Federal Archives - Shakadoo

Excuse Me, I’d Like To Return This Mortgage Please

…What? You can’t return a mortgage….can you? It’s not like it’s an ill-fitting shirt from the mall, or a bad batch of cheese from the grocery store. However, according to the Supreme Court, buyer’s remorse can now apply to homes as well. If you are unhappy with your mortgage, or have been unfairly treated by your lender, you can now rescind your mortgage. Check out this post by Holden Lewis at Bankrate for more:

“…In that case, you can rescind, or cancel, the mortgage any time within three years. All you have to do is send a letter to the lender — even if you have fallen behind on the payments. Heck, especially if you’ve fallen behind on the payments.”

That’s according to the Supreme Court, which ruled this week in favor of borrowers who sued their bank for not letting them unilaterally rescind their mortgage three years after closing.

Photo Credit: Robert Huffstutter

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Discounted FHA Loans Coming in 2015

by Kathy T.

The HAWK (Homeowners Armed With Knowledge) Program by the FHA is all set to roll out next year. The point of the program? It offers discounts to people getting an FHA loan- if they take several classes on homeowning. Personally, I think this is a great step. Providing people with more financial education before they take out a mortgage (or any large purchase) is the key to economic health. Read this article by Karen Highland at the Frederick Real Estate Online blog for more information on the discounts:

The classes cover how to evaluate housing affordability and mortgage alternatives, to better manage their finances, and to understand the rights and responsibilities of homeownership. After taking the classes, which are taken both before and after closing, mortgage insurance premiums will be cut for those borrowers. The average savings should amount to $325 a year, or almost $10,000 over the life of the 30-year loan.

Photo Credit: dcJohn

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Best Ways To Spend Your Tax Refund

by Kathy T.

Getting a tax refund is like being visited by Santa Claus as an adult. They only come once a year, so most people use them on frivolous purchases. And why not? It’s your money! But, there are smarter ways to use it than on useless junk. Whether you’re only getting back a little or a lot, tax refunds can be a huge help with normal expenses, debt payments, or even investments. This post by Kelli at The Freebie Finding Mom has some smart advice:

-Pay down debt: use it towards student loans, car payments, or credit cards.

-Build an emergency fund- start it out if you don’t have one already!

-Look at insurance needs- upgrade if you can!

-Plan for retirement- put it towards your IRA or 401k

-Plan for college- either for yourself or your children

-Invest- and help your money grow

So, playing a little with your tax refund is fine, but if you put most of it towards one of these other options, you’ll be much better off.

Photo Credit: Tax Credits

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New Years, New Rules

by Kathy T.

2014 brings in a host of new changes to the world, and to existing mortgage rules. They are designed to help out homeowners, but if you’re not prepared for them, they might take you by surprise. In order to prevent another housing bubble (and collapse), the Dodd Frank law has been enacted to make getting mortgages safer. But, it might result in problems for small banks and narrower options for buyers. Les Christie at CNN Money says:

“Beginning Jan. 10, banks have to ensure that monthly mortgage payments are affordable, a result of the Dodd Frank law passed in 2010. The failure to do so carries strict penalties.

“My concern is that we’re going to be in an environment where some lenders are too small to comply,” said David Stevens, CEO of the Mortgage Bankers Association.

During the housing bubble, some banks issued loans without even checking applicants’ income or assets.

Under the new rules, lenders must carefully determine that borrowers have the ability to repay their loans.”

Photo Credit: Toms Baugis

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Mortgage Rate Fluctuation

by Kathy T.

If you don’t quite understand the housing market and what causes mortgage rates to be in a constant state of flux, this one is for you! This article by Ilyce R. Glink at Yahoo Homes does a great job laying out all the reasons for market ups and downs, and why rates will be high sky one month and back to normal a week later. Obviously, it’s affected by normal economic forces like supply, demand, appreciation and inflation, but did you know about the Secondary Mortgage Market that affects rates much more heavily?

The secondary mortgage market is where loans and servicing rights are sold by market leaders Fannie Mae and Freddie Mac and bought by investors such as mutual fund companies, banks, hedge funds, and teacher and municipal pension funds.

On Wednesday, the Fed announced it would keep interest rates at below 0.25 percent in an effort to further stimulate the housing market and, hopefully, the broader economy. The Fed plans to keep interest rates near zero until the unemployment rate drops to 6.5 percent, as long as inflation remains in check.

Photo Credit: Stock Monkeys

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FIRPTA Tax Charged to Foreign Sellers

by Kathy T.

