(12/10/2010: MONEY Magazine) – Is now right time to invest in a house? Trick question. Actually, it’s two questions.

Question No. 1: Is now the time to buy?

Question No. 2: Is buying a house a good investment?

The first answer is easy: With a few exceptions, if you have 20% to put down and good credit, now is a great time to buy. That’s been the case all year, and I’d argue that we’re probably closer to the end than to the beginning of the really great time. Let me explain.

Back in January home prices had dropped 28% from their peak. More important, interest rates were at historical lows. By locking in a mortgage for 15 or 30 years on a value-priced home, you were getting an incredible deal, even if home prices decreased. (I took my advice and bought a New York City apartment.)

Most (and least) affordable cities to buy a home

At the time, I thought that prices and rates were more likely to rise than fall. I was half right: Home values have been inching up since the spring, but mortgage rates, incredibly, dropped further.

By August (the latest numbers available) the median home price had risen 1% over a year ago, but 30-year rates had dropped a half-point to 4.5%. Assuming 20% down and a 30-year mortgage, the total cost of owning a median-priced home is now down $16,000 from a year ago.

Home values may waffle over the coming year, but because Americans take out such large, long mortgages, rates are what really matter. And I am more likely to grow hair than see 30-year mortgage rates drop below 4%. It’s far more likely that rates (and the cost of ownership) will rise.

Now for question No. 2: Is a house a good investment?

CALCULATOR: How much home can you afford?

First, it depends on what you mean by investment. If your definition is strictly about dollars returned, a house probably won’t be a great use of your capital. If you bought the median-priced house today with 20% down, to recoup your total costs (and I’m not including property taxes and maintenance here) over three decades, the home’s value would have to rise about 3% a year.

That’s likely, but you’ll almost certainly (we all hope) do much better than that in the stock market. The fact is, however, that that’s the normal case for housing; the booms that began after World War II and in the late 1990s were the exceptions.

Of course, there are places where you might do better. I bought my condo in Manhattan, a small island that, by virtue of the business done on it, has a sustained demand for property. And smaller, energy-efficient housing in cities or inner suburbs around San Francisco or Chicago is likely to be in higher demand than big, outer suburban homes with long commutes to Las Vegas or Atlanta.

According to urban and environmental planning professor William Lucy of the University of Virginia, this move toward urbanization in American housing is the reversal of a trend that’s been in place since 1945. Keep it in mind when making your buying decisions.

That said, the key point to remember is this: Buying a fairly priced home at today’s rates may be the best deal you will ever get. And who knows? It may even turn out to be a good investment.

Until recently there has been confusion amongst the various government lending agencies as to what is allowed for the buyer to pay on behalf of the seller and when. As short sales have increased the need for clarification has grown. Government agencies have always had very strict guidelines about what a buyer is allowed to pay with most guidelines putting the extra costs unto the seller. Without equity in the property the strict guidelines have made it difficult for short sale escrows when the borrower is requested to pay seller fees. At one point earlier in the year the local HUD offices were saying it was allowed on FHA loans for the borrower to pay customary fees while HUD Washington said nothing was allowed. Finally, we have received clarity surrounding the policies from the government agencies and have been told the steps that need to be taken.

Effective as of June 24th, 2010 on FNMA, FHLMC, FHA and VA loans the following guidance has been released.

1) Allowable fees paid by the buyer include: short sale processing fees (also referred to as short sale negotiation fees, buyer discount fees, and short sale buyer fees), payment to a subordinate lien holder and payment of delinquent taxes or delinquent HOA fees.

2) The Servicer who is agreeing to the pre-foreclosure or short sale must be provided with written details of the fees or payments and has the option of renegotiating the payoff amount to release its lien.

3) The borrower (buyer) must be provided with written details of the additional fees or payments and the additional necessary funds to complete the transaction must be documented.

4) All parties (buyer, seller and servicer) must provide their written agreement/concurrence of the final details of the transaction that includes the additional fees or payments.

5) The HUD-1 Settlement Statement must include all fees and payments included in the transaction.

While the lenders will still have the right to disallow fees paid by the borrower on behalf of the seller, that are determined excessive, we now know all agencies recognize the need to facilitate the short sale transaction.

