Legislature backs TAX break for forgive mortgage debt
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Foreclosures to persist
According to authors at the Federal Reserve Bank of Cleveland, the nation’s high foreclosure rate is likely to persist. The Fed article looks at the changes in foreclosure and unemployment rates across states, noting the differences in the timing of the movements. The conjecture that the high foreclosure rate will persist is based in part on the observation that states that experienced boom-bust housing cycles in the past (Texas, Oklahoma, Massachusetts and California) had elevated foreclosure starts for years after the peak in foreclosure starts and inventory. These previous boom-bust cycles “were small in comparison to the current cycle,” the article said. While the recession has left deep scars in the housing and labor markets — with the unemployment rate doubling and the foreclosure start rate roughly tripling — the timing of the movements differs over the cycle, according to the abstract, written by the vice president at the Federal Reserve Bank of Cleveland, and K.F., a research assistant.
In So-Cal every Wednesday morning there is a short sale workshop open to the public, allowing homeowners, agents, brokers or investors the opportunity to see and participate in how and why this has been changing communities across our nation. Join us this week or any week for a fulfilling chance at making a difference in the lives of others.
The International Monetary Fund (IMF) warns that “the backlog of foreclosures and high levels of negative equity, combined with elevated unemployment, pose risks of a double dip in housing.” further support for foreclosure mitigation under the existing framework may be needed if the housing market were to weaken,” IMF wrote, adding that a worst-case scenario may include reconsideration of mortgage cram-downs within bankruptcy. The IMF noted that recent reform legislation emphasizes a return to “safe securitization” of assets like mortgages through greater oversight and accountability for ratings agencies, more transparency of the assets, greater emphasis on investor due diligence and “skin in the game” for originators. 
“Given the large role that securitization played in the past, and the potential limits to bank balance sheets for creating credit, speedy implementation of these measures would be essential to avoid limits on credit supply that could crimp the recovery,” IMF said. “It will also be important to coordinate reforms domestically and internationally to ensure safe securitization and promote a level playing field.” In the meantime, the housing finance system remains “costly, inefficient and complex,” according to the note. The IMF also recommended a clarification of government-sponsored enterprise (GSE) mandates and a privatization of their retained portfolios. Fannie Mae and Freddie Mac’s core bundling and guarantee business lines “should be made explicitly public,” the IMF said.
Please feel free to visit our Foreclosure Relief Page, to understand their are other options!
Demonstrate the ability to pay the loan and you are halfway toward becoming a commercial investor. Critical is an understanding of the major risks associated with commercial loans from the lenders perspective. Use this as a quick checklist when putting together an offer or evaluating your own potential.
1. Credit Risk. Perhaps the most common type of risk, this simply indicates the ability of the borrower to meet the contractual obligations as outlined in the loan documents…aka, the ability to pay. However, because you are dealing with commercial loans, the credit risk can be impacted by several items including competitive market factors (ie, the inability of the property to lease as expected, increased or decreased demand etc), interest rate sensitivity, rollover of leases (long term leases may be stable but are also more prone to declining values), changes in regulatory environment including zoning and tax laws.
2. Interest Rate Risk. The majority of commercial real estate is financed on a floating rate basis so interest rate risk is a very real threat depending upon the timing of cash flows, yield curves and other economic conditions that may adversely impact the economic climate.
3. Liquidity Risk. Banks must meet obligations the same way that private individuals are required to do so; loss of liquidity means the bank is unable to extend credit or must call loans in order to raise capital. For an investor, liquidity risk is typically isolated to the ability of the bank to loan money in the future should you require it in order to roll-over or refinance a loan.
4. Compliance Risk. Once the domain of elusive economic theory, compliance risk has risen to disproportionate levels thanks in large part to the current crisis as well as outside influences. Examples are broad but range from potential liability of bad debts during the mortgage boom to the current oil spill at BP; a bank may be held responsible for assets held as collateral. High risk assets will be assessed a premium.
Real estate investors seeking entry into the exciting world of commercial real estate should review each property from the perspective of the lender; examine risk levels and potential threats through the eyes of the bank in order to maximize your prospect for success.
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Tax foreclosures were once all the rage but with media attention on short sales and REO properties, they have recently fallen out of favor. Of course, among savvy real estate buyers and investors, nothing is “off the table” so it’s only fair to spend a bit of time… examining the pros and cons associated with each.
Tax Foreclosures are Not Tax Deed Sales
It’s important to differentiate between tax foreclosures, tax deed sales and other forms of government sponsored property sales. Tax foreclosures are typically the result of unpaid tax or other liens placed on the property (for example, unpaid income taxes). Tax deed sales are often the result of a homeowner failing to pay the local property taxes on a given parcel; after a period of time the taxes are paid by someone else (often an investor) with a guaranteed rate of return ranging from 5 to as high as 18 percent upon redemption. At some point and time in the future, if the original owner does not redeem the property and repay the prior property taxes plus interest, the property may eventually go up for auction.
