Easy Way to Keep Track of Lender Overlays

Let’s say you do business with 5 or 6 lenders. You (or your compliance department) get email updates. Maybe you get them one at a time. Maybe you get 10 changes at one time. An easy way to keep track of all lenders, all at one time is by subscribing to www.LendingArt.com. It’s free and when you register, you can pick and choose which lenders you want updates from. It’s just that easy.

Politics is Messing With My Livelihood

Last Wednesday the Dems rolled out their plan to address rising foreclosures. Let Fannie and Freddie increase the caps on their loan portfolios, and let’s set aside $200 million to pay “housing counselors” to help “troubled borrowers” negotiate with their lenders. Oh, and we ought to have a new mortgage “czar” to oversee the initiative.

For you youngsters who didn’t have drivers licenses in the 1970s, this “czar” idea really stinks. Google the word “boondoggle.” During the “gas crisis” of the 1970s, we had an energy “czar” appointed to oversee the government’s response to that crisis. If this idea gets out of the gate, run for cover.

The Bush administration is throwing its weight behind a bill you might want to download and read. It’s HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007. The bill has 25 co-sponsors, among them Tucson’s own Gabrielle Giffords, Democrat from the 8th district. Some of the other 24 are likely from your back yard.

The IRS has historically considered as income any debt that’s forgiven in a short sale or foreclosure, unless the person(s) involved declare(s) bankruptcy. HR 3648 would temporarily disallow such tax treatment, to the benefit of the seller in a short sale, or the mortgagor in a foreclosure. This could be good for the real estate business, as it would tend to shore up local economies by keeping homeowners out of bankruptcy.

It would NOT help IRS revenue, but the estimated shortfall for 2007-2008 would be a mere $179 million. (To put it in perspective, consider that we spend more than that on the war in Iraq and Afghanistan each day.)

So who would qualify? And what mortgages would fall under allowable “forgiveness?” The bill applies only to “principal residences.” But if I have lived in my second home for two out of the past five years, I can legally declare that home my “primary residence.” You can see where this might be useful to a borrower who has bitten off more than he can chew.

Here’s the gist of the bill, taken from the Congressional Budget Cost estimate: “HR 3648 would exclude from the gross income of a taxpayer any income by reason of discharge, either in whole or in part, of debt on the taxpayers’ principal residence. Such debt may include the initial loans to acquire, construct, or substantially improve the residence as well as any refinancing of debt to the extent the refinancing does not exceed the amount of the refinanced indebtedness. The exclusion from gross income would apply to discharges of indebtedness on or after January 1, 2007.”

Look out for the other shoe. Expect some negative amendment to the capital gains treatment currently afforded on a primary residence. Under current law, $500,000 can be claimed as a deduction for a married couple on the sale of a primary residence. Remember that your second home can be claimed as my primary residence if you have lived in it two years out of the previous five.

Under HR 3648, this could change such that the exemption would be tied to the actual number of years you live in the home. The bill would also extend the deduction for private mortgage insurance to the year 2014, a good thing in my opinion.

My Mother used to say “it’s easier to get forgiveness than permission.” With HR 3648, a good number of homeowners will have gotten both! The mortgage world is changing. Keep up!

And that’s the real estate opinion of this Tucson mortgage lender.