Key Update (6/17/10):FTB Accepts More First-Time Buyer Applications

As shown in the numbers below, we will soon receive First-Time Buyer applications totaling more than $100 million.  However, since many of these are duplicate, revised or invalid applications, we will accept at least 28,000 applications.  This will insure that we have enough valid applications to allocate the full $100 million.  These additional applications will be subject to the availability of remaining credits.  We will only issue approved certificates of allocation until the $100 million is exhausted.  We will announce the cut-off date on this webpage at least one full day before we stop accepting First-Time Buyer applications.

We have not processed any applications yet as our computer system is still being developed.  Once our computer system is completed, we will provide weekly updates on the number of certificates that have been mailed and the amount of credits that have been allocated. (Update 06/17/10)  

Fax delays

Due to the high volume of faxes we are receiving, you may experience some delays or difficulties in connecting to our fax number during normal business hours. It can take several minutes or possibly up to an hour to connect and transmit the fax. If you receive a busy signal, try again later. Check your fax confirmation to make sure all pages were transmitted successfully and keep a copy of the fax confirmation. Our fax number is open 24 hours a day so you may fax your application to us during non-business hours when the line is not so busy.

Applying for the 2010 New Home/First-Time Buyer tax credits: Applications must be faxed after escrow closes. We will deny the application if the 2009 form is used, we receive the 2010 application before May 1, 2010, or we receive the application before escrow closes. (Updated 04/28/10).

The New Home / First-Time Buyer Credits are available only for purchases that close escrow on or after May 1, 2010.

Check this page often. We will add updates as they become available.

General Information: These tax credits are available for taxpayers who purchase a qualified principal residence on or after May 1, 2010, and before January 1, 2011. Additionally, these tax credits are available for taxpayers who purchase a qualified principal residence on or after December 31, 2010, and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010. The purchase date is defined as the date escrow closes. Taxpayers may apply for the tax credits if they have entered into a contract before May 1, 2010, as long as escrow closes on or after May 1, 2010. However, taxpayers may not request a New Home Credit reservation if they have entered into the contract before May 1, 2010. (Updated 04/28/10)

These tax credits are limited to the lesser of 5 percent of the purchase price or $10,000 for a qualified principal residence. Taxpayers must apply the total tax credit in equal amounts over 3 successive tax years (maximum of $3,333 per year) beginning with the tax year in which the home is purchased. The tax credits cannot reduce regular tax below tentative minimum tax (TMT). The tax credits are nonrefundable and unused credits cannot be carried over.

The total amount of allocated tax credit for all taxpayers may not exceed $100 million for the New Home Credit and $100 million for the First-Time Buyer Credit. However, since many taxpayers will not be able to utilize the entire tax credit, the legislation specifies that the $100 million cap for the New Home Credit will be reduced by 70 percent of the tax credit allocated to each buyer and the $100 million cap for the First-Time Buyer Credit will be reduced by 57 percent of the tax credit allocated to each buyer. For example, if a taxpayer is allocated $10,000 for the New Home Credit, the $100 million cap for the New Home Credit will only be reduced by $7,000. If a taxpayer is allocated $10,000 for the First-Time Buyer Credit, the $100 million cap for the First-Time Buyer Credit will only be reduced by $5,700. The 70 and 57 percent reductions do not impact the amount that can be claimed by the taxpayer.

We will allocate the tax credits on a first-come, first-served basis. We expect it to take 3-6 months to notify taxpayers after an application or reservation is received. We need to develop a computer system to capture, verify, reserve or allocate, issue letters, and track the credits. Please be patient and do not fax an application more than once. Since the First-Time Buyer Credit is expected to be used up very quickly, we will provide estimates, based on sampling, of the number of First-Time Buyer applications and the related credit amounts that we have received beginning May 6, 2010. This will allow First-Time Buyers to estimate whether they will be able to apply for the credit and allow us to determine when we have received enough applications to fully allocate the $100 million and stop accepting First-Time Buyer applications. Since the New Home Credit is not expected to be used up as quickly, we will wait until approximately mid-July after our computer system is available to post information about the New Home Credit usage. (Updated 04/28/10)

Only one tax credit is allowed per taxpayer. If a taxpayer qualifies for both tax credits, the law specifies that we will allocate the amount under the New Home Credit.

