Suntrust Market Update

Thought for the week:

“The future belongs to those who believe in the beauty of their dreams.” Eleanor Roosevelt

Success Story:

Two brothers-in-law have a simple dream of starting a business and making $75 a week. They have a brilliantly simple marketing philosophy: one product served thirty-one different ways. Can you name them? Find the answer at the bottom.

In the News:

While it can’t be said that the U.S. economy has begun a recovery yet, there are signs of hope. According to the Economic Cycle Research Institute the decline in the annualized growth rate of our economy has slowed by 6% over the past six weeks. There is no recovery in sight, but the ECRI states ‘the up tick in its growth rate to a six-week high suggests the pace of contraction will slow in coming months’. This means ‘Good News’ could be on the horizon.

As stated in prior Market Updates, national real estate statistics are driven by numbers in Florida, Las Vegas, Arizona, California and Northern Virginia. On Friday, I spoke with a with Charlottesville resident vacationing at their 2nd home in south Florida. He told me about the opening of a new subdivision near his home with two model homes. The lots went on the market last Saturday, and cars were lined up for miles waiting to get into the area to view the property. His realtor had to cancel a couple of their planned golf outings, because he was too busy to get away. If this is a sign of that the Florida market is beginning to turn, it really is ‘Good News’.

Closer home, the Northern Virginia purchase market has heated up. Buyers are in the market and properties are moving. Our SunTrust Mortgage offices in Northern Virginia have full pipelines of purchase loans. Purchase applications have continued to increase in our office weekly as well. More importantly nationally applications for purchase mortgages increased 7.1% last week. If this trend continues, the media could jump on board leading to a change in the mindset of many future buyers. That would be ‘Good News’.

I would be remiss in not pointing out that potential buyers waiting for the right time should consider the facts above when considering how long they can afford to wait.

Market Update:

Global investors are constantly searching for opportunities that will provide the greatest return with the least amount of risk. As global financial markets struggled, many have searched for a safe haven in the U.S. financial markets. With the backing of the U.S. Government, investors view the Treasury and mortgage bond markets among the best opportunities resulting in an increased demand for U.S. investments such as mortgage backed securities. The increase in demand pushed prices higher and interest rates lower this week.

This week China’s Premier expressed concerns about the amount of investment his country has in U.S debt. This caused a panic in the bonds markets. The panic was quickly calmed, but uncertainties remain regarding the future of China’s continued involvement in future purchases. China is the largest foreign investor in U.S. debt. As we have stated often in our Market Updates, a reversal of this foreign demand could result in a spike to interest rates.

Potential buyers need to keep this in mind and understand that despite the efforts of our government, there are factors beyond their control that influence mortgage rates. Buyers should not assume today’s low interest rates will go unchanged in the future.

Let’s go get ‘em”!!
Interest Rates:

On Friday March 13th your purchase client with a 720 credit score putting 20% down could secure a conventional 30-Year Fixed rate at 4.50% with 1.125 points on a 30-day lock (APR: 4.634%).

FHA has established Risk Based Pricing with regards to credit scores. Borrowers with scores <660>719 will have a rate improvement. On Friday March 13th your FHA purchase client with a 660-719 credit score could secure a 30-Year Fixed rate at 4.750% with 1.0 point on a 30-day lock (APR: 5.368%). Remember the APR on FHA includes the MI.

Jumbo rates are subject to Risk Based Pricing with regards to credit scores. Borrowers with scores <740>759 will have a rate improvement. On Friday March 13th your Jumbo purchase client borrowing $1MM with a 740 credit score putting 25% down could secure a 30-Year Fixed rate at 5.875% with 1.250 points on a 30-day lock (APR: 6.008%).

(Burton Baskin & Irvine Robbins of Baskin-Robbins Ice Cream fame)
Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Suntrust Market Update

Thought for the week:

“The future belongs to those who believe in the beauty of their dreams.” Eleanor Roosevelt

Success Story:

Two brothers-in-law have a simple dream of starting a business and making $75 a week. They have a brilliantly simple marketing philosophy: one product served thirty-one different ways. Can you name them? Find the answer at the bottom.

