Loan Picture Improves but Troubles Remain: FDIC

For the first time in four years, loans that are 90 days or more past due have decreased instead of increased. While this is no doubt a good sign for the housing industry, it comes just days after the National Association of Realtors reported a record 27% drop home sales.

According to Reuters the Federal Deposit Insurance Corp earned $21.6 billion during the quarter largely due to banks putting away less money to cover expected loan losses.

During the first quarter, the industry earned $17.8 billion.

In other signs of improvement, the total assets of banks characterized as "problem" institutions fell during the quarter to $403 billion from $431 billion, and the FDIC's insurance fund increased by $5.5 billion during the quarter.

But there are still troubling indicators.

Loan balances continued to decline during the second quarter, with net loan and lease balances declining by 1.3 percent. Loans to small businesses and farms -- a major focus of the Obama administration -- fell by 1.8 percent during the quarter.

Questions for the Tax Lady: August 9th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: What is the maximum value of the American opportunity tax credit?

You can claim the credit for up to $2,500 of qualifying tuition and related expenses. However, it can only be claimed for the first four years worth of post-secondary education.

Question #2: How do I remove a tax lien against my property?

A tax lien will lasts until your debt is paid off or otherwise satisfied.

The IRS will issue a Release of the Notice of Federal Tax Lien under the following criteria:

• Within thirty days after a taxpayer satisfies his or her tax liabilities (including interest and penalties) by paying the debt or having it adjusted.
• The taxpayer must pay all fees that a state or other jurisdiction charges to file and release the IRS tax lien. The fees are added to the total amount owed.

In a nutshell, you must resolve your liability before a tax lien will be removed. Click here to learn more about the tax debt resolution services offered by my law firm.

Pending home sales 'fell off a cliff'

Most economists and financial experts expected home sales to drop off following the April 30th Home Buyers tax credit deadline. They were right.

According to the National Association of Realtors, home sales fell an astounding 30% in May. What may be most incredible is that the sales are down 15.9% from May 2009, when we were just starting to emerge from the recession.

Tax credits, while valuable for the people who can claim them, usually do not impact behavior all that much. People will buy homes if it makes sense for them, not just because they may get a tax break. That logic holds true here. The Home Buyers credit did not motivate new sales. Instead people who were already planning to buy a home simply changed the timing of when they would buy. So, there was a rush to close the sale before the credit expired. People who may have waited until later in the year already closed the deals. Frankly, I don’t think the huge drop in pending sales should be surprising.

Lawrence Yun, the chief economist for NAR believes that home sales will improve once the economy is more stable and unemployment drops. Once that happens, Yun expects home sales to increase dramatically, so long as the favorable prices and mortgage interest rates continue.

Makes sense to me, you can’t buy a home if you don’t have a job. Do you think our real estate market will reach the highs of 2006 again in our lifetime? Tell me your predictions at @ronideutch/Twitter or on Facebook.

You can find out more here.

200,000 could lose out on homebuyer tax credit

Many homebuyers, as many as 200,000 buyers according to CNN Money.com, could lose out on the $8,000 homebuyer tax credit. This is because many people are trying to purchase short sales, buying homes from sellers who owe more on their mortgage than the home is worth. Despite the name “short sale,” these deals often take a long time for the lender to approve. It could be anywhere from two to six months. This lag time could mean that buyers will lose out on the tax credit because their pending deals won’t be finalized by the June 30th deadline. Taking even more time are the home inspections. The average foreclosed home comes with many problems to repair, and fixing the issues takes time, slowing the process even further.

Richard Smith, CEO of Realogy, the parent company of several franchise real estate brokers started warning buyers back in January that short sales may not close in time to take the credit.

Read the full article here.

Real Estate's New Problem: Not Enough Homes

From CNNMoney.com:

Can it be possible? Despite the housing bust and high foreclosure rates, in some areas real estate agents are complaining that they don't have enough homes to sell.

There is currently an eight-month supply of homes on the market -- meaning that, at the current sales pace, it would take eight months to run through the backlog.

That's still a lot compared to the six-month supply that is expected in a normal market, but it is much better than it was. In March, there were nearly 2% fewer homes on the market than there were a year ago, and 21.7% fewer than the record of 4.6 million in July 2008.

