John Tuggle

The so-called senior payment—$250 for individuals, $500 for couples The check is almost in the mail. Barely three months from now, in May, retirees and other Social Security beneficiaries will get an extra $250 per person from Uncle Sam, as part of the economic stimulus bill signed into law on Tuesday. The so-called senior payment—$250 for individuals, $500 for couples who both receive some Social Security benefit—will go to retirees, older veterans, SSI (Supplemental Security Income) beneficiaries, and people with disabilities. Recipients won’t have to fill out a tax form or do anything—unlike the stimulus rebate of 2008. They just wait for the money to show up. They’ll get the money the same way they get Social Security—either through direct deposit or a check in the mail. Federal and state retirees who don’t receive Social Security benefits also will qualify to receive the payment but may have to file 2009 tax returns to receive it. The $250 senior payment was never included in the House-authored draft of the stimulus package approved in late January; it wound up in the Senate bill after being proposed by Max Baucus, D-Mont., chairman of the powerful Senate Finance Committee. The provision also was strongly promoted by Sen. Sheldon Whitehouse, D-R.I. AARP supported the measure early on. In a letter to lawmakers, the association argued that many retirees would be ineligible for workers’ tax credits but were in need of hardship relief. It cited research showing that older people tend to spend such payments “immediately.”

Average 30-year fixed-rate mortgages were up to 5.07 percent from 4.99 percent. Mortgage interest rates increased slightly for the week ended Feb. 20, driven by the previous week’s heavier-than-normal applications for new and refinanced loans, according to data from the Washington, D.C.-based Mortgage Bankers Association. The latest survey results, covering about 50 percent of all U.S. retail residential applications, show average 30-year fixed-rate mortgages were up to 5.07 percent from 4.99 percent. The 15-year fixed rate climbed to 4.71 percent from 4.66 percent. One-year adjustable-rate mortgages climbed to 6.13 percent from 6.1 percent, but make up less than 2 percent of all mortgage applications. Overall, association data shows applications were down 22.6 percent from the previous week, but up 9.8 percent from the comparable week in 2008. The application decline was heavily influenced by a refinancing falloff of 19.1 percent, while purchase financing declined 2.6 percent. Refinancings accounted for 69.7 percent of all applications, down from 74.2 percent in the previous week.

The debate rages on over the details of the housing rescue plan and will continue to do so for years to come. The moral hazard argument is fired up once again but now it is encompassing not only the issue of supporting our financial institutions who created this big mess, but it is very heated over the issue of rewarding bad behavior for those homeowners who lied about their incomes to get a mortgage that everyone knew they could not afford. There is no perfect solution to date and there will never be one. All we can hope to accomplish is to stem the tidal wave of foreclosures. It is clear that, as a nation, we have not moved past the anger stage yet. In moving forward, we must get over our anger and distrust, and work together to bring us out of these difficult times. The risk we take by no action is a prolonged and very ugly recession/depression. As much as we resent having to pay for our neighbors indiscretions, innocent or otherwise, if we do not act, we only cut our nose to spite our face. The Homeowner Affordability and Stability Plan as it is dubbed, has three major components that address some of the current problems that so many homeowners face to date. First, the plan will attempt to help as many as 5 million homeowners refinance their mortgages owned or guaranteed by Fannie and Freddie. Refinancings will be limited to 105% of LTV. Second, $75B will be used to match reductions lenders make in interest payments that lower borrowers’ payments to 31% of their monthly income. Under the program, a lender would be responsible for reducing monthly payments to no more than 38% of a borrower’s income, with government sharing the cost to further cut the rate to 31%. Third, the government will increase the size of Fannie and Freddie’s retained portfolios and will increase by $200B the amount of preferred stock it will buy in the GSEs thus adding support to their balance sheets while attempting to lower mortgage rates. To see the complete details go to http://www.treas.gov/press/releases/tg33.htm. Obviously this plan does not help everyone and we run the risk of some people getting government assistance that really do not need it. We can avoid much of this with proper due diligence, which we know if it was done in the first place, many loans would not have in fact been made. We also know that the statistics on loan modifications have been horrific in that more than 50%- 60% have redefaulted. Let us not confuse the causes of the markets declines with talk from the likes of Senator Christopher Dodd ( D. Conn.) that we may end up nationalizing some banks. People with perhaps more knowledge and respect have voiced a similar scenario before he made his comments to Bloomberg Television last Friday. Dr. Doom himself, Nouriel Roubini, stated a week prior to the Senator’s comments, that a takeover and resale of some banks may be the marketfriendly solution. This idea is similar to what the Swedes did in the 1990s. They took over failing banks, cleaned them up,and sold them in rapid order to the private sector. With all the guarantees, liquidity support and capitalization that the government has already done with many banks, they already control a huge portion of the banking system. Call it what you want.