In the News:

While it can’t be said that the U.S. economy has begun a recovery yet, there are signs of hope. According to the Economic Cycle Research Institute the decline in the annualized growth rate of our economy has slowed by 6% over the past six weeks. There is no recovery in sight, but the ECRI states ‘the up tick in its growth rate to a six-week high suggests the pace of contraction will slow in coming months’. This means ‘Good News’ could be on the horizon.

As stated in prior Market Updates, national real estate statistics are driven by numbers in Florida, Las Vegas, Arizona, California and Northern Virginia. On Friday, I spoke with a with Charlottesville resident vacationing at their 2nd home in south Florida. He told me about the opening of a new subdivision near his home with two model homes. The lots went on the market last Saturday, and cars were lined up for miles waiting to get into the area to view the property. His realtor had to cancel a couple of their planned golf outings, because he was too busy to get away. If this is a sign of that the Florida market is beginning to turn, it really is ‘Good News’.

Closer home, the Northern Virginia purchase market has heated up. Buyers are in the market and properties are moving. Our SunTrust Mortgage offices in Northern Virginia have full pipelines of purchase loans. Purchase applications have continued to increase in our office weekly as well. More importantly nationally applications for purchase mortgages increased 7.1% last week. If this trend continues, the media could jump on board leading to a change in the mindset of many future buyers. That would be ‘Good News’.

I would be remiss in not pointing out that potential buyers waiting for the right time should consider the facts above when considering how long they can afford to wait.

Market Update:

Global investors are constantly searching for opportunities that will provide the greatest return with the least amount of risk. As global financial markets struggled, many have searched for a safe haven in the U.S. financial markets. With the backing of the U.S. Government, investors view the Treasury and mortgage bond markets among the best opportunities resulting in an increased demand for U.S. investments such as mortgage backed securities. The increase in demand pushed prices higher and interest rates lower this week.

This week China’s Premier expressed concerns about the amount of investment his country has in U.S debt. This caused a panic in the bonds markets. The panic was quickly calmed, but uncertainties remain regarding the future of China’s continued involvement in future purchases. China is the largest foreign investor in U.S. debt. As we have stated often in our Market Updates, a reversal of this foreign demand could result in a spike to interest rates.

Potential buyers need to keep this in mind and understand that despite the efforts of our government, there are factors beyond their control that influence mortgage rates. Buyers should not assume today’s low interest rates will go unchanged in the future.

Let’s go get ‘em”!!
Interest Rates:

On Friday March 13th your purchase client with a 720 credit score putting 20% down could secure a conventional 30-Year Fixed rate at 4.50% with 1.125 points on a 30-day lock (APR: 4.634%).

FHA has established Risk Based Pricing with regards to credit scores. Borrowers with scores <660>719 will have a rate improvement. On Friday March 13th your FHA purchase client with a 660-719 credit score could secure a 30-Year Fixed rate at 4.750% with 1.0 point on a 30-day lock (APR: 5.368%). Remember the APR on FHA includes the MI.

Jumbo rates are subject to Risk Based Pricing with regards to credit scores. Borrowers with scores <740>759 will have a rate improvement. On Friday March 13th your Jumbo purchase client borrowing $1MM with a 740 credit score putting 25% down could secure a 30-Year Fixed rate at 5.875% with 1.250 points on a 30-day lock (APR: 6.008%).