When working with clients from foreign countries, something that easily slips notice is the FIRPTA tax owed when the property is sold. What in the world is FIRPTA? According to the Internal Revenue Service, it is the Foreign Investment in Real Property Tax Act of 1980. The Act authorized the U.S. to tax foreign persons on dispositions of U.S. real property interests. But here’s where it gets tricky,

Persons purchasing U.S. real property interests (transferees) from foreign persons, certain purchasers’ agents, and settlement officers are required to withhold 10 percent of the amount realized on the disposition (special rules for foreign corporations). In most cases, the transferee/buyer is the withholding agent. If you are the transferee/buyer you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax.

Real estate attorney Richard Zaretsky boiled it down to basics, including:

The way FIRPTA works, at the sale the closing agent or the new Buyer must withhold and submit to the IRS 10% of the sale price. Note, that is 10% of the contract sale price, not the net to seller! The Seller then needs to file a tax return and either pay the additional tax (if more would be due) or seek the refund.

So if you’re buying land, a house, or a business from a foreign seller, you might need to note this quirky little law that could bite you hard!

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Freddie Mac offers CreditSmart

by Kathy T.

If you’re considering buy a home, Freddie Mac is now offering an online program called CreditSmart that helps would-be buyers understand their credit and take some of the other financial steps necessary to make that big purchase. From Freddie Mac,

CreditSmart has a lot to offer. It can help you build or repair credit, create a budget, decide if owning a home is right for you, make sound financial decisions, and avoid costly scams. You’ll learn what types of mortgages are available and how to shop for a home loan. You’ll even get tips on finding a real estate agent who’s right for you.

Working with a good agent, making sure you know how to challenge a false credit report, and so much more is available through the free service. Check it out!

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$300 Little Comfort for Foreclosure

by Kathy T.

Homeowners who were unfairly persecuted by banks who claimed non-payment are now beginning to collect compensation for the foreclosures. But the compensation checks that have been mailed are pretty much insulting to a lot of the victims. From NBC News.com,

Pooley said she’s been fighting to save her home from foreclosure for the past three years. Believing that her servicer did not follow legal procedures, she said she has contested the foreclosure through her state’s foreclosure process, and managed to stop three foreclosure sales. She said she also has tried to get authorities to investigate.

Last month, she received her settlement payment, a check for $300.

“It was more than pathetic. It was insulting,” Pooley told NBC News. “I spent more in money on postage providing government agencies with detailed descriptions of what had happened in my case.

Military personnel who were foreclosed get the largest amounts from the settlement, but the remaining 2 million homeowners get between $300 and $500 each. That couple hundred bucks really is little comfort for people who have been unfairly displaced with their credit scores ruined.

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Administration Proposes to Ease Loan Restrictions

by Kathy T. Leave a Comment

The Obama Administration is encouraging lenders to make home loans a little bit easier, a move that causes both hope and dread. We are filled with hope for potential buyers to again be able to qualify for loans, yet the dread comes from the fact that loose lending standards are credited for a major part of the housing crisis.

From Realtor.com,

From 2007 to 2012, new-home purchases dropped 30 percent for buyers with credit scores above 780, the Federal Reserve reports. But the drop was even more pronounced for borrowers with credit scores between 620 and 680 — falling about 90 percent. Credit scores between 680 and 620 (out of 800) were once considered a “respectable range” for a credit score when applying for a mortgage,The Washington Post reports.

“If the only people who can get a loan have near-perfect credit and are putting down 25 percent, you’re leaving out of the market an entire population of creditworthy folks, which constrains demand and slows the recovery,” says Jim Parrot, the former senior adviser on housing for the White House’s National Economic Council.

It does make sense to ease some of the restrictions for people who do have good credit and do have a good job history, but don’t get too comfortable handing out loans willie-nillie like before!

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Tough Regulations for Bankers

by Kathy T. Leave a Comment

Banks regularly navigate through a maze of hundreds of rules and regulations mandated by governmental authorities. Sometimes they do a really good job, but other times they misfire. Neil Weinberg, editor in chief at American Banker, is sympathetic to banks regarding some of the rules they have to follow. From Linked In,

Perhaps the best example of how extreme, and self-serving, the government’s micro-management of banks can be involves Virginia Heritage Bank. The Treasury fined it $136,000 in the fall for failing to file a second set of paperwork attesting to whether its borrowers are sex offenders. The Treasury then used the proceeds from this and various other fines to pad by $4 million the “income” it declared under the Small Business Lending Fund.

There really are a myriad of rules that seem silly, but others highly necessary. It’s the price banks pay for providing a consumer service in which people should have some financial protection.

Photo by Tax Credits.

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