Taxpayers will not be eligible for either tax credit if any of the following apply:

• The taxpayer was allowed a 2009 New Home Credit.
• The taxpayer is under 18 years old. (A taxpayer who is married as of the date of purchase will be considered to be 18 if the spouse/registered domestic partner (RDP) of the taxpayer is 18 or older on the date of purchase.)
• The taxpayer or the taxpayer’s spouse/RDP is related to the seller.
• The taxpayer qualifies as a dependent of any other taxpayer for the tax year of the purchase.

New Home Credit: A qualified principal residence, for purposes of the New Home Credit, must:

• Be a single family residence, either detached or attached. This can be a single family residence, a condominium, a unit in a cooperative project, a house boat, a manufactured home, or a mobile home. A home constructed by the taxpayer is not eligible since the home has not been “purchased.”
• Have never been occupied. Sellers must certify that the home has never been occupied in order for a taxpayer to receive an allocation of the credit.
• Be eligible for the California property tax homeowner’s exemption.
• Be occupied by the taxpayer as their principal residence for a minimum of 2 years immediately following the purchase.

Tax credit allocation:

• A Certificate of Allocation will not be issued if:
  • The seller does not certify the home has never been occupied.
  • We do not receive the application and a copy of the properly executed settlement statement within 2 weeks (14 calendar days) after the close of escrow, regardless of whether a reservation request was submitted.
  • We receive the application or reservation request after the total tax credits available have been allocated.
• FTB’s determination may not be protested or appealed.

Reserving a New Home Credit Before Escrow Closes: Taxpayers who qualify for the New Home Credit may, but are not required to, request a reservation prior to the close of escrow. Reservations will become important as we near the $100 million cap for homes that may not close escrow before the cap is reached, as a reservation will “hold the taxpayer’s place in line” until 2 weeks after escrow closes. Taxpayers may only request a reservation if they have entered into an enforceable contract on or after May 1, 2010, and on or before December 31, 2010. Taxpayers may not reserve a credit if the contract was entered into before May 1, 2010. Taxpayers who only qualify for the First-Time Buyer Credit may not request a reservation.

Requesting or receiving a reservation does not guarantee the credit. An application must still be completed and faxed to FTB along with the final settlement statement within two weeks after the close of escrow. If a buyer requests a reservation and the purchase is cancelled, the buyer must notify FTB. (Updated 04/28/10)

First-Time Buyer Credit: A qualified principal residence, for purposes of the First-Time Buyer Credit, must:

• Be a single family residence, either detached or attached. This can be a single family residence, a condominium, a unit in a cooperative project, a house boat, a manufactured home, or a mobile home. A home constructed by the taxpayer is not eligible since the home has not been “purchased.”
• Be eligible for the California property tax homeowner’s exemption.
• Be occupied by the taxpayer as their principal residence for a minimum of 2 years immediately following the purchase.

A first-time buyer is any individual (and the individual’s spouse/RDP, if married on the date of purchase) who did not have an ownership interest in a principal residence, either in or out of California, during the preceding 3 year period ending on the date of the purchase of the qualified principal residence. If the buyer is married on the date of purchase and either the buyer or the buyer’s spouse/RDP had an ownership interest in a principal residence during the preceding 3 year period, the buyer does not qualify for the First-Time Buyer Credit even if the spouse/RDP is not going to be on title.

Tax credit allocation:

• A Certificate of Allocation will not be issued if:
  • We do not receive the application and a copy of the properly executed settlement statement within 2 weeks (14 calendar days) after the close of escrow.
  • We receive the application after the total tax credits available have been allocated.
• FTB’s determination may not be protested or appealed.

Estimated applications received for First-Time Buyer Credit as of 06/15/10 (Updated 06/17/10)

The figures shown below are only estimates, based on small samples. The numbers are overstated as there will be duplicate, revised, and invalid applications included as we have not verified any of the applications. These estimates are only provided to give a general idea of the number of applications received and the amount requested for the First-Time Buyer Credit. We are showing 57% of the estimated requested credit since the $100 million cap will only be reduced by 57% of the credit allocated to the buyer. The amounts do not reflect actual amounts which will be allocated. These estimates will be updated each Thursday until we are sure that we have received more than enough applications to allocate the full $100 million. Once we determine that we have received sufficient applications to allocate the full $100 million, we will stop accepting applications for the First-Time Buyer Credit. Estimates for the New Home Credit will be provided once our computer system is completed.