(Burton Baskin & Irvine Robbins of Baskin-Robbins Ice Cream fame)
Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Frequently Asked Questions About the Home Buyer Tax Credit

First-Time Home Buyer Tax Credit

Frequently Asked Questions About the Home Buyer Tax Credit

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the tax credit?First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
2. What is the definition of a first-time home buyer?The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
3. How is the amount of the tax credit determined?The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
4. Are there any income limits for claiming the tax credit?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.
5. What is "modified adjusted gross income"?Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
7. Can you give me an example of how the partial tax credit is determined?Just as an example, 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 home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.Here’s another example: assume that an individual home buyer 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.Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
9. How do I claim the tax credit? Do I need to complete a form or application?Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
10. What types of homes will qualify for the tax credit?Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
11. I read that the tax credit is "refundable." What does that mean?The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?No. You can claim only one.
16. I am not a U.S. citizen. Can I claim the tax credit?Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
17. Is a tax credit the same as a tax deduction?No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
18. I bought a home in 2008. Do I qualify for this credit?No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit.
19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.

20. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

21. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Frequently Asked Questions About the Home Buyer Tax Credit

First-Time Home Buyer Tax Credit

Frequently Asked Questions About the Home Buyer Tax Credit

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the tax credit?First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
2. What is the definition of a first-time home buyer?The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
3. How is the amount of the tax credit determined?The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
4. Are there any income limits for claiming the tax credit?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.
5. What is "modified adjusted gross income"?Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
7. Can you give me an example of how the partial tax credit is determined?Just as an example, 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 home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.Here’s another example: assume that an individual home buyer 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.Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
9. How do I claim the tax credit? Do I need to complete a form or application?Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
10. What types of homes will qualify for the tax credit?Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
11. I read that the tax credit is "refundable." What does that mean?The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?No. You can claim only one.
16. I am not a U.S. citizen. Can I claim the tax credit?Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
17. Is a tax credit the same as a tax deduction?No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
18. I bought a home in 2008. Do I qualify for this credit?No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit.
19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.

20. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

21. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

First-Time Home Buyer Tax Credit

First-Time Home Buyer Tax Credit

$8,000 Home Buyer Tax Credit at a Glance

• The tax credit is for first-time home buyers only.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
  

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/

First-Time Home Buyer Tax Credit

First-Time Home Buyer Tax Credit

$8,000 Home Buyer Tax Credit at a Glance

• The tax credit is for first-time home buyers only.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
  

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/

Top Ten Tips to Avoid Foreclosure

Watch How to Avoid Foreclosure - Top Ten Tips in How to Videos  |  View More Free Videos Online at Veoh.com
Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/

Top Ten Tips to Avoid Foreclosure

Watch How to Avoid Foreclosure - Top Ten Tips in How to Videos  |  View More Free Videos Online at Veoh.com
Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/

15 River Ridge Road - Home for Sale at Lake Monticello

One of the best prices at Lake Monticello!!
Offered at 294,900
15 River Ridge Road Video Tour of Home

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/

15 River Ridge Road - Home for Sale at Lake Monticello

One of the best prices at Lake Monticello!!
Offered at 294,900
15 River Ridge Road Video Tour of Home

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/

Bond Market Update October 16th

Technorati Profile

Thursday's bond market opened in negative territory but has since rebounded as the markets continue their see-saw activity. The stock markets are posting sizable losses after yesterday's sell-off dropped the Dow 733 points. With the Dow down 190 points this morning, it has given back all of Monday's record gain of 936 points. The Nasdaq is currently down 30 points and is also below its Friday closing level. The bond market is currently up 2/32, but due to a significant rally late yesterday, we should see mortgage rates improve this morning by approximately .500 of a discount point or .125 of a percent in rate.

This morning's economic data added more concern about the status of the economy and the likelihood of a quick recovery. The Labor Department said that the Consumer Price Index (CPI) for September went unchanged from August's level and that the core data that excludes more volatile food and energy prices rose only 0.1%. Both of those readings were bel ow forecasts, indicating that inflationary pressures are weaker than thought at the consumer level of the economy. That is good news for the bond market and mortgage rates.

The biggest surprise came from September's Industrial Production data that showed a whopping 2.8% monthly drop in output. This was the biggest monthly decline in 34 years and points towards a quickly slowing manufacturing sector. That is also good news for the bond market and mortgage rates.

