I have been waiting to get more information on the new short sales changes April 2010. According to HAFA, Home Affordable Foreclosure Alternatives, the new Short Sale Process will be crucially important in 2010.

The Treasury department has released new rules to help simplify the “short sale” process, which isn’t “short” at all. For months, the real estate community has been preparing these new changes. The purpose of HAFA guidelines is much like other failed attempts at helping the real estate industry - one is to have less foreclosures in 2010 and two, get the real estate market back in the appreciation mode.

The key short sales changes appear to be the following:

Mortgage servicers have 10 days to accept or deny a short sale request. After a sale is completed, the borrower could be completely released from debt.
Borrowers are eligible to receive a $1,500 moving allowance, if they sell their home through a short sale.
Mortgage servicers will receive $1,000 for each completed short sale.
Investors who hold first mortgages can get as much as $1,000 for allowing second lienholders to release their liens.
Second lienholders can get only as much as $3,000 in proceeds from short sale to release their liens.
The property must be the homeowner’s principal residence.
The homeowner is delinquent on the mortgage or default looks likely.
The loan was made before Jan. 1 this year and is less than $729,750
The borrowers’ total monthly mortgage payment exceeds 31 percent of their before-tax income.

The following changes only apply to banks that took TARP money (Troubled Asset Relief Program). Because they took TARP funds, the treasury will be requiring these banks to follow these new guidelines.

I will continue to update information on these short sale changes as they become more definite.

Should you have any questions, please do not hesitate to contact me at 631-831-9048. If you are behind on your mortgage and have questions about your options to avoid foreclosure, you can email me here.

(c) Copyright 2010 www.tommcgiveron.com
By Thomas McGiveron, LSA

The stability of the Long Island real estate market rests with the performance of mortgage backed securities. I have mentioned this key point in previous articles and I think a lot more people are paying attention.

This video below will go over in simple terms, mortgage backed securities and their relation to why mortgage rates are so low right now as well as why they will start rising in the near future.

I’ve mentioned before that homeowners looking to sell must pay close attention to what’s happening in the financial markets and the most important piece of financial information is looking closely at mortgage backed securities.

On Long Island, if the rates rise dramatically (as many economists believe), home values could drop dramatically. The more expensive it is to borrow money for a potential buyer, the less home they can afford. Thus, in order to sell your home, a buyer will only be able to afford so much.

For every 1% the mortgage rate rises, home values (in order to sell the home to a buyer) will need to drop 10%.

Please re-read the above statement. I think…no I know from experience, that most homeowners do not really pay attention to me when I say that because it sounds so unbelievable. But, not just on Long Island, but all across the country, if the money needed to borrow from a bank to buy a home goes up, especially given the countries financial challenges, the amount a buyer can afford goes down.

How? Because when buying a home, the most critical item to consider is the monthly payment. The difference between a 5% mortgage interest rate and 6% is not one percent, it’s over 16% higher. Meaning from 5% to 6%, the cost of the monthly mortgage is 16% higher. So if their mortgage interest at 5% is say $1,500, at 16%, the payment for interest would be $1,740. That’s a $240 increase. In this economy…in any economy, that’s a big difference.

The point of all this is for homeowners thinking of selling to realize that there are challenges ahead. If you want/need to sell your home, pricing it aggressively now and marketing it with the right real estate agent is imperative. Otherwise, come May/June of 2010, you could easily see your home’s value drop 10%….in literally 60 days.

(c) Copyright 2010 www.tommcgiveron.com
By Thomas McGiveron, Licensed Real Estate Salesperson
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So the question is, what is going to happen to mortgage rates in 2010? Well, have you ever heard the saying “It ain’t over til it’s over”? The Fed has told us repeatedly that their massive purchasing program of Mortgage Backed Securities is just about over - and this translates to home loan rates rising in the near future.

As you can see in the chart below, the amounts of Mortgage Backed Securities the Fed is purchasing are slowly dwindling, as the program is set to wrap up by March 31st, and are clearly trying to ration out the remaining portion. Last week, the Fed purchased $11 Billion in Mortgage Backed Securities, which leaves them with $66 Billion to spend out of their original $1.25 Trillion allotment. So about 95% of the total has already been spent and has purchased about 3 out of every 4 home loans during the past year. When such a large buyer leaves the market, it is very likely that prices will worsen.

