Key highlights – 1) Don’t have to miss payments to negotiate 2) $6000 incentive to second loan holders 3) Streamlined and simple process (In Theory) 4) FNMA/FHLMC loans.

Here is the link.

Will expiring tax breaks be extended?
With the “Bush tax cuts” (extended for an additional two years by legislation passed in 2010) set to sunset at the end of 2012, federal income tax rates will jump up in 2013. We’ll go from six federal tax brackets (10%, 15%, 25%, 28%, 33%, and 35%) to five (15%, 28%, 31%, 36%, and 39.6%). The maximum rate that applies to long-term capital gains will generally increase from 15% to 20%. And while the current lower long-term capital gain tax rates now apply to qualifying dividends, starting in 2013, dividends will once again be taxed as ordinary income.

Additionally, the temporary 2% reduction in the Social Security portion of the Federal Insurance Contributions Act (FICA) payroll tax, in place for the last two years, also expires at the end of 2012. And, lower alternative minimum tax (AMT) exemption amounts (the AMT-related provisions actually expired at the end of 2011) mean that there will be a dramatic increase in the number of individuals subject to AMT when they file their 2012 federal income tax returns in 2013.

Other breaks go away in 2013 as well.

• Estate and gift tax provisions will change significantly (reverting to 2001 rules). For example, the amount that can generally be excluded from estate and gift tax drops from $5.12 million in 2012 to $1 million in 2013, and the top tax rate increases from 35% to 55%.
• Itemized deductions and dependency exemptions will once again be phased out for individuals with high adjusted gross incomes (AGIs).
• The earned income tax credit, the child tax credit, and the American Opportunity (Hope) tax credit all revert to old, lower limits and less generous rules.
• Individuals will no longer be able to deduct student loan interest after the first 60 months of repayment.

There continues to be discussion about extending expiring provisions. The impasse, however, centers on whether tax breaks get extended for all, or only for individuals earning $200,000 or less (households earning $250,000 or less). Many expect there to be little chance of resolution until after the November election.

Will new taxes take effect in 2013?

Beginning in 2013, the hospital insurance (HI) portion of the payroll tax–commonly referred to as the Medicare portion–increases by 0.9% for individuals with wages exceeding $200,000 ($250,000 for married couples filing a joint federal income tax return, and $125,000 for married individuals filing separately).

Also beginning in 2013, a new 3.8% Medicare contribution tax is imposed on the unearned income of high-income individuals. This tax applies to some or all of the net investment income of individuals with modified adjusted gross income that exceeds $200,000 ($250,000 for married couples filing a joint federal income tax return, and $125,000 for married individuals filing separately).

Both of these new taxes were created by the health-care reform legislation passed in 2010–recently upheld as constitutional by the U.S. Supreme Court–and it would seem unlikely that anything will prevent them from taking effect.

Will mandatory spending cuts be implemented?

The failure of the deficit reduction supercommittee to reach agreement back in November 2011 automatically triggered $1.2 trillion in broad-based spending cuts over a multiyear period beginning in 2013 (the formal term for this is “automatic sequestration”). The cuts are to be split evenly between defense spending and nondefense spending. Although Social Security, Medicaid, and Medicare benefits are exempt, and cuts to Medicare provider payments cannot be more than 2%, most discretionary programs including education, transportation, and energy programs will be subject to the automatic cuts.

New legislation is required to avoid the automatic cuts. But while it’s difficult to find anyone who believes the across-the-board cuts are a good idea, there’s no consensus on how to prevent them. Like the expiring tax breaks, the direction the dialogue takes will likely depend on the results of the November election.

What’s the worst-case scenario?

Many fear that the combination of tax increases and spending cuts will have severe negative economic consequences. According to a report issued by the nonpartisan Congressional Budget Office (Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013, May 2012), taken as a whole, the tax increases and spending reductions will reduce the federal budget deficit by 5.1% of gross domestic product (GDP) between calendar years 2012 and 2013. The Congressional Budget Office projects that under these fiscal conditions, the economy would contract during the first half of 2013 (i.e., we would likely experience a recession).

It’s impossible to predict exactly how all of this will play out. One thing is for sure, though: the “fiscal cliff” figures to feature prominently in the national dialogue between now and November.

Valuation (how to deal with the underwater homes) – replace higher interest financing with lower interest financing to reduce risk to lenders.

Risk (how to deal with the prior bad paperwork) – replace it with new paperwork.

