BAD News for the Housing Recovery

The House of Representatives in Congress, especially the Republican ones, have been holding up legislation this year… It now appears that they will “hold up” a bi-partisan bill that would extend the Mortgage Debt Relief Act to the end of 2013. The Debt Relief Act is important to the Housing Industry – and if it Expires on December 31st of 2012 – we believe it will be BAD News for the Housing Recovery making it’s way through NC.

In the “Fiscal Cliff” discussions, you might hear about Taxes going up, and Government Programs that will be closed – but few are talking about the Tax Deduction put into effect to help with Foreclosures.

The Mortgage Forgiveness Debt Relief Act and Debt Reduction Cancellation, passed in 2007. In the past, cancelled or forgiven debt was reported as taxable income, which included short sales or mortgage principal deduction. So, if someone did a Short Sale – and the Bank “forgave” $30,000 (the bank took the loss with the sale) the Homeowner would then owe taxes on $30,000 of “income.” It’s such a double TRAGEDY – and it’s money people don’t have.

We believe that the elimination of this bill would increase the tax bill on distressed homeowners, hurt the short sale market, and possibly begin to again increase foreclosure activity.

Congress passed this Act to helping the Housing Market – hoping that people wouldn’t just walk away from their homes to avoid the additional burden of taxes, and it’s worked… and though the Short Sale Process is a difficult one for ALL parties to negotiate – it’s better than having vacant Foreclosed Homes, because we have all learned that Distressed Properties bring the overall neighborhood values down…

I’m not writing this as a “Political” statement – but really, I just don’t think people realize that there’s so much more to the “Fiscal Cliff” than Congress bickering with the White House! The Mortgage Foregiveness Debt Relief Act, and the Mortgage Interest Deduction for Homeowners are important – and I don’t feel they should just be “tossed” as a matter of Principal. We are struggling in North Carolina to get our feet under us with Home Values, and I personally don’t want to see us heading in the wrong direction – again.

More Problems With Allowing The Act To Expire:

This would also effect homeowners benefitting from the $25 billion settlement agreed upon by five of the nation’s largest banks in the wake of the robo-signing foreclosure scandal. Part of the settlement called for principal reduction $20,000 average per borrower, and with the debt-forgiveness reduction, such homeowners would find their tax payment much higher.

So far there appears to be a Senate panel that agrees that an extension of the mortgage debt relief law is important, and it appears that they have a bipartisan bill to extend it through 2013. S till, there is a long way to go until this is law.

What Will Happen To Mortgage Rates If We Go Over The Cliff?

If you think you might be underwater on your home – and you want to refinance to a lower rate, there might be some help.

We offer the HARP 2.0 program – and if your home is with Fannie Mae or Freddie Mac it will allow us to do a refinance, even if your home is worth substantially less than your mortgage balance. Also, FHA and VA have Streamline Refinance programs available that do not require an Appraisal. It might be time to Refinance?!

Stay tuned! No matter what happens – no matter what rates are – WE have some of the BEST Mortgage Interest Rates Today! It’s going to be interesting for those of us who are Economic Junkies over the next few weeks! Have Questions? Call Steve and Eleanor Thorne 919 649 5058 Connect with us on Google Plus or Facebook!