The Labor Department said that 461,000 new claims for unemployment benefits were filed last week. This was a smaller number than was expected but since the data tracks only a week's worth of claims, it had little impact on trading this morning.

The remaining two reports are both scheduled for release tomorrow morning. September's Housing Starts is the first, but is the week's least important piece of monthly data. It gives us an indication of housing sector strength and mortgage cre dit demand, but usually is not a mover of mortgage rates. It is expected to show a decline in starts of new homes last month. If it varies greatly from forecasts, we could see the bond market have some reaction to the news, but probably not enough to cause much movement in rates.

The last report of the week is October's preliminary reading to the University of Michigan's Index of Consumer Sentiment late tomorrow morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows a sizable decline in consumer confidence, bond prices will probably rise. It is expected to show a reading of 65.0, down from September's final of 70.3.

Bond Market Update October 16th

Technorati Profile

Thursday's bond market opened in negative territory but has since rebounded as the markets continue their see-saw activity. The stock markets are posting sizable losses after yesterday's sell-off dropped the Dow 733 points. With the Dow down 190 points this morning, it has given back all of Monday's record gain of 936 points. The Nasdaq is currently down 30 points and is also below its Friday closing level. The bond market is currently up 2/32, but due to a significant rally late yesterday, we should see mortgage rates improve this morning by approximately .500 of a discount point or .125 of a percent in rate.

This morning's economic data added more concern about the status of the economy and the likelihood of a quick recovery. The Labor Department said that the Consumer Price Index (CPI) for September went unchanged from August's level and that the core data that excludes more volatile food and energy prices rose only 0.1%. Both of those readings were bel ow forecasts, indicating that inflationary pressures are weaker than thought at the consumer level of the economy. That is good news for the bond market and mortgage rates.

The biggest surprise came from September's Industrial Production data that showed a whopping 2.8% monthly drop in output. This was the biggest monthly decline in 34 years and points towards a quickly slowing manufacturing sector. That is also good news for the bond market and mortgage rates.

The Labor Department said that 461,000 new claims for unemployment benefits were filed last week. This was a smaller number than was expected but since the data tracks only a week's worth of claims, it had little impact on trading this morning.

The remaining two reports are both scheduled for release tomorrow morning. September's Housing Starts is the first, but is the week's least important piece of monthly data. It gives us an indication of housing sector strength and mortgage cre dit demand, but usually is not a mover of mortgage rates. It is expected to show a decline in starts of new homes last month. If it varies greatly from forecasts, we could see the bond market have some reaction to the news, but probably not enough to cause much movement in rates.

The last report of the week is October's preliminary reading to the University of Michigan's Index of Consumer Sentiment late tomorrow morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows a sizable decline in consumer confidence, bond prices will probably rise. It is expected to show a reading of 65.0, down from September's final of 70.3.

Rate Lock Advisory

This week brings us the release of seven economic reports that are of interest to the mortgage market. The week also gets heavy in quarterly earnings releases for companies, which could cause significant movement in the stock markets again. The earnings results could affect bond trading as investors move funds into stocks if the reports are good. The other possibility is that the earnings reports would generally disappoint, meaning investors may move funds out of stocks and into bonds as a safe-haven. The latter would be good news for the bond market and mortgage rates.

The bond market is closed tomorrow in observance of the Columbus Day holiday and will reopen Tuesday morning. The first pieces of data come Wednesday morning, which are two of the week's more important releases. The first is September's Retail Sales report. This data is very important to the markets because it measures consumer spending by tracking sales at retail establishments in the U.S. S ince consumer spending makes up two-thirds of the U.S. economy, any related data is considered to be highly important. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates should drop. However, stronger than expected sales could fuel a stock rally and push mortgage rates higher. Current forecasts are calling for a 0.4% decline in sales.

September's Producer Price Index (PPI) is the second report of the day. This index measures inflationary pressures at the producer level of the economy and is also considered to be of high importance to the markets. Analysts are expecting to see a decline of 0.3% in the overall index and a 0.2% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. A larger than expected increase could fuel inflation concerns in the bond market and push mortgage rates higher. But, weaker than expected readi ngs should lead to lower rates, especially if the sales report doesn't give us stronger than expected results.





