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END OF THE YEAR SUMMARY

This year’s report is going to sound a lot like the wrap-up from the last 2-3 years. Difficult transactions, distressed properties ruling the day, and we keep waiting for the wave of foreclosures that has yet to arrive. I feel like the little boy that cried “Wolf!” when we keep hearing from all the “experts” that there is a huge wave of foreclosures headed our way, yet the lenders continue to drip them out in a measured manner.

Delinquencies seem to be rising again, which could force the lenders’ hands into more foreclosures. However, loan modifications appear to be getting better. I’ve reviewed many for local homeowners, and I’m seeing some good ones finally come across my desk, even some principal reductions. If this trend continues, that may keep more properties from becoming foreclosures.

Overall inventory is WAY down, almost 40% less than last year. Many banks called off foreclosures last year to work through the Robo-signing and MERS lawsuits. Some of these cases have settled recently, which could mean they’ll start foreclosing more rapidly next year. Unless some new reason to delay pops up in 2012 like it has the last few years?

Prices seem to be mostly flat. The average listing price for our area went up a bit, but the average sold price is about where we ended last year.

Big news is that the law in California changed where in most cases lenders can’t pursue after a short sale (consult an attorney). So short sales are now something every distressed homeowner needs to at least consider if they can’t make their payment and can’t get a sensible loan modification.

HARP II CLARIFICATION

I had written an article a month or two ago about the big changes in regards to the government HARP program and I need to clarify one point. To recap the article, the government is making major changes to the HARP program and are now calling it “HARP II.” The goal is to help those borrowers who want to refinance their home into today’s super-low interest rates, but can’t because they are upside down. You can call your current lender to apply, or any other lender that can do HARP II refinances.

The main qualification is that your mortgage must be owned by Fannie Mae or Freddie Mac, and that is where the confusion is coming in. I’ve had people comment that they think they can’t apply for HARP II because their loan is with Wells Fargo, or BofA. They are confusing the “servicer” of their loan with the “owner” of their loan. Your loan may have been sold time and time again to different investors, but you still make your payment to the same servicer.

Here is a snippet from the original Federal Housing Finance Agency press release:

“The existing mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
Homeowners can determine if they have a Fannie Mae or Freddie Mac loan by going to: http://www.FannieMae.com/loanlookup/ or calling 800-7FANNIE (8 am to 8 pm ET)
https://ww3.FreddieMac.com/corporate/or 800-FREDDIE (8 am to 8 pm ET).”

So if you are interested in the upside-down refi plan, your first step is to check who owns your loan as per the above. Good luck and let me know how it goes if you have any success.

PLEASE BE ADVISED…

Have you ever heard that saying, “If it’s not in writing, it doesn’t count?” Well, never was that more true than right now in regards to our real estate and mortgage mess. The number of people applying for loan modifications and/or dealing with a potential foreclosure of their home is at an all-time high. When you call into your lender/servicer, you almost never deal with the same person. And it seems like the story changes from day to day. I’ve had clients call their lender and be told their loan mod is approved one day, only to have foreclosure commence the next day. And no matter how much you point out what “Bob” at their office said last week, it doesn’t seem to matter.

Well, here is an idea to turn the tables on them that comes from www.hansonlawfirm.com. You’ve probably noticed how your lender tells you that the call is being recorded for “quality” or “training” purposes? Well, how about you do the same? First, consult an attorney before trying this. Then go buy a cheap hand-held tape-recorder. When you get a bank representative on the phone, tell them that you would like to record the call so that you have a legal record of the call and so that there is no confusion later. Ask them to state their full name, and to give you some kind of identification. Either an employee ID #, or date of birth, or last five digits of their social security number.

If they won’t talk to you under those circumstances, you can ask “Why?” In theory, they shouldn’t mind, because they are probably recording the call on their end. And they wouldn’t be telling you anything that isn’t legal and authorized by the bank, right? And you can count on what they tell you verbally, right? Remember that most banks are required by Federal law to try to work out some kind of solution to your mortgage problem. So if you can show that they refuse to talk to you, they could be in hot water. If nothing else, it’s fun to make THEM squirm a little on the phone…

END OF THE YEAR TAX TIPS

The end of the year is fast approaching. Now is the time to do some planning ahead to try to reduce your income tax bill if you can. Here are two ideas for you to consider.

1. Pay your property tax bill in December (if you can). If your property taxes are not impounded, that means you write the checks yourself. If this is you, and you can afford it, consider paying the 2nd installment (the one due next February) before the end of this year. That could increase your deductions for the 2011 tax year.

2. Pay your January mortgage payment(s) in December. Same reason as above. This can generate an extra month’s worth of interest deduction on your taxes.

You’ll want to check with your tax professional first to see if it is more beneficial to increase your deductions this year versus next. If, for example, you believe you will be in a lower tax bracket next year because of a reduction in income, you may want more tax breaks this year, and vice versa. If this seems backwards, consider that the higher your marginal tax rate, the more beneficial each dollar of deduction is.

This is an important consideration, because by pulling some of your 2012 deductions into 2011, you will be effectively reducing your 2012 deductions by that amount. If you do this again in 2012, you will be roughly breaking even (assuming you will be in the same tax bracket). However, due to the time value of money, I think you’d rather have the tax break THIS year versus next year.

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