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Stimulus Plan Update

February 27th, 2009 1:36 PM

Tax Credit for Homebuyers
First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.

The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Tax Credit Versus Tax Deduction

It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!

Phaseout Examples

According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.

To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:

Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

For those tracking the math in the examples above, you may be wondering where the “$20,000” came from—that is, why you divide “$10,000 by $20,000” in the first example and “$13,000 by $20,000” in the second example. Here’s where the $20,000 comes into play:

The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

In other words:

• $170,000 – $150,000 = the $20,000 in the first example
• $95,000 – $75,000 = the $20,000 in the second example

Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.

Homes that Qualify

The tax credit is applicable to any home that will be used as a principal residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principal residence also qualify.

Higher Loan Amounts

More good news – there is an extension on the additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans will again be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard “jumbo” loan rates.

FHFA News Release -

http://www.mortgagemarketguide.com/download/022309_final.pdf

Additional Housing-Related Provisions

Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

More Help for Homeowners in the Future
Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.

According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.

While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.

The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.

As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.

Posted by Andi Bytyqi on February 27th, 2009 1:36 PMPost a Comment (0)

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Economic Stimulus Plan Benefits the Housing and Mortgage Industries

February 18th, 2009 10:31 AM

Revised February 17, 2009

Just signed and sealed…a $787 Billion Stimulus Plan made up of tax cuts and spending programs aims at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II.

Home owners and potential homebuyers stand to gain from key provisions in this stimulus plan. Here is what we know as of today...

Tax Credit for Homebuyers

First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.

Additional Housing-Related Provisions

Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

More Help for Homeowners in the Future

Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.

The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.

As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.

Thanks,

Andi Bytyqi, MBA
President
Metro Point Lending LLC
Office: 405.513.8610
Mobile: 405.205.7585
Fax: 877.203.0303
Andi@MetroPointLending.com
www.MetroPointLending.com

Posted by Andi Bytyqi on February 18th, 2009 10:31 AMPost a Comment (0)

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TARP II Cuts the $15,000 Tax Credit to Homebuyers

February 12th, 2009 11:58 PM

Greetings Everyone,

As the Congress and Senate deliberated and compromised on what to keep and what to throw out the $15,000 Tax Credit got the ax. Basically, this new incentive was a new proposal to adjust the previous $7,500 Tax credit that was passed in 2008. It was also going to apply not only to New Homebuyers, but to any primary residence buyer. It would have also been a true Tax Credit and not only a 15 year interest free loan from the IRS as the $7,500 Tax Credit was. The NAR believed that the $15,000 Tax Credit would have helped sell about 500,000 homes and would help the home prices stabilize.

The new tax credit that has been agreed upon and will be up for a final vote soon, is a $8,000 Tax Credit to any New Homebuyer that has not owned a home in the last three years. It is not required to be paid back as long as the Homebuyer keeps the house as their primary residence for at least two years.

The NAR believes that this tax credit will help sell approximately 200,000 new homes and even though it's not as good as the other tax credit, it will still help stabilize home prices to a degree.

I will keep you posted as I find out of any changes regarding this important issue for our industry.

Thanks,

Andi Bytyqi, MBA
President
Metro Point Lending LLC
Office: 405.513.8610
Mobile: 405.205.7585
Fax: 877.203.0303
Andi@MetroPointLending.com
www.MetroPointLending.com

Posted by Andi Bytyqi on February 12th, 2009 11:58 PMPost a Comment (0)

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Weekly Newsletter for the week of Feb 09, 2009

February 9th, 2009 12:09 AM

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By	Andi Bytyqi

Andi Bytyqi
President
Metro Point Lending LLC
Office: 405.513.8610
Cell: 405.205.7585
Fax: 877.203.0303
E-Mail: Andi@MetroPointLending.com
Website: www.MetroPointLending.com

For the week of Feb 09, 2009 --- Vol. 7, Issue 6

Last Week in Review

THEY SAY "NO NEWS IS GOOD NEWS"...and that sentiment was particularly true last week, as several pieces of news that arrived were far from good.

On Friday, the Labor Department reported that 598,000 jobs were lost in January. This was worse than expectations of 540,000 jobs lost, and is the worst number since December 1974. Overall, about 3.6 Million jobs have been lost since December 2007, with nearly half of them in just the past three months. And you can see this clearly in the chart below, which looks unusual because it's measuring a negative number, for something that is normally reported as a positive (i.e. the number of jobs created). The rate of unemployment jumped to 7.6%, but the number of part-time workers increased dramatically as well. Many part-time workers would rather be full-time, but are simply taking what they can get. Added up, the number of underutilized workers now represent over 15% of the workforce overall. Let's hope the Stimulus Plan spurs some job growth.