This is very important because as the Fed has less money to last through the remaining months of the program, their ability to keep home loan rates low via their purchasing power will wane. And those who can take advantage of currently low home loan rates do not wait, as the clock on these historically low rates is ticking.

Chart: The Fed’s Purchase of MBS (By Month)

The purchasing of these MBS’s, is exactly what has kept mortgage interest rates low, as I’ve previously mentioned. Originally, I thought, as many did, that rates wouldn’t take a hit until after the complete execution of this program in March. However, the government slowing of these purchases will have an effect on the rates before March 31st!

These are historic times in real estate and I feel that many people who want to really buy, are going to miss out on an opportunity to have a 5% 30 year fixed interest rate…because they just kept waiting and waiting….and waiting.

Now is absolutely the time to buy. Prices are down over 35% in almost every area throughout Long Island. If you’ve been paying attention to certain homes on the market through your home search, you know that home is on the market now (it may not be there 3 months from now). And right now, you can obtain an historically low interest rate.

I had a closing the other day and my buyer client, with buying down his rate, got a 30 year fixed loan for 4.25%.

4.25% for 30 years. In 3 months, that will most likely be 6.25%…with buying down the rate…

The clock is ticking.

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So the question I recently asked myself is how many homes are in foreclosure in Suffolk County, New York. Immediately, I went to work and found out that there are over 190 homes that are bank-owned in Suffolk County…under $300,000. Foreclosures in Suffolk County priced over $300,000 numbers around 50.

So to be fairly accurate, it is okay to say that there are currently 250 homes in Suffolk County that are currently bank-owned…and on the Multiple Listing Service of Long Island. This 250 number does not include all the homes that are not listed yet, in the process of foreclosure, or currently in contract.

If I were to make an educated guess, based on my experience as a BPO agent (an agent who performs broker price opinions for banks to price out homes on their books), I would that there are over 10,000 homes in Suffolk County, that are somewhere in the process of foreclosure.

I complete about 50 BPO’s per month on average. And my competition in this business (other real estate agents doing just as much or more), leads me to believe that not just Suffolk county, but all over Long Island will be facing very difficult times in 2010 and well into 2011.

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Well 2009 is in the books and I want to put a stamp on exactly how the Long Island real estate market faired throughout the course of the year. The Long Island real estate statistics for 2009 may surprise many people. There’s one very clear message from the stats that I want to share right away and that is, we are in “the trough”.

As the downward trend has dropped, these statistics which I’m sharing here, demonstrate that we are in the low point of the Long Island real estate market. It doesn’t mean that things are miraculously going to turn around and homes are going to start appreciating, but it does mean that we are almost certainly at the low point and we could “skip along” here at this level for quite sometime and even dip down a little.

I’ve talked alot over the past 3 years about supply and demand. Supply is still very high, but little by little, it is decreasing and more homes are being sold so demand is catching up with supply. Ask any real estate agent on Long Island and they will tell you, when a property for sale is priced right, it sells quick and usually receives multiple offers. So buyers are out there and more importantly, they’re buying.

Now before moving forward I need to preface this information with the following challenges our market faces. One, unemployment is high and inflation may hit the country in 2010, which most economists say it will. Two, foreclosures are rising due mainly to unemployment with prime buyers being the hardest hit (now we’re in the second phase of this foreclosure crisis) - see previous article here. Regarding the foreclosure crisis, you can see the article in Newsday’s Sunday, January 17th paper online about foreclosures on Long Island.

The state of the Long Island real estate market for December 2009 is broken down into a comparison between December 2008 and also a slight comparison to April 2009 (the last time I did this graph).

What you’ll see is not just one or two anomolies but many areas having increased sales prices or very slight declines over December 2008 and April 2009. Long Island is broken down into zones. For information on where you live and what zone you’re located in, please contact me directly at 631-831-9048.

