Paul Bozek

As many know, the deadlines are soon approaching and the Tax Credit that are being offered by the government are soon expiring. Many First Time Home Buyers and Move Up/Repeat Buyers can still take advantage of these incentives but there is not much time left. As always, please use this only as a guide and always consult your CPA to determine if you qualify.

The Credit has been extended until April 30, 2010. This will apply for both First Time Buyers and Existing owners. In order to qualify, a buyer would have a purchase contract dated before April 30, 2010 and the loan would have to fund before June 30th, 2010. There is no exceptions to this rule as of right now and buyers that do not adhere to this guidelines will most likely see their possible credit disappear right in front of them. Buyers, agents and lenders alike need to be aware of these deadlines which might leave some home purchase transaction buyers out in the cold.

In addition to the deadlines, there are other qualifications. These are the following:

Income Qualifications: Single Tax payers can make no more than $125,000 annually while married couples filing jointly cannot make more than $225,000. First Time Home Buyers can receive a tax credit up to $8,000 while existing home owners purchasing can take advantage up to $6,500.

First Time Home Buyer Defined: A first time home buyer is defined as someone who has not owned a property in the last 3 years of the new home purchase. For married couples, this would apply to both people not just one. If one of the couples does not fall into this category, thend NEITHER one of the couples would be considered a First Time Home Buyer. Move Up /Repeat Buyer Defined: A move up buyer is defined as someone who has lived at least 5 years in the same residence out of the last 8 years from the purchase date. Both spouses must qualify under this rule to take advantage of the move up buyer tax credit. The buyer(s) do not have to buy a bigger or more expansive house to qualify.

How is the Tax Credit Determined: For first time home buyers and move up buyers alike, the tax credit is calculated the same way. The only difference is the cap in the tax credit of $8,000 for first time home buyers and $6,500 for move up buyers. The Tax Credit is basically 10% of the purchase price not to exceed the above mentioned figures. Also, the house cannot be more than $800,000 in price on the move up buyer side.

Partial Tax Credits with Higher Income Example: Couples with income exceeding the income limits may still qualify for partial tax credit. For example, a couple making $235,000 annually is $10,000 over the max income. The "phase out range" is 20,000 so you would basically have to divide 10,000 by 20,000 and get a factor of .50. You then take 1.0 - .50 and get .50. At this point you would multiply 8,000 by .50 and get a $4,000 tax credit as a result.

These are the basics of the tax credit. You can always read up more about it on www.fhamadesimple.com/TaxCredit.html

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Looks like unemployment continues to increase. I think it will be a slow process and the road to recovery will start with getting TRUE unemployment figures well below 10%. Currently with 20% out of work, it puts about 30 million Americans that are out of work. This Gallup survey is based on a sample size of 20,000 US adults between Jan1 - 31 so I think the sample size is somewhat small. However, I would see this figure as accurate from personal observation.

The poll comes at a time when voter anger over the slow economic recovery is running high and President Barack Obama's hopes of boosting employment through government programs have been frustrated by partisan rancor in Congress.

Gallup found that underemployed Americans were more likely to have a favorable view of Obama, with 55 percent approving of his performance as president against 49 percent of the public.

The poll's estimate of U.S. underemployment is higher than official statistics. The Labor Department says 16.5 percent of American workers were without employment or worked part-time for economic reasons in January against Gallup's 19.9 percent.

A Labor Department official said the government rate may be lower because it factors out temporary seasonal changes in employment to better reflect the underlying economy.

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We've been extremely lucky with low rates all year. Last week, we saw a substantial spike in rates followed by somewhat of a decrease. We are hoping to see rates in the low 5's or high 4's through March. After April, the feds are pulling out of buying Mortgage Backed Securities which will make rates level out to market. Currently, we are seeing artificial rates that have been kept down by the feds. Surprisingly, I am still seeing many homeowners waiting for lower rates. Maybe they know something I don't...

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So the feds decided to raise the rates yesterday way in advance of everyone' expectations. We have been hearing that rates will rise all year and this is the beginning of the trend. Any rate drops are temporary and should be used as opportunities to lock in. Consumers that are STILL holding off for lower rates will be greatly disappointed and likely pay more for their home loan.

There is a bunch of mixed news in my opinion regarding foreclsoures and defaults. I just read an article that less people are defaulting compared to last year but foreclosures are on the rise. I don't see the economoy getting any better any time soon. I think most of the figures are skewed or 'cooked' the same way they were before this mess. On the bright side, I think this market has and will continue to create tremendous opportunities for those that take advantage and adapt to this market

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I wanted to share this article with everyone from CNBC today. Front page is talking about what I've seen happen in the industry for a while now. It's called "Strategic Default." This is where homeowners choose to walk away from their home because it doesn't make business sense. This holds true for many people upside down in their house and it makes it that much easier when you see everyone on Wall Street walking away from their bad investments.

Wayne Bryant and his wife have just stopped paying the mortgage on their home in northern California, even though they can afford to pay. The reason? Because, Bryant says, the value of the house is less than what they owe.

"We are 45-50 percent under water," claims the 61-year-old Bryant, who works in airport management. "At this point we are 20 years away from being even. We're walking away because it's a good business decision."

Bryant bought his home three bedroom townhouse in 2006 for $582,000 and says it's worth about $315,000 now. He says he has never missed a payment on any of the homes or cars he's bought over the years. But that's changed.

"I thought about the moral hazard," Bryant admits. "But look at what's going on. Big banks are not helping anyone out. Big investors are walking away from debts. I'm angry how the system works. There's no way I'm going to feel guilty about this."

Analysts say Bryant is joining an increasing number of homeowners across the county who are "walking away" or making a 'strategic default' on their mortgage payments.

"About 25 percent of mortgage defaults across the country are the strategic kind," says Greg McBride, senior financial analyst for Bankrate.com. "That not a small number."

And it appears to be a growing option for homeowners.

"It's somewhat substantial," says Bob Walters, chief economist at Quicken Loans. "We are talking about it more in the industry and it's becoming more accepted among homeowners."

Lenders and Backlog of Mortgage Problems

What's helping make walk aways more acceptable is a lack of fear. If homeowners like Bryant don't dread the banks coming after them, there's a reason, says Jon Maddux CEO of the web site YouWalkAway.com that, for a fee, advises homeowners on strategic defaults.

"Banks are backlogged with paperwork on foreclosures and short sales," Maddux says. "And a lot of lenders are not really eager to take the property back because there's no housing market right now. There's no rush to go after delinquent payments."

While Bryant says frustration and anger with the system are driving him to skip his payments, not everyone is walking away because of outrage.

"I stopped getting child support payments and that meant the end of paying my mortgage," says Jayme Protich, a divorced mother of two college age children from Tallmadge, Ohio. "I tried working with the lender but they never got back to me. Not once."

Protich, who used Maddux's service, stopped making her $1,300 monthly payments in early 2009 on the three bedroom, two car garage home she and her ex-husband built 16 years ago. She tried selling the house after her divorce but got no offers. Even when the house was listed at the price of the mortgage, $215,000.

After living in the home for months and not making payments, Protich eventually had to move into an apartment. But any break in not paying the mortgage went to covering college fees for her children.

"The bank finally took over the house after a sheriff's sale," says Protich, who works at a local food service distribution company and has a second job in the summer at a local golf course. "I didn't want to do this, not pay my mortgage. But with my two kids, I didn't have much choice."