Applications for First-Time Buyer Credit received as of 06/15/10

As of	Estimated Total First-Time Buyer Applications Received	57% of Estimated Requested Credit
05/04/10	430	$ 2,351,000
05/11/10	2,470	$ 13,283,000
05/18/10	4,830	$ 25,473,000
05/25/10	7,330	$ 38,357,000
06/01/10	9,760	$ 50,948,000
06/08/10	12,740	$ 65,787,000
06/15/10	15,220	$ 78,108,000

Estimated applications and reservation requests received for New Home Credit as of 06/15/10 (Updated 06/17/10)

The figures shown below are only estimates, based on small samples. Our computer system has not been completed, so we have not started processing the applications and reservation requests. The numbers are overstated as there will be duplicate, revised, and invalid applications included as we have not verified any of the applications. In addition, some purchases may be included twice if we have received both a reservation request and an application for the purchase. These estimates are only provided to give a general idea of the number of applications and reservation requests received and the combined amount requested for the New Home Credit. We are showing 70% of the estimated requested credit since the $100 million cap will only be reduced by 70% of the credit allocated to the buyer. The amounts do not reflect actual amounts which will be allocated. These estimates will be updated each Thursday until we are sure that we have received more than enough applications to allocate the full $100 million. Once we determine that we have received sufficient applications and reservation requests to allocate the full $100 million, we will stop accepting reservation requests and applications for the New Home Credit.

Reservation requests and applications for New Home Credit received as of 06/15/10

As of	Estimated Reservation Requests Received	Estimated Applications Received	Estimated Total Reservation Requests and Applications Received	70% of Estimated Total Requested Credit
06/15/10	1,930	3,700	5,630	$ 36,360,000

 

How to apply (Updated 04/28/10)

Applications: We will accept applications by fax only beginning May 1, 2010. Do not use the 2009 application. Applications received before May 1, 2010, or before escrow closes will be denied.

• Within two weeks (14 calendar days) after the close of escrow:
  • The seller must complete Parts II, III, and also Part IV (if the home has never been occupied) of Form 3549-A, Application for New Home / First-Time Buyer Credit, and provide a copy to the buyer or escrow person.
  • The buyer will complete Parts I, V & VI of Form 3549-A.
  • Fax the completed Form 3549-A and the final settlement statement (generally the buyer’s HUD-1 statement) to FTB at 916.855.5577. It is best that the escrow company, on behalf of the buyer, fax the completed application and settlement statement to FTB and provide a copy to the buyer. (The buyer retains ultimate responsibility to ensure the completed application and settlement statement are submitted timely to the FTB.)
• Fax is the only delivery method that will be accepted and considered for credit allocation by FTB, as the date and time stamp on the fax will determine the order in which credits are allocated. Check the fax confirmation to make sure you sent it to the correct fax number. The date and time applications are received may not be reviewed in any administrative or judicial proceeding.
• Fax only one completed application per residence with all qualified buyers listed. Do not include information on nonqualified buyers. An incomplete application may delay or prevent credit allocation.
• Do not fax the application to FTB before escrow closes.
• Do not fax the application to FTB more than once. We will process the applications in the order received as quickly as possible.
• Only send one application per fax transmission. Including more than one application in the fax transmission will cause delay and may even cause an application to be skipped.
• The buyer keeps a copy of the completed Form 3549-A for their records.
• Please use the online fillable Form 3549-A. Simply fill in all required information, print the form, and sign. If you fill out any portion of the form by hand, please print as clearly and neatly as possible using CAPITAL LETTERS and stay between the lines as the faxes can be very hard to read.

Reservation Requests: We will accept reservation requests for the New Home Credit by fax only beginning May 1, 2010. If you are applying for the First-Time Buyer Credit, you will not be able to request a reservation before escrow closes. Reservation requests received before May 1, 2010, or after escrow closes will be denied.