Many Realtors and Clients have inquired about the refundability for the First Time Home Buyer's Tax Credit as revised and enacted into law by the Congress and President Obama last week.. Below is how I see it: (Please keep in mind that anyone seeking this or any other tax credit and/or deduction should seek competant advice from a tax professional. I am not a tax professional) All that said lets go. In 2008 Congresss created a $7,500 First-Time Homebuyer Tax Credit. It was effective for First-time Homebuyers who purchased after April 8th, 2008 and would run through July 1, 2009. It could be taken on your 2008 or 2009 taxes regardless if the tax payer purchased in 2008 or 2009. The largest problem was that this credit would have to be repaid through payroll withholding and tax liability over a 15 year peroid of time. Many people considered it a debt and not a benefit. Allthoug in all reality is was a debt but is was an interest free debt, which of course, you do not see too often. All in all a pretty good deal if you could get it. Powerful groups such as the NAR, The Mortgage Bankers Association and the National Homebuilders Association began in 2008 to advocate to remove the repayment feature of the credit and extend the credit to the end of 2009. These advocacey groups also wanted the credit available to all homebuyers. Now, under the Stimulus Bill just passed by Congress and signed into law by President Obama, the proponets succeded in removing the repayment requirement for 2009. The credit was extended for sales competed through November 30, 2009. The amount of the credit was raised to $8,000 and credit is available for purchases made after Janujary 1, 2009. Sales in 2008 would have to take the credit under the old repayment requirement rule. The credit is still only for First Time Homebuyers and this is defined as an individual that has not owned a home in the last three years. The BIG news is the credit is REFUNDABLE up to 10% of the purchase price of the property. If the property purchase is $60,000 then the credit is for up to $6,000 and if the purchase is $135,000 then the credit is up to $8,000. For the rest of the examples herein please assume that the pruchase amount is over $80,000. When they say REFUNDABLE it means that if your total tax liability in the give year is less than $8,000 then the IRS is going to send a refund for the balance. The First-time Homebuyer is going to get a CHECK. That should help offset downpayments made and cost paid very handsomely. All this said it is also important to observe that many taxpayers do not have a tax liability that exceeds $8,000. For example a single filer would need $46,000 in taxable income to hve $8,000 in tax liability and a couple would need $58,600 in taxable income to have $8,000 in tax liability. All taxpayers that have less than this amount will get a check for the differenced. If you are fixed income and have no liability you will most likely get the full $8,000 check for the credit. In most cases the program will phase out for individuals making over $95,000 and couples making over $170,000. Other situations that would prevent the credit from being attained would be if you purchased the property from a close relative (spouse, parent, grandparent, child or grandchild), you stop using the home as your primary residence, yoiu sell the home prior to the end of three years from the purchase date, and if you are a non-resident alien. Other information that is important is that the new plan will allow you to take the credit on your 2008 Tax Return (Due by April 15, 2009), an amended 2008 Tax Return, or your 2009 Tax Return due in 2010. For all your answers and the exact text of the new credit please go to www.irs.gov . Another excellent resource is http://www.realtor.org/government_affairs/gapublic/american_recovery_reinvestment_act_home?lid=renav0019 John Tuggle February 22, 2009

Bank of America Corp. will rebrand its Countrywide Financial Corp. mortgage unit, a company spokesman confirmed Thursday. Countrywide will be renamed Bank of America Home loans in late April. In addition, according to The Wall Street Journal , Charlotte, N.C.-based BofA (NYSE: BAC) plans to hire 1,000 people in its mortgage unit and move 500 employees to mortgage processing from home-equity processing. In other developments, BofA’s stock fell 14 percent in Thursday trading. The company’s stock, which has traded between $3.77 and $43.50 per share over the last year, closed at $3.93 per share Thursday. BofA’s stock closed at $4.57 per share Wednesday.