US Non-Farm Payroll

And with last Monday's news that the Personal Consumption Expenditure (PCE) index reported its smallest gain in five years, the argument of inflation being a threat to the economy has taken a back seat for now. While that may sound like good news, the bigger topic for the moment is the threat of deflation in the near term. Why is deflation considered worse? Deflation kills the over-all economy, as there is no incentive to spend today when prices look as if they'll be getting cheaper in the future. This consumer mind-set obviously destroys product sales, and in turn, adds to the already dismal amount of job losses. If deflation takes hold, the fear is that it can lead to a devastating economic cycle.

However, there was some possible good news from last week. There was renewed talk about relaxing the "mark-to-market" accounting rules, which is not only vital to the economy, but also to the mortgage industry as lenders need the ability to lend for the mortgage and housing industry to recover and thrive. "Mark-to-Market" rules led to the failure of many financial institutions that really weren't in bad shape, but simply made them appear to be over leveraged as they were forced to value their assets against distressed institutions selling assets at steep discounts. It will be important to watch this news story in the weeks ahead.

And when all was said and done, the news of the week wasn't so horrible for Bonds and home loan rates, as they ended the volatile week only slightly worse than where they began.

HAVE YOU BEEN THINKING OF BUYING A HOME OR REFINANCING YOUR LOAN? CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW TO MAKE SURE YOU AVOID A VERY COSTLY MISTAKE!

Forecast for the Week

This week is a quiet one when it comes to scheduled economic reports being delivered, but there's still plenty of news that could shake the markets, including updates on the Stimulus Plan still making its way through Congress, as well as the aforementioned mark-to-market rule. It should be noted that Stock prices, especially within the financial sector, have reacted very well anytime there is a mention of a possible relaxation of mark-to-market accounting.

In the way of economic reports, Thursday will bring the Retail Sales Report for January. Since many retailers are still struggling, as consumers continue to rein in spending, it wouldn't be a surprise if this is a horrible report...which could be friendly for Bonds and home loan rates. It also wouldn't be a surprise for Friday's Consumer Sentiment Report to be horrible as well. And given the current job market, Thursday's weekly Jobless Claims Report will be another one to watch.

Remember: Weak economic news normally helps Bonds and home loan rates improve, as money flows out of Stocks and into Bonds. As you can see in the chart below, Bonds and home loan rates have lost some ground and worsened in recent weeks. I will be watching closely to see what happens this week.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Feb 06, 2009)

The Mortgage Market View...

AVOID THIS COSTLY MISTAKE

If you've been following the financial news, you've probably heard that the Fed's been buying Mortgage Backed Securities and will continue to do so as needed. Unfortunately, some media outlets have picked up on the news and mistakenly reported that these purchases will continue to cause rates to drop lower into the summer.

But is that really what it means? No.

The truth is, the Fed has been buying Mortgage Bonds. BUT... more precisely, they're buying a lot of FNMA 30-yr 5.0% and 5.5% Bonds. Many of the mortgages in these pools are outstanding home loans with rates between 6.0% and 6.5%, as the rate that a borrower pays is different than the coupon rate given to an investor buying into that mortgage pool, with the difference being taken by Wall Street firms and government agencies. The loans in these pools the Fed is buying hand over fist are likely be refinanced and paid - because current rates make it very attractive to refinance a loan over 6.0% - and thus giving the Fed a quick recoup on some of their investment.

Bottom line: The Fed's purchase of higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.

The Problem Is...

Many consumers are in situations where they can refinance now and save hundreds of dollars a month on their mortgage payments. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save, in the hopes of gaining a few more dollars of savings per month if a lower rate came their way. Of course, while they're waiting, rates could turn higher - and this window of opportunity could pass them by entirely.

Here's the Clincher.

Even if consumers are ultimately able to time the market perfectly and save another few bucks per month, they could still end up losing. That's because while they delayed, they lost the savings each month they could have gained by taking action sooner. In other words, they may have lost hundreds of dollars for every month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.

I don't want anyone to miss an opportunity by either waiting or misunderstanding the media headline. Let's talk further on this. Call or email me, and let's discuss what this might mean for you.

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of February 09 February 13

Date	ET	Economic Report	For	Estimate	Actual	Prior	Impact
Wed. February 11	08:30	Balance of Trade	Dec	-$37.0B		-$40.4B	Moderate
Wed. February 11	10:30	Crude Inventories	2/06	NA		NA	Moderate
Thu. February 12	08:30	Jobless Claims (Initial)	2./07	NA		NA	Moderate
Thu. February 12	08:30	Retail Sales	Jan	-0.3%		-2.7%	HIGH
Thu. February 12	08:30	Retail Sales ex-auto	Jan	-0.4%		-3.1%	HIGH
Fri. February 13	10:00	Consumer Sentiment Index (UoM)	Feb	61.5		61.2	Moderate

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is not without errors.

As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

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Andi Bytyqi
Metro Point Lending, LLC
16307 Sonoma Park Dr.
Edmond, OK 73013

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Posted by Andi Bytyqi on February 9th, 2009 12:09 AMPost a Comment (0)

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