• If a buyer wishes to request a reservation, before the close of escrow:
  • The seller must complete Parts I, II, & III of Form 3549-RR, Reservation Request for New Home Credit.
  • The buyer completes Parts IV & V.
  • Fax the completed Form 3549-RR and the required pages of the purchase agreement to FTB at 916.855.5577. If escrow has opened, it is best for the escrow person, on behalf of the buyer and seller, to fax the completed Form 3549-RR and the required pages of the purchase agreement to FTB and provide a copy to the buyer. If escrow has not opened, the buyer may fax it to FTB. (The buyer retains ultimate responsibility to ensure the completed reservation request and the required pages of the purchase agreement are submitted timely to the FTB.)
  • Do not fax the entire purchase agreement. Only fax the pages which show:
    • Property address
    • Buyer’s name
    • Seller’s name
    • Purchase price
    • Deposit amount
    • Buyer’s signature
    • Seller’s signature
• Fax is the only delivery method that will be accepted and considered for credit reservation by FTB, as the date and time stamp on the fax will determine the order in which credits are reserved. Check the fax confirmation to make sure you sent it to the correct fax number. The date and time reservation requests are received may not be reviewed in any administrative or judicial proceeding.
• Fax only one completed reservation request per residence with all qualified buyers listed. Do not include information on nonqualified buyers. An incomplete request may delay or prevent the reservation.
• Do not fax the reservation request if the contract was entered into before May 1, 2010.
• Do not fax the reservation request to FTB after escrow closes or with the application (Form 3549-A).
• Do not fax the reservation request to FTB more than once. We will process the requests in the order received as quickly as possible.
• Only send one reservation request per fax transmission. Including more than one request in the fax transmission will cause delay and may even cause a request to be skipped.
• The buyer keeps a copy of the completed Form 3549-RR for their records.
• Please use the online fillable Form 3549-RR. Simply fill in all required information, print the form, and sign. If you fill out any portion of the form by hand, please print as clearly and neatly as possible using CAPITAL LETTERS and stay between the lines as the faxes can be very hard to read.

Claiming the tax credit:

• The taxpayer must receive a Certificate of Allocation from us to claim the tax credit on their California personal income tax return. The Certificate of Allocation will state the maximum amount the taxpayer can claim listed by tax year.
• The taxpayer should refer to the 2010 New Home / First-Time Buyer Credit Publication for instructions on claiming the tax credit (the publication will be available after December 15, 2010).
• Special rules apply to married/RDP taxpayers filing separately, in which case each spouse/RDP is entitled to one-half of the tax credit, even if their ownership percentages are not equal. For 2 or more taxpayers who are not married/RDP, the tax credit amount will have already been allocated to each taxpayer occupying the residence on their respective tax credit allocation letter.
• If the available tax credit exceeds the current year net tax, the unused tax credit may not be carried over to the following tax year.
• The tax credit may not reduce regular tax below TMT.
• The tax credit is not refundable.
• Any disallowance of the tax credit may not be protested or appealed.

More Information

• New Home / First-Time Buyer Frequently Asked Questions (Updated 06/03/10)

Contact Us:

• 888.792.4900 (press 1)
• 916.845.4900 (not toll-free)

Email: wscs.gen@ftb.ca.gov

The Senate has passed a bill to give homebuyers another three months to close on their homes and receive tax credits up to $8,000. The Tax Extenders Bill would apply to homebuyers who met the April 30, 2010 deadline with a signed contract to purchase a new or existing primary residence. The amendment would extend the deadline to September 30, 2010 for homebuyers to close on their real estate transaction. The previous deadline was June 30, 2010. The bill now goes to the House of Representatives, where it is expected to pass.

