable treasury yields.  This particular provision does NOT affect investor loans, only owner occupied borrowers.

This move will clarify some of the confusion the lender industry has had over what steps to take in future lending practices, and will hopefully result in a loosening up on “A” loans not covered by these new regulations.

Senate Votes to Increase FHA Program

The Senate voted overwhelmingly today to expand FHA’s program to help refi people who are defaulting on ARM loans.  The program will increase the limits of FHA financing for higher priced areas.  The bad news is you have to be in default to qualify.  Seems a little unfair that taxpayers have to bail out everyone else, doesn’t it?

 http://news.yahoo.com/s/ap/20071214/ap_on_go_co/congress_mortgage_crisis

WSJ Compares Mortgage Meltdown to S&L Crisis

A very interesting article in the Wall Street Journal compares the potential fallout of the mortgage meltdown to the S&L debacle of the 1980’s and the tech bust of 2000.

Click here to read.

I don’t agree with all the conclusions and presumptions, but one major point that is made (for better or worse) is that the suffering from the loan defaults has been (and will continue to be) at the hands of investors not banks, since most of the bad loans were sold in pools on Wall Street.

Still, we’ve seen Countrywide and more recently Citicorp sell off a nice chunk of assets recently to keep up with the defaults and lack of capital in their reserves.  How will this all play out?  Nobody knows for sure, but the Fed’s active role may soften things a bit with lower interest rates that stimulate more buying power for the consumer, thus reducing inventory for sellers and builders.

More to come… 

Find the “Blue Chip” Neighborhoods in Your City

Forbes did an interest article on “blue chip” neighborhoods that rarely go down in value and have always had solid appreciation, such as Pacific Palisades, CA

http://tinyurl.com/2h4bpq

Every city has such neighborhoods and you should look at these areas as the “heartbeat” of your city – when these areas are up, the surrounding areas go up in value.  I call this the “blob” effect in my book, “Defensive Real Estate Investing”.  Buy the cheapest or worst houses on the block (the “WOBs”) near the BLOB, and your investments will be a good, safe bet.

—>>> Defensive Real Estate Investing

Gov’t Works out Deal with Lenders to Freeze Interest Rates

The Bush Administration has worked out a deal with lenders to freeze rates on adjustable loans for up to 5 years.  This would apply to loans originated at the beginning of 2005 through July 2007. 

http://news.yahoo.com/s/ap/20071205/ap_on_go_pr_wh/mortgage_crisis

Is this a smart move?  Time will tell, and certainly this is the first real move the government has made to directly help homeowners.  Certainly the people who got loans before 2005 will feel left out, but this will undoubtedly reduce the foreclosure rate.  The bottom line of whether this improves the housing market will be dependent on whether it makes investor on Wall Street feel warm and fuzzy enough to start buying up pools of mortgage backed securities so lenders can start softening up on their loan guideliness.

Two new events launched for 2008

It’s time to start thinking about your goals for 2008 and I’m here to help you achieve them.

Basic Training Boot Camp – Jan 19th, 20th
http://www.realestatebasictraining.com

Foreclosure Investing Seminar – Jan 26th
http://www.foreclosure-seminar.com

Best of success in 2008!

Staging Makes People Think with Their Hearts instead of Their heads Warns Brokers

A testament that staging really works, brokers are warning homebuyers not to be “fooled” by home staging.

http://realtytimes.com/rtpages/20071130_veilstaging.htm

Brokers are concerned that people will be mislead into thinking a room is larger than it really is or be distracted by “heartwarming” decorations instead of thinking clearly with their heads.  While such a statement is dumb, it is also true and a testament of the effectiveness of home staging.  The idea is to get people emotionally attached to your home so they buy!