Read on for the full article…

Housing Policy Changes

It appears there are several major housing policy changes coming in the next two to three months, and that the overall goal will be to reduce the large backlog of seriously delinquent loans while, at the same time, not flood the housing market with distressed homes.

Currently, according to LPS, there are 1.81 million loans 90+ days delinquent and an additional 2.21 million loans in the foreclosure process.

• HARP Refinance: Back in October, the FHFA announced some changes to HARP to allow homeowners with GSE loans and with negative or near negative equity – and who are current on their mortgages – to refinance into lower interest rate loans.

The key to this program for the lenders was that the lender was not responsible for any of the representations and warranties associated with the original loan (this is huge for the lenders). The elimination of Reps and warrants for the original loans applies to Desktop Underwriter® (DU) and that will not be updated until March.

So I expect HARP refinance activity to pickup significantly in March.

• Mortgage Settlement: It sounds like this will be announced in late January or possibly in February (if at all). Some of the details have leaked, and there will probably be some mortgage modifications that include principal reduction. It is possible that there will be a refinance program for non-GSEs borrowers with negative equity (similar to HARP), although this hasn’t been announced.

• REO to Rental Program: This rental program for Fannie and Freddie REO is being pushed by several agencies, and was discussed last week in the Fed white paper “The U.S. Housing Market: Current Conditions and Policy Considerations” and by NY Fed President William Dudley: Housing and the Economic Recovery

This program could include bulk REO sales to investors, but might also include Fannie and Freddie renting out more REOs. (Fannie and Freddie already have a program to keep tenants in place if they foreclose on a rented property).

There will be a similar effort for non-GSE properties (in other words, loans that are not owned by FNMA and Freddie Mac. From the Fed white paper:

“In light of the current unusually difficult circumstances in many housing markets across the nation, the Federal Reserve is contemplating issuing guidance to banking organizations and examiners to clarify supervisory expectations regarding rental of residential REO properties by such organizations while such circumstances continue (and within relevant federal and statutory and regulatory limits). If finalized and adopted, such guidance would explain how rental of a residential REO property within applicable holding-period time limits could meet the supervisory expectation for ongoing good faith efforts to sell that property. Relatedly, if a successful model is developed for the GSEs to transition REO properties to the rental market, banks may wish to participate in such a program or adopt some of its features.”

Look for this guidance to be issued soon, and to relax the rules on how banks can manage rented REOs.

There are some minor programs too (like the Freddie Mac program to allow 12 months of forbearance for unemployed borrowers) and there could be more programs coming. But the key policy changes will probably be 1) the mortgage settlement, 2) the HARP refinance program, and 3) the REO to rental program.

It sounds like all of these program will be in place by the end of Q1.

The plan will streamline the refinance process by eliminating appraisals and extensive underwriting requirements for most borrowers, as long as homeowners are current on their mortgage payments … Fannie and Freddie have also agreed to waive some fees that made refinancing less attractive for some.
…
Pricing details won’t be published until mid-November, and lenders could begin refinancing loans under the retooled program as soon as Dec. 1 … Loans that exceed the current limit of 125% of the property’s value won’t be able to participate until early next year. The program’s expiration date … will be extended through 2013. HARP is only open to loans that Fannie and Freddie guaranteed as of June 2009.

This is more aggressive than I expected and there will actually enable many folks to refinance that simply could not. As a reminder – this only applies to loans that are current and guaranteed by Fannie and Freddie. Contact our office to find out if you qualify!

French Fries, Chocolate Cake, skipping your workout to sleep in late, having that last drink before heading out, winning that argument with your spouse or kids, going home early instead of finishing.

“What gives you short term pleasure gives you long term pain – short term pain gives you long term gain” Darren Hardy, Publisher of Success Magazine.

Kinda gets you thinking a bit, huh.  Consider the areas of our lives and businesses where we choose the short term pleasure over what we know to be the right choice.
“It’s Ok; the work will be there tomorrow”
“I can hit the gym or take a walk when I have a bit more time”
“I deserve the desert, what would this great meal be without the desert!”

Darren Hardy, the publisher of Success Magazine, a man who gets to interview the most successful people on the planet – people like Virgin founder Richard Branson, Steve Jobs of Apple, Facebook’s Mark Zuckerberg, racing legend Jeff Gordon, actor Steve Martin, and singer Alicia Keys, has been on a mission to find out what makes some people extraordinarily successful in the same 24 hours, 365 days a year that we all have.  What do they do with their 1440 minutes a day? How does Richard Branson run 400 companies, be in great physical shape and be constantly on the move in the exact same time that we skip the gym, ignore our friends and family, don’t return a phone call and then blame our lack of health and cash flow on something else – “It’s the Market” – “It’s the Economy” – “My kids just won’t listen to me – how can they act that way?”