By Paige Tepping RISMEDIA, June 17, 2010–As the temperatures continue to rise this summer, so does the cost of keeping your home cool. While homeowners across the country come to depend on air conditioners to keep the temperature down during the warm summer months, there are other options that will keep you cool while keeping your energy bill low. Fans and ceiling fans -If you’re looking for ways to beat the heat, a ceiling fan can be a great investment for your home. This one appliance can make a room feel 6 or 7 degrees cooler, and even the most power-hungry fan costs less than $10 a month to use if you keep it on for 12 hours a day. Good fans make it possible for you to raise your thermostat setting and save on air-conditioning costs. Fans don’t use much energy, but when air is circulating, it feels much cooler. Ceiling fans are best, but a good portable fan can be very effective as well. -You should remember that even mild air movement of 1 mph can make you feel three or four degrees cooler. Also, make sure your ceiling fan is turned for summer – you should feel the air blown downward. Shades, drapes or blinds -Install white window shades, drapes or blinds to reflect heat away from the house. Close blinds, shades and draperies facing the sun (east-facing windows in the morning and west-facing windows in the afternoon) to keep the sun’s heat out and help fans or air conditioners cool more efficiently. Always remember that the best way to keep your home cool is to keep the heat out. Internal Heat -The most common sources of internal heat gain are; appliances, electronic devices and lighting. Be aware of devices in your home that are generating heat and if you have air conditioning, use it wisely. Don’t put lamps, televisions or other heat-generating appliances next to your air-conditioning thermostat, because the heat from these appliances will cause the air conditioner to run longer. The heat they produce will make the thermostat think your house is warmer than it really is, and your system will run harder than it needs to. -Unless you absolutely need them, turn off incandescent lights and heat-generating appliances. Replace incandescent bulbs with compact fluorescents; they produce the same light but use a fifth the energy and heat. -You should also try to avoid heat-generating activities such as cooking on hot days or during the hottest part of the day. If you are cooking, use your range fan to vent the hot air out of your house. By reducing the amount of heat in your home, you will use less energy to cool it. Plants -Plant trees or shrubs to shade air conditioning units, but not block the airflow. A unit operating in the shade uses less electricity. Deciduous trees planted on the south and west sides will keep your house cool in the summer and allow the sunlight to warm the house during the winter. Roof and Walls -Paint your roof white – If you’ve got a flat roof, paint it with a specially formulated reflective paint or just paint it white. The reflective effect will help to keep the rooms under the flat roof much cooler. Other things to remember -Humidity makes room air feel warmer, so reduce indoor humidity. Minimize mid-day washing and drying clothes, showering and cooking. When you must do these things, turn on ventilating fans to help extract warm, moist air. -Avoid landscaping with lots of unshaded rock, cement, or asphalt on the south or west sides of your home because it increases the temperature around the house and radiates heat to the house after the sun has set. -If the attic isn’t already insulated or is under-insulated, insulate it now. Upgrading from 3 inches to 12 inches can cut cooling costs by 10%.

The Home Affordable Modification Program (HAMP) seems to be helping at least some distressed homeowners, but as of June 1, 2010 all Mods must be based on verifiable income. The following write-up adds some additional insight:

HAMP Modifications Jump Sharply
The number of permanently modified home mortgages rose by 30 percent in April to about 25 percent of the 1.2 million trial modifications started under the Treasury Department’s Home Affordable Modification program begun a year ago.

Treasury officials say many modifications were cancelled because of loan servicers’ failure to verify homeowners’ income. Beginning June 1, the program requires that all modifications be based on verified income statements.

“We expect a much lower rate of cancellations going forward as the percentage of verified income modification increases,” said Herbert Allison, assistant Treasury secretary for financial stability.
Source: Los Angeles Times, Jim Puzzanghera (05/18/2010)
This is some good news that this program is finally starting to gain traction. It is sad it has been so long in coming. Many more people have lost their homes waiting for their lender to help them. I hope the trend continues and helps many more homeowners keep their home. For some, the HAMP program will only be a band-aid and unfortunately foreclosure will follow.

Home Affordable Modification Program (HAMP”)

About HMPadmin.com

In March 2009, the Obama Administration published detailed program guidelines for Making Home Affordable (MHA) Program. Mortgage servicers were authorized to begin modifications under the plan immediately. With assistance of several government agencies, GSEs and servicers – this effort involved development and refinement of servicer guidelines, modification documents and data collection and modeling tools. Key servicer documents and tools required to service HAMP loan modifications are stored and maintained on HMPadmin.com. This site provides general guidelines and overview documents available to the public as well as secure access to core tools and documents needed to complete the loan modification process. HMPadmin.com continues to evolve just like the Making Home Affordable Program. As new program updates are announced, the servicer documents and tools required to administer those programs are developed and added to this site to allow for a one-stop experience for mortgage servicers.

HMPadmin.com currently maintains servicer tools and documents for the following Programs:

• Home Affordable Modification Program – designed to enable borrowers that meet eligibility requirements to avoid foreclosure by modifying loans to a level that is affordable for borrowers and sustainable for the long-term.
• Second Lien Modification Program – designed to enable borrowers struggling with their mortgage to lower payments on second mortgages.
• Home Affordable Foreclosure Alternatives Program – provides borrowers that do not qualify for a HAMP modification with options to avoid foreclosure through a short sale or deed-in-lieu.
• Treasury FHA-HAMP – designed to enable borrowers with FHA-insured first lien mortgage loans, that are modified under FHA-HAMP, eligible for certain incentive payments under HAMP.

