$8,000 Tax Credit to BUY a Home still in Play!!

NEW YORK (CNNMoney.com) -- Confused about whether lawmakers will extend the $8,000 first-time homebuyer credit and what it would look like?


Negotiations about whether and how to extend and expand the tax credit for homebuyers are moving quickly. Here are the latest developments.

That's understandable, since the situation is still very fluid.
Here's where things stand!!

Support for the credit: There is still bipartisan support in Congress for extending the credit past Nov. 30 and making it available to more homebuyers.

Some of the issues still in play: Just how far past Nov. 30, the size of credit and how many more buyers would qualify.

It's still not clear where President Obama stands on the issue. Last week, Housing Secretary Shaun Donovan said the administration wanted to review more data to better assess the cost of the credit before weighing in.

What's on the table now: There appears to be movement toward a compromise deal that falls between the most and least generous proposals that have been put forth so far.

"There is bipartisan compromise to extend the credit through spring and expand it to existing homeowners who are stepping up to a different home," financial policy analyst Jaret Seiberg wrote in a research note for Concept Capital's Research Group.

The latest idea under discussion is a credit worth up to $8,000 for first-time homebuyers and up to $6,500 for homeowners looking to trade up to a bigger primary residence and who have already lived in their current home for five years. (CNN: Senate compromise may be in the works.)

To qualify for the full credit, however, homebuyers must have adjusted gross income of less than $125,000 ($225,000 for married couples filing jointly).

In addition, the credit would only apply to homes sold for $800,000 or less. Contracts to buy a home must be signed by April 30, 2010, and the deals must close by June 30 in order for a buyer to qualify for the credit.

Rationale for extending the credit: Supporters of the credit say it has helped to boost existing home sales in recent months. Extending the credit would help further support sales, stabilize housing prices and generate jobs in the face of an expected rise in foreclosures next year, which is expected to put downward pressure on prices.

If the credit is allowed to expire, they say, the housing market and the broader economy will grow moribund again.

"The most fundamental argument for the credit is that nothing works in the economy if housing is falling -- it hurts household wealth and credit becomes tight," said Mark Zandi, chief economist at Moody's Economy.com. "[The credit] is a good insurance policy. It's vital to stem the housing price declines."

What critics say: Though extending the credit has bipartisan support, it is not without its critics.

Critics, while acknowledging that the credit has helped to generate additional home sales, say it has been poorly targeted and therefore not cost-effective.

They point to estimates that only 10% to 20% of the nearly 2 million homebuyers who will have gotten the credit by Nov. 30 bought solely because of the tax break.

In other words, a large majority of homebuyers who benefited from the credit would have bought their homes without it.

By one economist's estimate, the government may have spent $43,000 for each sale that occurred strictly because of the credit.

In a position paper published this week, the liberal Center on Budget and Policy Priorities said making the credit available to existing homeowners would not help stabilize housing prices or reduce inventory

If you have any questions about purchasing a home or how you can benifit from this tax credit please contact Robert at (562) 673-1136. Thank you

Rob Ask? Is it time to Dump your ARM??

Some 1.5 million adjustable-rate mortgages reset soon. If yours is one of them, you need to decide whether to lock in your rate and refinance into a new loan.

(Money Magazine) -- If you are among the 6.5 million homeowners who took out a low-rate adjustable-rate mortgage during the housing boom, you've probably spent the past couple of years waiting for your day of reckoning to come.

After all, you've probably heard repeated warnings that when your ARM resets your payments would spike dramatically: an especially big problem if you used a low-rate ARM to stretch for a home you could barely afford.

The good news is that scenario hasn't come to pass. Instead, interest rates have fallen to record lows, and when your ARM resets you'll probably see your monthly nut fall, not rise.

But once the economy stabilizes, the government will start peeling back the policies that are keeping mortgage rates low.

"Eventually rates are going to go up very significantly," says Greg McBride, a senior financial analyst at Bankrate.com. The Mortgage Bankers Association predicts fixed mortgage rates will reach 5.9% by the end of 2010 and 6.3% by the end of 2011.

To see what could happen to your payments later on, look on your mortgage documents to find the cap, or the number of points your rate can move in any given year after the first reset (one or two is typical), as well as the lifetime cap on your loan. Then figure out if you should refinance now and what kind of mortgage you should get if you do.

Stand pat if ...
You plan to move in the next three years. In that case, the few thousand dollars you'll pay to refinance is likely to exceed any extra interest you'll pay on the mortgage before you move.

You have less than 20% equity in your home. If you bought in the past few years and real estate values in your area have taken a big hit, you may not qualify for the best rates. "That makes refinancing less attractive," says Wilton, Conn. mortgage broker Tim Malburg, Homeowners with a jumbo mortgage (more than $417,000 in most areas) are held to an even higher equity standard.

Refi to a 5/1 arm if ...
You'll be in your home for three to five more years. In mid-September, ARMs that were fixed for the first five years cost about half a percentage point less than 30-year fixed-rate loans. Over a five-year period, that could save you almost $10,000 on a $300,000 mortgage.