The great news is that he has been able to identify the Key to Success and I am thrilled to bring it to you.

Success is earned by Hard Work – Stunning isn’t it.  Success is earned one day at a time, one step at a time, one conversation at a time, one transaction at a time and one decision at a time. It can be pretty boring and unexciting to discover that there is no Silver Bullet, No Secret handed down through the ages only to be lost and discovered recently to be shared via books, DVD’s and infomercials.

There are however, clues, and Darren shared the Operating System and the Top Three things he discovered that were present in every super-achiever he has spent time with.

Success Operating System
CHOICE – Avoid small insignificant choices in your life and business
BEHAVIOR – You must Own your Time
HABITS – Consistency Wins

The 3 Distinctions of the Successful
1)    A Not Do List – Saying No is the Master Skill – What crappy stuff do you need to get rid of?
2)    Not doing Many – Doing Only the VITAL Few
3)    Perceive Failure Differently – how you respond makes all the difference
The Working Realtor Vital 3:

• Pitch a Listing
• Negotiate a contract
• Prospect

That’s It – imagine what your life and cash flow would look like if you only did those three things.   So the next time a friendly colleague, well-meaning neighbor or even your best friend or spouse says “It’s a Tough Market” – Tell them that 13,452 homes sold in the United States yesterday, 13,452 homes will sell today and 13,452 homes will sell tomorrow and you want your piece of it!

Learn more and find resources at www.DarrenHardy.com – or let me know if I can assist you in implementing your own personal Success Plan.

Get our Free Mobile App at:  borrowsmartmobile.com/jthompson – Register your Mobile Device and get Live Mortgage Rates and Homebuyer Instant Affordability Calculator.

Impact from: Europe, the Fed, the US, Affordability, Interest Rate Trend, Appreciation and FOOD!

Click on this link or the image below to watch our short video review…

The Budget Control Act of 2011 left all sides with plenty to argue about over the next few months. In addition to increasing the debt ceiling, it would bring down the federal budget deficit by an estimated $2.1 trillion over the next ten years. It also sets the stage for more debate over how to achieve that $2.1 trillion reduction, focusing on spending cuts rather than increased revenues. Here are some of the key provisions.

Debt ceiling will be increased in stages

The $14.3 trillion debt ceiling will be increased immediately by $400 billion, and by another $500 billion after September. The increases will allow the Treasury to pay bills without interruption after August 2.

Assuming deficit reduction measures are adopted by the end of the year, an additional $1.2 trillion to $1.5 trillion in borrowing authority will be available in 2012, which is believed to take care of the Treasury’s needs until 2013. Though Congress could vote to disapprove the additional borrowing authority, that action could be vetoed, which would prevent a rerun of the recent uncertainty.

Immediate limits are imposed on discretionary spending

Caps on domestic and defense spending will cut an estimated $900 billion to $1 trillion–roughly the same amount as the initial increase in the debt ceiling–from federal budgets over the next decade.

Joint congressional committee will seek $1.5 trillion in additional deficit reduction

A special joint select committee of 12 Democrats and Republicans from both the House and Senate will be charged with finding ways to reduce the deficit by an additional $1.5 trillion. The committee, which must be appointed within two weeks after the legislation is signed, is directed to report its proposals by November 23, 2011; by December 2, it must submit legislation to implement them. Both houses of Congress must vote on that legislation, which cannot be amended, by December 23.

Additional spending cuts, 2012 debt ceiling increase tied to deficit reduction agreement

The joint committee’s deficit reduction proposals will determine the amount of an additional increase in the debt ceiling. If the committee’s proposals are approved by Congress, the debt ceiling will be increased in 2012 by the amount saved by the deficit reduction measures. If the committee cannot agree on how to cut the deficit by at least $1.2 trillion, or if Congress doesn’t approve the committee’s proposals, the new debt ceiling increase would be limited to $1.2 trillion.

To try to prevent gridlock on the committee, failure to agree on at least $1.2 trillion in deficit reduction would automatically trigger an additional $1.2 trillion in broad-based spending cuts beginning in January 2013. The cuts would apply to both defense spending, such as the Departments of Defense and Homeland Security, and to nondefense spending, such as payments to Medicare providers. However, Medicare cuts would be limited to 2% of the program’s cost, and programs such as Social Security, veterans benefits, food stamps, and Supplemental Security Income (SSI) would be exempt.

