Archive for December, 2006
Congress Makes Mortgage Insurance Tax-Deductible in 2007
Congress Makes Mortgage Insurance Tax-Deductible in 2007
Congress has passed legislation to allow premiums on private and government mortgage insurance to become tax-deductible for qualified borrowers in 2007.
For the first time, borrowers who make less than $100,000 a year will be able to write off the full amount of their premiums.
Homeowners making more than $110,000 will not be eligible.
Private mortgage insurance is often a requisite for borrowers who don’t put down at least a 20% down payment or take out a second “piggyback” loan.
Over the last five years, about 20% of new loans have been taken out with mortgage insurance, and more than half of those carrying private insurance, according to Mortgage Insurance Companies of America (MICA).
The tax breaks will take effect for new loans in 2007.
The write offs are expected to result in average tax savings of between $300 and $350.
An increase in the use of home-equity loans by borrowers to cover down payments in recent years has hurt private mortgage insurers.
Private mortgage insurance is most often used on low-down-payment loans bought by Fannie Mae and Freddie Mac.
(source: www.mortgageledger.com
New contract could keep a roof over their heads
Originally published in the Kansas City Star on Sunday, Dec. 10
By Gene Meyer
Grant and Anne Lindquist know a lot about stretching a $48,000 income stream.
Their money covers the costs of a four-member household and the carpentry-painting business that Grant Lindquist owns.
They shop carefully for business and household needs, supplement groceries with vegetables from the garden of their rural Olathe home, sign up for Internet service primarily when their children John, 15, and Megan, 11, need it for school, and use credit cards only when they absolutely must. 
In a perfect world, “I would have a credit score of zero, because it would mean I’ve never used credit,” Grant Lindquist told a financial planner.
But it’s not a perfect world.
The family’s aversion to borrowing, plus a lean year when income from the business dropped below $18,000, put the Lindquists in a financial jam that until recently seemed to offer no good way out.
They missed some mortgage payments, which triggered a cascade of interest, penalties and other fees that quickly pushed their original $780-per-month house payments to more than $1,600.
The Lindquists even considered selling the home — into which they poured a ton of sweat equity, including extensive cabinetry and a stone fireplace front that Grant Lindquist installed — just to salvage what they could from the investment.
“I don’t mind the idea of selling, but I would hate to leave good neighbors,” said Anne Lindquist, who to supplement the family’s income works part time as a day-care teacher and also helps care for acquaintances’ children.
Kevin Taylor, a certified financial planner in Overland Park, found an unexpected solution to the dilemma when he dug into the Lindquists’ situation for a Kansas City Star Money Makeover. He discovered a Chicago clearinghouse for community activists, the National Training and Information Center , that works with the Lindquists’ mortgage holder to help renegotiate contracts for borrowers who may be caught in predatory loans.
Taylor helped put the Lindquists in touch with the Chicago organization. Details of a potentially more manageable mortgage are still being worked out, but things look promising, said Sam Finkelstein, the center’s national housing organizer, who is familiar with the situation.
Regardless of how the Chicago negotiations come out, the Lindquists said they are ready to do whatever they must to resolve the impasse.
“And that is a good thing,” Taylor said. “The worst thing that could have happened is that this thing would simply have continued to unfold month after month,” eroding their equity.
The Lindquists’ sketchy credit history and fluctuating income made it impossible to get a reasonably priced conventional mortgage when they bought their home a few years ago. The higher-cost subprime adjustable-rate loan they got seemed manageable when the initial payments were $780 a month.
Then their original lender sold the loan to a second lender that in turn sold it to a third. Each sale seemed to trigger higher interest rates and new fees. The Lindquists refinanced part way through the process to rein in the escalating payments, but even so they fell behind as fees piled onto their unpaid balances.
Florida-based Ocwen Financial Corp., the company servicing the loan, calculates that the Lindquists’ monthly payment is now more than $1,600 and climbing.
The Lindquists say that even if they managed to come up with that much money, it leaves no way to save for retirement, their children’s educations or anything else the family might need to achieve a more secure financial future.
“It would consume all the joy we could have had in our lives,” Grant Lindquist said. “We’ve become mortgage slaves.”
The Lindquists are not alone, recent statistics show.
Defaults on adjustable-rate mortgages jumped 25 percent to a five-year high in October, according to investment brokers Friedman Billings Ramsey Group Inc.
Borrowers heading into deep financial trouble have a handful of choices for getting out. If things have not reached a point where foreclosure is inevitable, many lenders either will modify a mortgage or place it in what is known as forbearance.
Modifying a mortgage often means rewriting the loan so that payments are affordable now and adding any delinquent amounts to the principal or adding them as additional payments on the loan’s back end. Forbearance plans often require making a normal payment plus at least a partial payment of delinquent amounts while interest costs and fees continue to mount.
The Lindquists say that the still-ticking clock of interest and finance charges while their mortgage was in forbearance was one of the big reasons their payments are becoming so much bigger so quickly
Ocwen, the company servicing the Lindquists’ mortgage, is one of four major lenders working with the National Training and Information Center to negotiate some relief for strapped borrowers. The effort follows a settlement of Federal Trade Commission allegations that some past Ocwen practices were unfair to consumers.
Ocwen’s customer service operations normally can help resolve 80 percent or more of such problems without resorting to foreclosures, said Paul Koches, the company’s general counsel. But it also works with grass-roots organizations like NTIC in Chicago.
At Taylor’s suggestion, the Lindquists called the NTIC, talked with counselors there and provided them with the income and other information needed to propose new terms to Ocwen. That work appeared to be nearly completed last week as Anne Lindquist reported that the couple’s NTIC counselor needed “one more piece of information to ‘nail it down,’ in his words.”
Even if the effort fails, the Lindquists will have made significant progress, because they also have agreed on a backup plan, which is selling the home to save as much equity as they can, Taylor said.
“Your worst choice, which is doing nothing, is off the table,” he said.
Meantime, the Lindquists also started to tackle other financial chores they had let slip. One of the biggest was coming up with what seemed to be workable plans for paying their credit-card and personal bills. They also think that starting an emergency fund to avoid future debt is more in reach than they imagined.
“For the first time in 22 years, we have a budget, and our spending seems under control,” Anne Lindquist said.
30 Year Fixed Mortgage Rates back in the 5% range?
Yes, believe it or not, you can get a 30 Year Fixed Mortgage for under 6%. Today, If you have a loan amount of less thatn $417,000 (and are willing to pay a 1% loan origination fee), you can get a home mortgage for only 5.875%.
If you have been waiting for a great time to buy, it is NOW, considering all of the properties on the market from the sellers that still need to sell during the holidays.
Call me if you need any assistance making this happen.
Have a great week!
Anthony