Pros & Cons
Although tax foreclosure sales may sound simple enough, in reality they are often plagued by problems. For example, unlike short sales or REO properties, the buyer often assumes all prior liability for past due taxes when purchasing the property. Additional liens (including other forms of taxes, HOA fees, etc…) may add thousands to the purchase price of the property. Because the tax lien takes precedent over all other liens, a substantial sum may be required to obtain clear title and clear liens against the property. Remember, there is often a mortgage in addition to the back taxes owed.
Tax foreclosures can also be highly competitive; auctions often take place quarterly or once per month with extensive advertising used to attract maximum bidding. Pre-approval is necessary since closing typically takes place within 10 to 30 days after the auction. Bidders may conform to the dictates of the taxing authority rather than negotiate a closing based upon their own individual situation. Of course, the use of leverage, timing and other financial issues may significantly impact the individual rate of return for any type of real estate investment. Be sure to take all considerations into account before moving forward with a tax foreclosure sale.
Although both REO and tax foreclosed homes are typically sold in “as is” condition, the bank representative and others typically attempt to provide a thorough review of the property. Tax foreclosures should be extensively scrutinized prior to the sale in order to gain as much information as possible; it’s not unheard of for investors to believe they got a “great deal” and were the lowest bidder only to find out there were zoning irregularities, EPA restrictions or other major issues associated with the property.
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With defaults continuing to mount and declining property values still widespread, the industry is seeing an increase in short sales. Such transactions are expected to burgeon even further now that the federal government has implemented its Home Affordable Foreclosure Alternatives (HAFA) program. With the new policies and still-precarious market conditions, short sales are gaining in popularity among lenders and distressed homeowners alike, but as with any modus operandi that rapidly picks up steam, this proliferation can open the gate for fraudulent activity. Experts say one area of the short sale process particularly vulnerable to fraud is property valuation. Bank-owned fraud attributed directly to schemes involving short sales and REO inventories has increased by 40 percent over the past year and has more than doubled from two years ago, according to market data from the California-based risk mitigation firm Interthinx.
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Yesterdays news on Foreclosure relief just in and official. When helping others out of a bad place and finding others for a new place, the California legislation has approve what will help us all succeed in our dreams of paying it forward.The bill would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale. The law is expected to affect about 34,000 taxpayers.
Gov. Arnold Schwarzenegger is expected to sign the measure, which would also provide about $60 million in tax credits to green-energy companies.
Californians can already claim the tax breaks on federal returns. With the April 15 deadline for tax filings looming, the Senate and Assembly approved the measure, SB 401, by Sen. Lois Wolk, D-Davis.
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Perhaps you are 1 in the mix of this poor economic downward spiral, finding yourself in the midst of the “what is it I’m doing about my families future”. We’ll your not alone out there because many of us have lost our security of full time employment as well as maybe our long term financial stability with all the cut backs involved today’s slowdown with world wide production. Pundants have put the spin on this over and over, and all indicators show through 2010 it will continue to lag. Sorry for the slap in the face by the hand of reality, get over it and off your asses folks, opportunities never fail to exist in any market!
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Home affordable foreclosure alternatives. As for banks, they’ll face loan losses, but HAFA could trim expenses.”The new plan doesn’t keep people in their homes, but it does eliminate the costs of foreclosing properties and the deterioration of value associated with vacancies,” Cooper said.Banks often spend $20,000 to $40,000 to take a home all the way through foreclosure. Short sales can be the cheaper option, says Eli Tene, president of Woodland Hills, Calif.-based I Short Sale.
“Any savings through short sales will help,” Tene said. “But once (HAFA) kicks off, it will have limited success as it reaches only about a quarter of homeowners in trouble.”
Short sales have become more common, but they’ve been hard to pull off. They can take months, even more than a year to complete, says Leonard Baron, a real estate professor at San Diego State University. To understand all the complexities the investor needs better knowledge of the tools he can obtain. Just like the weekend DIY warrior, tools make the job! That new combo slide miter saw that enables quick and accurate crown molding cuts for the fixer needing a face lift.
Interestingly enough and more often than not the Realtor’s are getting in the way of too many home owners that are upside down in this real estate market. They have found most of the NOD’s that have the lenders { mortgage servicer’s } all up in arms over their ever growing long list of non performing assets. While very few investors have the magic pill that can fix most of these peoples problems, some do know how to execute short sale potential properties, and save the home owners themselves 7 years of misery, as well as, getting the banks closer to doing what they do best, ” lending money “.
One major snafu that’s not working is the way the Realtor goes about this tricky process, causing lengthy negotiations and or no buyers during the home owners time of need. The caveat here lies in understanding exactly what it is that the banks are truly looking for, and securing a huge opportunity for several entities.
When it does go smoothly and a fix and flip might be the exit strategy, a full blown kitchen remodel will take place, Home Depot can employ more help, and the real estate investor has upgraded a home that will create jobs in the consrtuction industry enabling the home to appraise higher and the state can collect more revenue to repair the roads…… etc. etc.