In some areas, supplies are even bidding-war tight. In Denver, for example, supply has fallen to 5.7 months from 6.2. In Phoenix it has declined to 4.5 from 5.2; and in San Francisco inventory has halved, to 3.2 months from 6.5 last March.

In California, almost all cities have a short supply of single-family homes. That's especially true in the lower-priced categories, according to Leslie Appleton-Young, chief economist for the California Association of Realtors.

Property Tax Rebellion Brewing After Real Estate Collapse

From ABC News.com:

Never judge a house by its tax bill. That's the lesson Don Newby, 65, is learning.

The construction manager from Gibbsboro, N.J., is paying boom-era property taxes on a home that has lost 20 percent of its value in the past three years. He blames the Gibbsboro tax authorities, which haven't reassessed property values in the town since 2003.

"That's absurd," says Newby, who pays $14,000 a year in taxes on a four-bedroom, bi-level modern house in the New Jersey township that's not far from Philadelphia. Newby, who was unemployed for a year following the economic collapse, claims the government is intentionally delaying new assessments to benefit from the lag as long as possible.

"When you watch how property values have come down, it appears I could save almost $2,000 in taxes."

Costly Lag in Assessing Property Values

Americans around the country are grumbling that local tax assessors haven't caught up with the real estate downturn, leaving homeowners with unfairly high property taxes. Many disgruntled homeowners including Newby are challenging authorities, either by appealing their tax bills or mobilizing groups to push for tax reforms.

New Home Sales Fall to Record Low

A government report released Wednesday showed that the sales of new homes at fell to a record low in February. It is believed to be the outcome from all of the foreclosed homes and a weak economy with high unemployment.

New-home sales fell 2.2% to a seasonally adjusted rate of 308,000 last month, compared to an upwardly revised annual rate of 315,000 in January, the Census Bureau said. What’s crazy is that “this is the lowest rate since the government began keeping records in 1963 and marked the fourth straight month of declines.”

Economists expected February sales to rise to an annual rate of 315,000. New-home sales were down 13% from February 2009. New-home sales fell in every region of the United States, except the West region, which saw a 20.8% jump in new-home sales. The Northeast was hardest hit, with a 20% decline in February. Most likely effected by weather.

A stubborn job market is what is said to of kept pressure on the housing market. The U.S. unemployment rate stood at 9.7% last month, after unexpectedly falling in January, suggesting that the economic recovery could be gaining steam. But, "the economy, while recovering, is still not full speed ahead," said Hoffman.

In regards to new homes, the Census Bureau estimated that 236,000 new homes hit the market in February.

In November, Congress extended and expanded an $8,000 tax credit for first-time home buyers, which also allows some repeat buyers to qualify for a $6,500 credit. Buyers have until April 30 to qualify for the credit.
New-home sales saw a surge of activity when home buyers thought the November tax credit would expire, but retreated after the extension.

Although February's data was "a bit disappointing," Hoffman says the real test will come during peak home buying season in the spring.

"The real story will be if no one knocks at the door for a new-home in an environment of record low mortgage rates, a home buyer's tax credit and a recovering economy," said Hoffman. "If they don't, then it's lights out." Read the full article here: New-home sales fall to record low from CNNMoney.com.

Not Much Impact from Repeat Buyer Credit

From Google News:

It sounded like a great idea three months ago: Hand homeowners a $6,500 tax credit to find a new place to live, giving a thrust of energy to the housing market's recovery.

So far, people are staying put.

In November, the federal government extended a tax credit of up to $8,000 for people who hadn't owned a home for three years. This credit had helped boost home sales last summer and fall. Seeking to build on that momentum, the government added a new credit of up to $6,500 for current homeowners, hoping it would transform them into house-hunters this winter and spring.

But real estate agents around the country say the credit is doing little to elevate sales. Reasons vary.

The unemployment rate is still near 10 percent and consumer confidence is falling. Home prices have stabilized in some markets, but are still a third below their 2006 peak. Droves of people who want to sell are stuck because their home is worth less than they paid for it. Harsh winter weather has Americans shoveling driveways instead of preparing their home for buyer visits.

"No one is saying, `I need to buy something before it expires,'" said Tim Surratt, an agent with Greenwood King Properties in Houston.

The tax credit for current homeowners was intended to help stabilize prices and bolster the economy, but the housing market remains vulnerable. Sales of both new and previously occupied homes dropped in January, and the Mortgage Bankers Association's index of loan applications recently hit a 12 1/2-year low.