The lowest rate since government began keeping records in 1963 and the fourth straight month of declines!

What about the RESALE side of Residential real estate? 

The resale market has cooled a bit in March in terms of buying activity, but demand continues and we expect this to build as we enter Spring/Summer period where buying/selling activity traditionally increases. Below are some excerpts from CNN-FN article (3/25) and I’ve  attached link at bottom for those who would like to read the entire text:

6 housing trends in a still-shaky market

By Amanda Gengler, writerMarch 24, 2010: 4:48 AM ET

(Money Magazine) — The drama is nearly over. After a decade of extremes — the ebullient highs of the real estate boom, then the devastating lows of the bust — calmer forces are beginning to prevail in the housing market.

The big fall-off in home values, which has taken median price of a house down almost 30% since 2006, looks to be in its final stages in most places: Three-quarters of  nation’s 384 metropolitan areas will see prices down less than 5% a year from now, according to projections from Fiserv and Moody’s Economy.com; 10% seem poised for modest increases. Meanwhile, Uncle Sam is lending a steadying hand with programs designed to prop up the market — at least for a while yet.

http://money.cnn.com/2010/03/18/real_estate/housing_prices.moneymag/index.htm?postversion=2010032404

Add to this the fact that while Federal Tax Credit for residential Buyers expires April 30 the State of CA just Monday passed it’s own new tax credit to incentivize Buyers as follows:

Tax credit proposal will have following highlights:

The Governor plans to set aside $200 million, twice the amount set aside last year. The credit will be offered on a first come first served basis till the fund is exhausted. Last year the fund ran out in 8 months. The legislature approved the extension Monday, which will provide an extra $200 million for income tax credits to Californian’s who buy a home between May 1st 2010 and Dec. 32, 2010 and closes escrow by August 1, 2011. $100 million for first time homebuyers purchasing existing homes and $100 million for anyone who buys a new, unoccupied home.

Ø  The tax credit will apply to buyers of new & existing homes. The last credit was only applicable to new homes.

Ø  The tax credit will be available only to first time home buyers.

Ø  The current proposal is for the purchase of an existing home, as well as a newly built residence.

Ø  The tax credit will be $10,000 or 5% of the purchase price whichever is lower.

Ø  The tax credit would begin May 1st, 1 day after the Federal Tax Credit ends April 30th.

Ø  The credit should last between May 1, 2010 and December, 31, 2010.

Ø  The credit will be given in 3 payments to a taxpayer’s personal income tax returns over 3 year period; a credit of $3,333/year.

(Thanks to Kevin Budde of Bank of America for the following summary)

Consumers, lenders, real estate agents and regulators alike are wondering how mortgage-related actions such as modifications, short sales, foreclosures or bankruptcies will impact consumers’ credit profiles and, especially, their credit scores going forward. Several studies made by the credit bureaus provide some of those answers.

“Loan Modifications”: Consumers should proactively seek out Loan Modifications before they experience severe delinquency in their credit file. Late payments have a far greater impact on a credit score than Loan Modifications. 

Types of Loan Modifications are: (1) “Forbearance”-Borrower is permitted to make substantially reduced or postpone making monthly payments (2)”Principal Forgiveness”-Lender forgives part of original principal or (3)”Recapitalization”-Loan terms extended and/or interest rates are reduced. 

Short Sale, Foreclosure and Bankruptcy: In some cases, consumers face extreme financial situations (job loss or severe income restriction) and simply cannot afford to continue paying their mortgage. This can lead to a Short Sale, Foreclosure (including all variations, i.e. a deed-in-lieu of foreclosure) or Bankruptcy, and these events have significant impact on consumers’ credit scores.

Here is an average range of “reduction” in FICO scores per each event:

Loan Modification: -30 to -40 points

Short Sale: -115 to -125 points

Foreclosure: -130 to -140 points

Bankruptcy: -365 to -355 points

A derogatory event such as a Bankruptcy “significantly” reduces a consumers’ credit score. Raising the credit score is extremely challenging until the public record identifying the Bankruptcy is removed from credit file. This currently takes a minimum of seven years for Chapter 12 and Chapter 13 bankruptcy, and ten years for Chapter 7.

Bottom line is the difference between a consumer with no delinquencies and a consumer with a delinquency and defaults on primary accounts (mortgage, auto and credit card) represented an average of 243 points.