Also scheduled for release Wednesday is the Fed Beige Book during afternoon trading. This data details economic conditions throughout the U.S. by region. It is relied upon heavily by the Federal Reserve during FOMC meetings when determining monetary policy. If it reveals stronger signs of inflation from the last release, we could see mortgage rates revise higher shortly after its 2:00 PM ET release.

Thursday morning also brings us two economic releases. The first is September's Consumer Price Index (CPI) that measures inflationary pressures at the consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see a rise of 0.1% in the overall index and an increase of 0.2% in the core data reading. A larger than expected increase in the core reading coul d raise inflation concerns in the bond market and push mortgage rates higher Thursday. However, a smaller than expected reading should ease inflation concerns and lead to lower mortgage rates.





September's Industrial Production data is the second release of the day and will be released mid-morning. It gives us an indication of manufacturing strength by tracking orders at U.S. factories, mines and utilities. It is expected to show a 0.8% drop in output from August's level, meaning that manufacturing activity fell sharply. A smaller than expected decline or an increase in output would be negative for bonds and mortgage rates while a larger drop should help push mortgage rates lower, assuming that the CPI shows favorable results.

The remaining two reports are both scheduled for release Friday morning. September's Housing Starts is the first, but is the week's least important piece of data. It gives us an indication of housing sector st rength and mortgage credit demand, but usually is not a mover of mortgage rates. It is expected to show a decline in starts of new homes last month. If it varies greatly from forecasts, we could see the bond market have some reaction to the news, but probably not enough to cause much movement in rates.





The last report of the week is October's preliminary reading to the University of Michigan's Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows a sizable decline in consumer confidence, bond prices will probably rise. It is expected to show a reading of 69.0, down from September's final of 70.3.

Overall, I am expecting to see a fair amount of movement in mortgage rates this week, but mostly the latter part of the week. The key reports are Wednesday's PPI and Retail Sales reports and Thursday's CPI data. But as we saw last week, we certainly don't need factual economic releases to see mortgage rates move. I am thinking we may still see plenty of volatility in the stock markets that may affect bond prices also. Accordingly, please proceed cautiously if you have not locked an interest rates yet.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Lock Advisory

This week brings us the release of seven economic reports that are of interest to the mortgage market. The week also gets heavy in quarterly earnings releases for companies, which could cause significant movement in the stock markets again. The earnings results could affect bond trading as investors move funds into stocks if the reports are good. The other possibility is that the earnings reports would generally disappoint, meaning investors may move funds out of stocks and into bonds as a safe-haven. The latter would be good news for the bond market and mortgage rates.

The bond market is closed tomorrow in observance of the Columbus Day holiday and will reopen Tuesday morning. The first pieces of data come Wednesday morning, which are two of the week's more important releases. The first is September's Retail Sales report. This data is very important to the markets because it measures consumer spending by tracking sales at retail establishments in the U.S. S ince consumer spending makes up two-thirds of the U.S. economy, any related data is considered to be highly important. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates should drop. However, stronger than expected sales could fuel a stock rally and push mortgage rates higher. Current forecasts are calling for a 0.4% decline in sales.

September's Producer Price Index (PPI) is the second report of the day. This index measures inflationary pressures at the producer level of the economy and is also considered to be of high importance to the markets. Analysts are expecting to see a decline of 0.3% in the overall index and a 0.2% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. A larger than expected increase could fuel inflation concerns in the bond market and push mortgage rates higher. But, weaker than expected readi ngs should lead to lower rates, especially if the sales report doesn't give us stronger than expected results.





Also scheduled for release Wednesday is the Fed Beige Book during afternoon trading. This data details economic conditions throughout the U.S. by region. It is relied upon heavily by the Federal Reserve during FOMC meetings when determining monetary policy. If it reveals stronger signs of inflation from the last release, we could see mortgage rates revise higher shortly after its 2:00 PM ET release.