Contracts to Buy Homes Inch up in December

On Tuesday, the National Association of Realtors announced that the number of people preparing to buy a home rose slightly in December of 2009. Many are considering this a positive sign for the upcoming “spring home buying season.”

The National Association of Realtors said Tuesday its seasonally adjusted index of sales agreements rose 1 percent from November to December to a reading of 96.6. That was a bit lower than the 97.1 level analysts expected.

The index has risen for nine out of the past 10 months as buyers work to take advantage of an $8,000 first-time homebuyer tax credit.

The credit had been set to expire Nov. 30 before Congress extended it to April 30. Lawmakers also added a $6,500 credit for current homeowners.

10 Tips on Mortgages for 2010

From MSN Money:

More than three years into a painful housing crash, the real-estate market has sent recent -- albeit tentative -- signs of stabilization. Home sales have increased, inventory levels are down, and price declines have become less precipitous.

Along with more-affordable home prices and a tax perk from Uncle Sam, attractive mortgage rates -- which remained near 5% as of late December -- have been a driving force behind this development. The availability of low mortgage rates will play a decisive role in the performance of the 2010 housing market as well.

To help consumers better understand the requirements and costs they will face as they shop for a home loan next year, U.S. News spoke with a handful of housing market experts and compiled a list of 10 things to know about getting a mortgage in 2010.

1. Lending standards

The steep run-up in home prices during the first half of the decade was fueled in large part by breezy lending standards. Some bankers handed out loans without down payments or documentation requirements.

But when the housing bubble popped and those loans became massive losses, banks began raising lending standards for borrowers of all stripes. And with the labor market continuing to erode -- the unemployment rate topped 10% in October -- and mortgage delinquency rates setting records, there is no reason to expect credit requirements to loosen in 2010.

Continue reading at MSN Money.com…

1 in 4 Mortgages 'Underwater'

From CNNMoney.com:

In a sign that more foreclosures could be on the horizon, 23% of people with mortgages owe more than their home is worth, according to a report released Tuesday.

Almost 10.7 million U.S. mortgages were "underwater" as of September, said research firm First American CoreLogic.

Another 2.3 million homeowners are within 5% of negative territory, the report said. The two figures combined comprise almost 28% of all residential properties with mortgages.

Negative equity, also called an "underwater" or "upside down" mortgage, has become more common as home values plummet. The report is closely watched because borrowers who are underwater are more likely to be foreclosed.

Would you walk away from your house?

Foreclosures have been rampant for some time, but lately the tide of decay had seemed to be slowing -- so Tuesday's report could dent optimism for the housing market over the next few months.

Homebuilding Drops as End of Tax Credit Loomed

From Bloomberg.com:

Residential construction in the U.S. unexpectedly dropped in October amid concern a homebuyer tax credit would expire, illustrating the market’s dependence on government help to sustain a recovery as job losses mount.

Builders broke ground on 529,000 houses at an annual pace, down 11 percent from the prior month and the fewest since April’s record low, Commerce Department figures showed today in Washington. Data from the Labor Department signaled inflation will be of little concern for the Federal Reserve.

Homebuilding seized up as builders waited for President Barack Obama to extend a first-time buyer incentive, which has since been passed and expanded. The highest unemployment rate in 26 years and consumer prices that remain below Fed long-term goals indicate policy makers will need to nurture the economy by keeping interest rates near zero.

“The recovery isn’t well established enough yet to take away that support,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York, who previously worked at the Fed. “An early withdrawal of fiscal and monetary stimulus would probably be quite disruptive.”

Realtors’ Agenda Shifts from Homebuyer Tax Credits to Lending Issues

After successfully lobbying for an extension and expansion of the first-time homebuyers credit, the National Association of Realtors is reportedly set to focus it efforts on relieving the commercial real estate credit crunch. According to Market Watch, there are hundreds of billions of dollars in commercial loans that will require refinancing over the next two years.

"The commercial area is something that is going to be in the news more and more, as loans are rolled over and need to be refinanced," NAR senior vice president and chief lobbyist Jerry Giovaniello said Sunday at the industry group's annual conference in San Diego.

Commercial transactions are down due to a "virtual lack of available credit," according to Lawrence Yun, chief economist of the NAR. About $800 billion to $850 billion in commercial loans will mature in the next two years and will require refinancing, he added.