You have a jumbo loan. These large mortgages can feel like a rip-off right now, since rates for 30-year fixed jumbos are about a percentage point higher than those for smaller loans -- an unusually wide spread, says Keith Gumbinger, vice president at HSH Associates.

That's because the government has been purchasing loans backed by Freddie Mac and Fannie Mae, which has artificially driven down conventional-mortgage rates.

If you need a jumbo mortgage you'd knock about three-quarters of a percentage point off your rate by taking a 5/1 ARM. That would save about $3,300 a year for a half-million-dollar loan.

Refi to a fixed-rate loan if ...
You might be less attractive to a lender later on. If you'll need to take a big loan to pay your kid's college tuition, say, or think you might get laid off -- then it's worth doing the refi while you have the chance.

You'll be in your home five years from now. While most experts think that rates will stay low for a while, they're not likely to get much lower, and there's no guarantee they won't jump unexpectedly.

If you're planning to stay longer than five years, go with a 30-year fixed to eliminate any interest-rate risk, since rates on seven- and 10-year ARMs are only a notch lower than those on 30-year loans. And if you have any doubts about your time frame, lock in. After all, you don't want to be in this same predicament five or so years down the road.

You'll pay more to lock in a fixed-rate mortgage today. But a couple of years from now, holding on to that adjustable-rate loan could get costly.

If you have any questions about principle reduction or just general questions about your mortgage please contact Robert Vaughan at (562)673-1136
Thank you and God Bless

500 Helped by Obama Mortgage Rescue!

The administration reaches its goal a few weeks early. But it remains to be seen how many of these trial modifications will work.

NEW YORK (CNNMoney.com) -- Loan servicing companies have put 500,000 troubled borrowers into trial mortgage modifications, the Obama administration said Thursday.

The administration set that target in late July after it came under fire for not helping homeowners fast enough. http://shortrefiusa.com/

Officials have increased the pressure on servicers to speed up their implementation of the president's foreclosure prevention plan, which calls for reducing eligible borrowers' monthly payments to no more than 31% of their pre-tax income. Servicers had until Nov. 1 to hit the half-a-million mark.

The administration also released a related report Thursday showing that 16% of eligible troubled borrowers at least 60 days delinquent were placed into trial modifications as of the end of September. This is up from 12% a month earlier.

Consumer advocates have said that the president's initiative has prompted servicers to help more people than ever before. But, there is still a long way to go.

The administration's efforts are only "chipping away" at the problem, said Barry Zigas, director of housing policy for the Consumer Federation of America

"It's very, very frustrating that so many borrowers are on track to lose their homes," Zigas said. Thursday's report "is not a cause to rest."

President Obama announced the $75 billion initiative in February and the first institutions to join began accepting applications in April. http://shortrefiusa.com/

The plan, which was projected to help up to 4 million homeowners, puts qualified borrowers into three-month trial modifications before the adjustment is made final. Servicers, borrowers and investors can get financial incentives to participate.

Servicers' performance, however, remains very uneven. Short Payoff Refinance http://shortrefiusa.com/

Saxon Mortgage Services once again led the pack with 41% of eligible delinquent borrowers in trial modifications, while Citigroup (C, Fortune 500) and Aurora Loan Servicers following at 33%. JPMorgan Chase (JPM, Fortune 500) has put 27% of its clients into trial modifications, while Wells Fargo (WFC, Fortune 500) has placed 20% and Bank of America (BAC, Fortune 500) 11%.

Several servicers, including many of the largest banks, have made great strides in recent months. Wells Fargo, for instance, had helped only 6% of eligible borrowers by the end of July. The bank's numbers rose after it started putting people into the trial modifications before collecting all the documentation, a practice which many of its peers do.

Administration officials met with servicers Thursday afternoon to press for further improvements in their modification efforts and responsiveness to borrowers. Many people have complained that financial institutions lose their paperwork, transfer them repeatedly between departments and require that they fill out applications again and again.

Permanent modifications
Though the housing market is showing signs of stabilizing in some locations, the foreclosure crisis continues to plague the nation. The president's plan has been credited with reducing the number of homes falling into foreclosure, but some experts worry that the modifications will only delay many inevitable defaults.

Many banks put delinquent homeowners into the trial modifications as long as they meet the basic criteria, such as having a first mortgage of less than $729,750 and living in the home as their primary residence. During the three-month trial, banks gather detailed income documentation and determine whether they'll recover more money by foreclosing on the home or by offering a permanent modification.

Banks, however, say they are having trouble obtaining the needed paperwork from borrowers, said Zigas. http://shortrefiusa.com/

Borrowers, meanwhile, must make timely payments during the trial.

The industry is now waiting to see how many borrowers in trial modifications will qualify for permanent adjustments. Banks said they have yet to compile how many people were ultimately denied permanent modifications.

If you have any questions please contact Robert Vaughan (562) 673-1136