For the above Long Island real estate market information, it actually surprised me to see the dramatic improvements from the April, 2009 report. One of the main themes throughout the statistics was, that the market is leveling off. Units sold from December 2008 were basically doubled in December 2009. And with over 11 out of 17 zones, actually seeing an increase in sales price averages, that represents an improvement of 65% of the overall Long Island market.

Again, I’m not saying that values are “going up”. What this data suggests is that more homes are selling and many of those homes that sold, sold for more money than they did in just April of 2009.

Now for a closer look at where we are in the Long Island market, we need to look at the amount of homes that are for sale and how many are selling. The graph below demonstrates very simply that while the market has made great strides in the right direction (less inventory), we still have a long way to go until demand evens out with supply.

For buyers, these are clear signs that if you want to buy a home, now is the time to seriously do what you must to purchase a home at the lowest rates in our history. I continually hear prospective buyers tell me they’re waiting…and I’m thinking in my head, “…for what, cows to fly?”

Five percent interest rates are not here to stay. And once they go up, chances are we will never see rates like that, on 30 year loans, for a very long time, if ever again in our lifetimes. Rates are historically low and the Long Island real estate market is down nearly 37% (and more in some areas)…and let us not forget about the $8,000 tax credit (which is money in your pocket).

This State of The Long Island Real Estate Market tells me what I need to know and that is, convince buyers to buy, rather than sit around and wait. The bottom is here and the market might stay down in this area for a good amount of time, but interest rates of 5% and $8,000 will not.

For sellers, your motivation for selling is paramount. If you’re highly motivated, it’s so important that you hire a real estate agent who can prove to you that he or she can sell your home for the most amount of money in the shortest period of time. Selling before May 1st, 2010 is extremely important. Call me if you don’t know why.

631-831-9048

(c) Copyright 2010 www.tommcgiveron.com
By Thomas McGiveron, Licensed Real Estate Salesperson

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These videos will explain what’s behind the impact of foreclosures in 2010. The unemployment rate is staggering and is the new challenge for the real estate market. While the Long Island real estate market has seen some improvements (small steps toward recovery), foreclosures and other distressed sales will be the topic of 2010.

For the website with the report on the impact of foreclosures throughout New York, you can visit http://data.newyorkfed.org/creditconditions.

Should you have any questions you can reach me at 631-587-1700, ext. 51.

(c) Copyright 2009, www.tommcgiveron.com
By Thomas McGiveron, LSA

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In New York, it’s important to understand what exactly is in store for the real estate market. Buyer demand is extremely important to keeping home values from dropping further. The higher demand is for home purchases, the more valuable homes will be.

One of the things that is helping real estate market sales is the tax credit for home buyers. Right now through April, 30th, 2010, buyer activity will continue to be higher because home buyers have access to up to $8000 in tax credits. This tax credit is helping homes maintain some value continuity.

From the graphic you can see that after the tax credit ends, there is nothing to help the real estate market maintain value or slow decline. Right now, buyers are looking. This is very important to remember.

Now note the graphic that shows what’s in store for price rebounds throughout the country.

As a homeowner myself, I could easily shrug my shoulders and think that a graphic is meaningless, and think that the real estate market is on the rebound already. I wish that were the case. But wishful thinking isn’t what helps people understand what’s happening with the market. Insightful analysis is what will help a seller make an educated decision about selling their home.

For more information on the Long Island real estate market, click here.

You can reach me at 631-831-9048.

(c) Copyright, 2009 www.tommcgiveron.com
By Thomas McGiveron, LSA

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When it comes to Long Island short sales, having completed several this year, let me say that throughout the course of 2009, the process has improved…but has a long way to go. I came across some very interesting information about the process of how “banks” determine whether or not to move forward with a short sale negotiation.

I put the word “banks” in quotations because it’s not necessarily banks that are handling the short sales. During the course of the past several years, Loan Servicing companies have become increasingly popular.

There are two basic elements to a mortgage loan. They are Processing and Servicing. Keeping in mind that any business must function with the intent on making a profit.