"The credit has to be available ... or potentially lenders will end up owning half of Manhattan," Giovaniello said.

For residential properties, meanwhile, lending requirements remain tough, he said.

"The problem has been to convince lenders, federal agencies and Congress to push the money from Wall Street to Main Street," Giovaniello said. "We think that the lenders could be more flexible. Their capital standards have increased, their stock prices have increased and they need to get out of that overreaction mode."

NAR's policy agenda also includes making sure the Federal Housing Administration remains strong.

Continued tight underwriting standards for conforming mortgages have led prospective buyers to seek out home loans insured by the FHA, which have seen an uptick.

Continued at Market Watch.com…

Home-Purchase Index in U.S. Plunges to Lowest Level Since 2000

From Bloomberg.com:

Mortgage applications to purchase homes in the U.S. plunged last week to the lowest level in almost nine years as Americans waited for the outcome of deliberations to extend a government tax credit.

The Mortgage Bankers Association’s index of applications to buy a house dropped 12 percent in the week ended Nov. 6 to 220.9, the lowest level since Dec. 2000. The group’s refinancing gauge rose 11 percent as interest rates decreased, pushing the overall index up 3.2 percent.

The drop in buying plans points to the risk that the recent stabilization in housing will unravel without government help. In a bid to sustain the recovery, Congress passed and the administration signed a bill last week to extend jobless benefits and incentives for first-time homebuyers, adding a provision that also made funds available to current owners.

“Uncertainty over the housing tax credit sent some tremors through the market in recent weeks,” Michael Larson, a housing analyst at Weiss Research in Jupiter, Florida, said before the report. “But now that Congress has extended and expanded the credit, we should see demand pick back up.”

The MBA’s overall index climbed to 627.5 last week from 608.3, the banking group reported today in Washington. Its refinancing gauge increased to 2998.2 from 2693.7.

U.S. Home Sales Rise to Two-Year High on Tax Credit

After struggling for the better part of the last two years, it looks like the real estate industry is finally rebounding as the third quarter of this year represented the largest increase of home sales in two years. Much of this increase can likely be attributed to the homebuyer’s credit, which was due to expire at the end of this month. However, other financial experts are asserting that many of the buyers who used the credit would have purchased a home anyways. Checkout the following story from Bloomberg.com on the new report.

U.S. home sales increased 11 percent to a two-year high in the third quarter as an $8,000 tax credit for first-time buyers boosted demand.

Sales of existing single-family homes and condominiums increased to 5.3 million at an annualized, seasonally adjusted rate from the previous quarter, the National Association of Realtors said today. The median price fell 11 percent from a year earlier to $177,900, the Chicago-based trade group said.

Distressed sales accounted for 30 percent of all transactions, down from 36 percent in the second quarter, the Realtors said. President Barack Obama signed legislation on Nov. 6 extending the housing credit that was set to expire at the end of this month. Demand from buyers seeking to use the benefit reduced the inventory of previously owned homes for sale to 3.63 million in September, the lowest since January, the group’s data show.

“What the tax credit did was make the housing market stronger by borrowing from future sales,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. “There’s payback after it expires in 2010 -- we’ll see weaker demand.”

The sales gain to 5.3 million was the highest since the third quarter of 2007, when sales were 5.45 million.

Homebuyer Tax Credit Extended and Expanded

After weeks of uncertainty, the Senate and House of Representatives have both passed legislation to extend and expand the homebuyers credit. In addition to extending the deadline through April 30, 2010, it will also include a $6,500 credit to homebuyers who have lived in their current residence more than 5 years. According to the Associated Press, the White House even announced that Obama would promptly sign the bill into law.

Examiner.com publish an article with more details of the new credit. They also raise several valid questions as to whether this extension and expansion will actually help or hurt the ailing economy. You can read a segment of their post below, or find the full text here.

The National Association of Realtors had been pushing hard to extend the credit, as well as include non-first-time home buyers, saying the legislation has helped stabilize the housing market and increased home sales, projected at 5.1 million for the year.

Supporters of the tax credit say that it has helped to boost existing home sales in recent months and that the housing market, and broader economy, would suffer if it is allowed to expire. They contend that extending the credit would help further support sales, stabilize housing prices and generate jobs in the face of an expected increase in foreclosures next year, which is expected to put ongoing downward pressure on prices.

