California legislators are in the process of approving a bill that would provide state tax relief for eligible homeowners who’ve had debt forgiven by mortgage lenders through relief provisions including mortgage modifications and short sales. This is another step toward cleaning up the mortgage mess; If homeowners facing the loss of their homes can also expect to lose their shirts paying taxes, what’s their incentive for staying in their homes and cooperating with lenders? No one wants more people to walk away from homes they can’t sell, or mortgages they can’t pay.
The bill, which has been unanimously passed by California’s state Senate, is now in the hands of the state Assembly. It’s important to note that tax relief would be available only to owner-occupants.
While the action of the Federal Reserve to lower its rate to 2.25% grabbed the headlines, a little further behind the scenes were several positive indications for the mortgage markets:
As much as the regulatory actions indicate a desire to ease the mortgage crisis and stimulate the economy, it is the financial market developments that could indicate a fundamental improvement in conditions on the way.
Treasury Secretary Henry Paulson calls for national licensing for mortgage brokers in an effort to guard against fraud. He also calls for clearer disclosures to borrows on the terms of their home loans.
One of the challenges faced by the average home owner or potential buyer is deciphering how to react to big-picture news about the mortgage market. Often, the right move runs counter to the news cycle.
Over the past week, that news cycle continued to focus on negative stories. For example:
Mortgage foreclosures were reported to be up sharply in February over the prior year’s levels
In other words, the macro-economic view of housing and mortgages continues to be bleak. It may be counter-intuitive, but this could well be an environment which calls for action, on the part of home owners and potential buyers alike.
Fannie Mae and Freddie Mac have raised their loan limits, a move designed to make mortgage funds available and to ease the loan approval process for borrowers living in areas where housing prices are very high.
The new lending limits vary according to region, but typically allow for more borrowing power in areas where housing prices far exceed Fannie and Freddie’s previous loan limit of $417,000. As an example, borrowers in Honolulu, HI may now qualify to borrow as much s $793,750 under the new loan limits.
This is great news, as it evens the playing field for borrowers and mortgage lenders in areas with astronomical home values. The ability to qualify for conforming mortgages can ease the mortgage applicaton process and help borrowers save on financing costs associated with non-conforming jumbo loans.