Thursday morning also brings us two economic releases. The first is September's Consumer Price Index (CPI) that measures inflationary pressures at the consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see a rise of 0.1% in the overall index and an increase of 0.2% in the core data reading. A larger than expected increase in the core reading coul d raise inflation concerns in the bond market and push mortgage rates higher Thursday. However, a smaller than expected reading should ease inflation concerns and lead to lower mortgage rates.





September's Industrial Production data is the second release of the day and will be released mid-morning. It gives us an indication of manufacturing strength by tracking orders at U.S. factories, mines and utilities. It is expected to show a 0.8% drop in output from August's level, meaning that manufacturing activity fell sharply. A smaller than expected decline or an increase in output would be negative for bonds and mortgage rates while a larger drop should help push mortgage rates lower, assuming that the CPI shows favorable results.

The remaining two reports are both scheduled for release Friday morning. September's Housing Starts is the first, but is the week's least important piece of data. It gives us an indication of housing sector st rength and mortgage credit demand, but usually is not a mover of mortgage rates. It is expected to show a decline in starts of new homes last month. If it varies greatly from forecasts, we could see the bond market have some reaction to the news, but probably not enough to cause much movement in rates.





The last report of the week is October's preliminary reading to the University of Michigan's Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows a sizable decline in consumer confidence, bond prices will probably rise. It is expected to show a reading of 69.0, down from September's final of 70.3.

Overall, I am expecting to see a fair amount of movement in mortgage rates this week, but mostly the latter part of the week. The key reports are Wednesday's PPI and Retail Sales reports and Thursday's CPI data. But as we saw last week, we certainly don't need factual economic releases to see mortgage rates move. I am thinking we may still see plenty of volatility in the stock markets that may affect bond prices also. Accordingly, please proceed cautiously if you have not locked an interest rates yet.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Credit Scoring Part IV

Credit Scoring

Part IV: Credit Remediation

If you are in need of credit remediation, and especially if you live in an area where this is an overall problem within the population, you should seek to align yourself with a credible referral source for credit repair. While government web sites will suggest that self-help may be the best option, keep in mind that for the most part people lack discipline when it comes to spending and making payments. They are not likely to have the diligence to research and remedy their own credit problems.

The Federal Trade Commission regulates credit repair services, and they provide free information to help consumer’s spot, stop, and avoid businesses with fraudulent, deceptive, or unfair practices. Be familiar with the Credit Repair Organization Act http://www.ftc.gov/os/statutes/croa/croa.htm as you seek out a genuine ally in this area. Research their background and make sure this company will cast a good reflection on you when you refer your clients to them.

written by Leonard Winslow, a Mortgage Loan Officer, of Gateway Bank Mortgage, INC. for The Avery Group Real Estate Blog

Credit Scoring Part IV

Credit Scoring

Part IV: Credit Remediation

If you are in need of credit remediation, and especially if you live in an area where this is an overall problem within the population, you should seek to align yourself with a credible referral source for credit repair. While government web sites will suggest that self-help may be the best option, keep in mind that for the most part people lack discipline when it comes to spending and making payments. They are not likely to have the diligence to research and remedy their own credit problems.

The Federal Trade Commission regulates credit repair services, and they provide free information to help consumer’s spot, stop, and avoid businesses with fraudulent, deceptive, or unfair practices. Be familiar with the Credit Repair Organization Act http://www.ftc.gov/os/statutes/croa/croa.htm as you seek out a genuine ally in this area. Research their background and make sure this company will cast a good reflection on you when you refer your clients to them.

written by Leonard Winslow, a Mortgage Loan Officer, of Gateway Bank Mortgage, INC. for The Avery Group Real Estate Blog

A Lenders Response to the Bailout Rescue Plan

The Chinese have a proverb: "May you live in interesting times." And we are living through interesting times indeed.