"Tax credits like this only work by creating the sense of urgency to take advantage of them," Sen. Johnny Isakson (R-GA), the measure's main sponsor, said in a statement. "This is the last extension of the home buyer tax credit, and I urge all Americans whether they're first-time buyers who've always dreamed of having a home of their own or someone who's been gridlocked in the failure of our move-up market to take advantage of this opportunity."

Property Buyers in US Rush to Beat Deadline for First Time Tax Credit

Realtors and buyers are in a dead rush to meet the deadline for the homebuyers tax credit at the end of this month. Since there has not yet been a final decision about extending the credit, thousands across the country are trying desperately to close escrow before the looming deadline. However, as PropertyWire.com reports, many of them are finding out that they are simply too late.

The latest figures from the National Association of Realtors (NAR) show that its Pending Home Sales Index rose to 110.1 in September, its eight consecutive monthly rise.

The index now stands at the highest level since December 2006 when it was 112.8 and is 21.2% higher than September last year, marking the largest annual gain on record.

But it could be a short-lived blip as many analysts believe that the recovery in the US housing market is being propped up by the first time buyer tax credit that was introduced by the Government to boost demand for houses.

‘What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,’ said Lawrence Yun, NAR chief economist.

Meanwhile, the foreclosure crisis is moving into small towns and suburbs which have previously been untouched by the economic downturn, according to new research.

Mortgage Activity Fell in U.S. Last Week

According to UPI.com, the amount of mortgage applications fell by around 12% in the United States last week. The Mortgage Bankers Association made the announcement at the end of last week, and also reported that the Refinance Index fell by over 16%.

The average interest rate for 30-year, fixed-rate mortgages decreased from 5.07 percent to 5.04 percent with points rising from 1.13 to 1.25, the organization said.

Rates for the average 15-year, fixed-rate mortgage increased slightly from 4.51 percent to 4.53 percent. Points in 15-year, fixed-rate mortgages fell from 0.96 to 0.78.

The average interest rate for one-year adjustable rate mortgages fell from 6.86 percent with an average 0.31 points to 6.79 percent with 0.29 points, the report said.

Foreclosures: 'Worst Three Months of All Time'

Despite suggestions that the housing crisis was cooling off, a new report is claiming that the third quarter of this year was actually the worst three months of all time for home foreclosures in the U.S. According to the report, over 938,000 families received foreclosure notices in the past three months. To put those numbers into perspective, 1 out of every 136 homeowners in this country was forced into foreclosure in just the past few months.

"They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes.

During that time, 937,840 homes received a foreclosure letter – whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state -- the best record in the country.

The RealtyTrac report also unveiled the results for September, and it found that there was slight relief from foreclosure filings. Last month, notices totaled 343,638, down 4% compared with August. Unfortunately, that total accounts for 87,821 homes that were repossessed by lenders.

Check out the rest of the article at CNNmoney.com, or click here to read an entry on the top foreclosure alternatives I posted earlier this week.

U.S. Will Set Guidelines to Modify Real-Estate Loans

From Bloomberg.com:

U.S. bank regulators, saying losses on souring commercial real-estate loans pose the biggest risk to lenders, will issue guidelines to help the institutions modify the agreements.

Reduced demand for space has led to falling rental rates, adding to losses on the loans, leaders of the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision told the Senate subcommittee on financial institutions today.

“The most prominent area of risk for rising credit losses at FDIC-insured institutions during the next several quarters is in CRE lending,” FDIC Chairman Sheila Bair said, referring to commercial real estate. “Prudent loan workouts are often in the best interest of financial institutions and borrowers.”

Large concentrations of commercial property loans are behind many of the 123 banks that failed in the past two years, draining the FDIC’s deposit insurance fund. Commercial real- estate loans totaled almost $1.1 trillion as of June, representing 14 percent of all loans and leases, Bair said.

Federal bank regulators will soon issue guidelines on commercial real-estate loan workouts, Bair said without providing specifics.

“The guidance we are working on is intended to promote supervisory consistency, enhance the transparency of CRE workout transactions, and ensure that regulatory policies and actions do not inadvertently curtail the availability of credit to sound borrowers,” said Timothy Ward, the OTS’s deputy director of examinations, supervision and consumer protection.