Balanced budget amendment would give authority to increase debt ceiling

President Obama also would be granted immediate authority to increase the debt ceiling by $1.5 trillion if Congress were to pass by year’s end a constitutional amendment requiring a balanced budget. Such an amendment also would need to be ratified by three-quarters of the states.

Subsidized loans for graduate students eliminated

Subsidized-interest Stafford Loans for graduate and professional students (other than those in state-required teaching or certification programs) will end after July 1, 2012, though unsubsidized loans will still be available. The Act also adds $17 billion in mandatory funds over two years for Pell Grants to compensate for the funding gap

The basics of borrowing from a 401(k):
A 401(k) plan will usually let you borrow as much as 50% of your vested account balance, up to $50,000. (Plans aren’t required to let you borrow, and may impose various restrictions, so check with your plan administrator.) You pay the loan back, with interest, from your paycheck. Most plan loans carry a favorable interest rate, usually prime plus one or two percentage points. Generally, you have up to five years to repay your loan, or longer if you use the loan to purchase your principal residence.

The opportunity cost of borrowing from a 401(k):
When you take a loan from your 401(k) plan, the funds you borrow are removed from your plan account until you repay the loan. While removed from your account, the money isn’t continuing to grow tax deferred within the plan. So the economics of a plan loan depend in part on how much those borrowed funds would have earned if they were still inside the plan, compared to the amount of interest you’re paying yourself. This is known as the opportunity cost of a plan loan, because you may miss out on the opportunity for more tax-deferred investment earnings.

Can you continue to contribute to the plan?
If you take a loan, will you be able to afford to pay it back and continue to contribute to the plan at the same time? If not, borrowing may be a very bad idea in the long run, especially if you’ll wind up losing any employer matching contributions.

What if your employment terminates?
If you terminate employment, your plan will typically provide that your loan is immediately payable. If you can’t repay the loan, the outstanding balance will be treated as a taxable distribution to you (reduced by any after-tax contributions you’ve made). And if you’re not yet 59½, a 10% early distribution penalty may also apply to the taxable portion of your distribution.
However, if you borrow from a Roth 401(k) account and you don’t repay the loan, there will be no income tax consequences if your distribution is “qualified” (that is, your account satisfies a five-year holding period requirement, and you’re either 59½ or disabled). Even if your distribution isn’t qualified, only the earnings you’ve borrowed from your account, not your own contributions, will be subject to tax and potential penalty.

When should you consider a loan?
Plan loans may make sense in certain cases (for example, to pay off high-interest credit card debt, or to purchase a home). But make sure you compare the cost of borrowing from your plan with other financing options, including loans from banks, credit unions, friends, and family. To do an adequate comparison, you should consider:
•    Interest rates with each alternative
•    Whether the interest will be tax deductible (for example, interest paid on home equity loans is usually deductible, but interest on plan loans usually isn’t)
•    The amount of investment earnings you may miss out on by removing funds from your 401(k) plan.

Our Borrow Smart Analysis make this easy, you can compare the standard loan, and compare using a 401(k) for the down payment easily.

Declining values, however, are a problem for borrowers. You can’t get 100 percent financing with a reverse mortgage or anything close so as home values have declined, owners have gotten less cash from their properties, in some cases not enough to make a reverse mortgage worth the effort. To try to help, HUD introduced the HECM Saver plan last September. Instead of a 2 percent up-front insurance fee with a regular FHA-backed reverse mortgage, the cost of coverage was reduced to 0.01 percent. The catch was that in exchange for virtually no up-front mortgage fee, the amount a borrower could take out against a home was reduced. FHA would be protected with lower loan values.

Reverse mortgages hold foreclosure risks as the seniors still need to still make property tax and homeowners insurance payments. Because a reverse mortgage has no required monthly payments for principal or interest, borrowers are qualified on the basis of the value of their homes. However, borrowers continue to have an obligation to pay property taxes and insurance. If homeowners don’t make those payments, a reverse mortgage with no monthly costs for principal and interest can actually be foreclosed. In fact, last year an audit showed that unknown to HUD, nearly 13,000 borrowers could be facing foreclosure.

The reverse mortgage program was designed in a different economic time. Reverse mortgages made a lot of sense when home values were generally rising because negative amortization could be offset with higher prices. But home values have been falling in most areas of the country since 2007. Combine negative amortization with falling home values as was the case in option ARM loans, and you have a program that can no longer work.