Whatever the political posturing regarding the rescue plan, a plan needed to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of "toxic" mortgages. This has a lot to do with FASB 157, also known as "mark to market".

Each day, lenders must mark their assets to the marketplace. It's like you having to appraise your home everyday and, if your neighbor was under duress because she got very ill, divorced, lost her job and was forced to sell her home quickly, she may have sold it super cheap. Now, does that mean your house is worth that super cheap price, too? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle.

Why is this so bad? Because, as lenders mark down their assets the amount that they have previously loaned becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are still $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio...at cheap prices.

And this makes the vicious cycle continue. And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn't just A paper or B paper etc. it's everything. It's got some A paper, B paper, C paper...and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.

Now add to all this, the opportunistic "shorting" done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan, the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posturing from both sides is just part of the process.

This is not easy to understand for the general public. In fact most politicians don't get this either. That's why it is a difficult yet critical bill for them to vote on.

Once this is done, it will take some time but the markets will stabilize. As for the real estate and mortgage industries, it will take a bit of time but we will make it through this. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to improve the situation overall.

As always – please keep in touch during these volatile times. I am here to help you and your clients in any way that I can.



Sincerely,
Leonard Winslow
Gateway Bank Mortgage
434-220-3409
leonardwinslow@gwfh.com

A Lenders Response to the Bailout Rescue Plan

The Chinese have a proverb: "May you live in interesting times." And we are living through interesting times indeed.

Whatever the political posturing regarding the rescue plan, a plan needed to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of "toxic" mortgages. This has a lot to do with FASB 157, also known as "mark to market".

Each day, lenders must mark their assets to the marketplace. It's like you having to appraise your home everyday and, if your neighbor was under duress because she got very ill, divorced, lost her job and was forced to sell her home quickly, she may have sold it super cheap. Now, does that mean your house is worth that super cheap price, too? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle.

Why is this so bad? Because, as lenders mark down their assets the amount that they have previously loaned becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are still $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio...at cheap prices.

And this makes the vicious cycle continue. And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn't just A paper or B paper etc. it's everything. It's got some A paper, B paper, C paper...and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.

Now add to all this, the opportunistic "shorting" done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan, the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posturing from both sides is just part of the process.

This is not easy to understand for the general public. In fact most politicians don't get this either. That's why it is a difficult yet critical bill for them to vote on.

Once this is done, it will take some time but the markets will stabilize. As for the real estate and mortgage industries, it will take a bit of time but we will make it through this. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to improve the situation overall.

As always – please keep in touch during these volatile times. I am here to help you and your clients in any way that I can.



Sincerely,
Leonard Winslow
Gateway Bank Mortgage
434-220-3409
leonardwinslow@gwfh.com

700 Billion Dollar Bailout for who??

So Congress passes a seven hundred billion dollar bailout...but who is going to benefit from this "bailout"? It appears the bill is more designed to jumpstart a struggling world market and not individual homeowners. Foreclosures are rising, short sales are becoming more prominent, more homeowners are looking at ways to afford their payments and reduce their debt, and stocks continue to struggle. All in all, not good. What we are waiting for is a trickle down effect. We will probably see the government give money to banks to encourage lending between banks. This should increase confidence and make banks more willing to lend again. Hopefully, this extra capital will become available to people trying to make their payments, ease the burden, but only time will tell...

700 Billion Dollar Bailout for who??

So Congress passes a seven hundred billion dollar bailout...but who is going to benefit from this "bailout"? It appears the bill is more designed to jumpstart a struggling world market and not individual homeowners. Foreclosures are rising, short sales are becoming more prominent, more homeowners are looking at ways to afford their payments and reduce their debt, and stocks continue to struggle. All in all, not good. What we are waiting for is a trickle down effect. We will probably see the government give money to banks to encourage lending between banks. This should increase confidence and make banks more willing to lend again. Hopefully, this extra capital will become available to people trying to make their payments, ease the burden, but only time will tell...