In order to explain this slide simply, anything that says “negative” would mean that the loan service company would lose money on that aspect of a short sale. Without incentives to go through with a short sale, loan service companies have no choice but to lean in the direction of foreclosure. Hence, where it says “positive”, that’s where the companies will make money, rather than lose.

Now the Treasury Department has come up with a viable plan to actually encourage banks and loan service companies to consider short sales over foreclosure, many homeowners may be saved from foreclosure.

So what does this mean to buyers?

It means that a short sale may very well be an excellent opportunity to purchase a home and help a struggling homeowner to avoid foreclosure.

For sellers, it’s simple, if you want to ever buy a home again or at least within the next 3 to 4 years, cooperating with your “bank”, may very well put you and your family in a position to buy again sooner than you think.

If you are struggling to make your mortgage payment, please call me at 1-877-765-3123, ext. 51, immediately.

If you’re a buyer, it is imperative that you find a qualified real estate agent to help you through the process of buying a short sale. They can be very good opportunities, but know which ones are good and which ones are not is the key to successfully purchasing a short sale. You can visit www.islandforeclosures.org and contact me there by signing up to receive email updates on properties for sale throughout Long Island or call me at the number above.

(c) Copyright, 2009
By Thomas McGiveron, Licensed Real Estate Salesperson

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Homebuyer Tax Credit Update!

TAX CREDIT OVERVIEW

Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a Tax Credit?

A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

1. They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
2. They do not use the home as your principal residence.
3. They sell their home before the end of the year.
4. They are a nonresident alien.
5. They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
6. Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
7. They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.
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If you’re a seller and you don’t quite understand how this can help you, call me at 1-877-765-3123, ext. 51.

By Thomas McGiveron, Licensed Real Estate Salesperson

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The government purchasing of mortgage backed securities is nearing an end. To quote, Steve Harney, national residential real estate expert, “When the banks have to lend their own money to people on a 30 year loan, they’re not going to be satisfied with 5%…”

If you’re frequented my website, you know that I pay close attention to what’s happening in the real estate market. I do this so I can be a strong source of valid and useful information for my clients and my readers. What I’m going to cover in this article is going to be like smelling salts that wake you up from a daze.

The Fed will gradually slow the pace of the purchasing mortgage-backed securities (MBS) in anticipation of a full execution of the program to keep the mortgage interest rate low by the end of March, 2010.

It marks an extension of the MBS-purchasing program past the previously anticipated year-end date of December 2009. The slowing of purchases is intended to “promote a smooth transition in markets” as the government ends its participation in the agency MBS market. Basically, the government is going to stop buying mortgage securities in March, 2010.

To implement the gradual slowing of agency MBS purchases, agents acting on behalf of the Federal Reserve Bank of New York’s open market trading desk plan to reduce the average weekly purchase amounts beginning with the reporting week that starts September 24, according to a NY Fed statement.

Will the real estate market be strong enough to withstand this slowdown? Are banks and their investors, willing to invest money into such an unsteady market area, such as the current real estate market? This is the big question…is the party [of low interest rates] coming to an end?

With the largest purchaser of MBS, not buying up these assets (helping turn money over quickly for banks and their investors), will banks be apt to continue writing mortgages at 5%?

The answer is no.

So rates will go up after March, 2010.

Question is, how high and will buyers continue coming out to buy? I would say the answer to buyers still buying is a big fat YES [they just can’t pass up the fact that prices are down 35% from peak]. Additionally, as mortgage interest rates go up, prices must drop [hear that sellers?].

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REAL ESTATE MARKET UPDATES

• Short Sales Changes April 2010
• Long Island Real Estate Market: Mortgage Interest Rate Watch
• What Is Going To Happen To Mortgage Rates In 2010?
• How Many Homes Are In Foreclosure In Suffolk County?
• The State of The Long Island Real Estate Market: December 2009
• Loan Originators Disclosure of Closing Costs
• A Closer Look At The Impact Of Foreclosures In 2010
• Buyer Demand, Prices & Rebound
• The Future Of Mortgage Interest Rates
• For First-Time Buyers: The Process Of Buying A Home

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