HARP Hits 2 Million, Mortgage Interest Tax Deduction Under Spotlight, And Home Ownership Trends

2 Million HARP Refinances

Government sponsored housing agencies Fannie Mae and Freddie Mac have reached a major milestone, 2 million refinances have been closed since inception of HARP (Home Affordable Refinance Program) in March of 2009.  HARP is setup to assist homeowners who are current on mortgage payments, but unable to refinance due to declining housing values.  The program has been credited with pumping millions back into the economy, as reduced mortgage payments lessen the squeeze on monthly budgets.  The ability to refinance keeps a frustrated homeowner from throwing in the towel, walking away from a property and adding another foreclosure to a saturated market.

Mortgage lenders like AmeriSave are following HARP legislation carefully in 2013.  In his 2013 State of the Union, President Obama spoke of supporting legislation changes to HARP that would open up HARP to an estimated 12 million eligible homeowners.  The bill, S. 249, was introduced by U.S. Senators Robert Menendez (D-NJ) and Barbara Boxer (D-CA) and states that under the bill borrowers would see reduced refi fees, no cost appraisals and extension of HARP for one year past its current expiration.  HARP is currently scheduled to expire on December 31, 2013.  Source: Housing Wire

Government Overstates Cost of Mortgage Interest Tax Deduction

As the federal government tries desperately to reduce the deficit in the federal budget, nearly every loophole and deduction are fair game for the chopping block.  Did you know that prior to the Tax Reform Act of 1986, interest on all personal loans (including credit cards) was deductible?  TRA86 changed that, but did keep the mortgage interest deduction to encourage more homeownership in middle-class Americans.  Homeownership has exploded since 1986, fueled by an abundance of inventory and ease of obtaining a mortgage.  In 2010, when the deduction came up for elimination, the Joint Committee on Taxation projected that the popular write-off would cost the government $137.7 billion dollars in lost tax revenue in 2013.  The good news is that the Committee recently published revised estimates that peg the figure closer to $69.7 billion for 2013.  The change in the figure is due to changes in the economy and tax legislation.  The deduction isn’t off the chopping block yet, but the revised report may have bought it some time.

Home Ownership Trends

The quintessential American Dream: Homeownership.  Since 1960’s the national rate of homeownership has remained in the 67% range.  US Census data shows that 52% of foreign-born US residents own their home, compared to 67% of native-born Americans.  At nearly 75%, owner-occupied homes are most common in suburbs and rural areas.  Just over 84% of married couples own their home, compared to 50-60% of single males and females.  Some numbers suggest that the importance of homeownership to young adults (born after 1980) has declined.  Only 39% of young adults are homeowners compared to the national rate of 65%.  Possible factors for a lack of interest in homeownership in this age group include a trend in marrying and starting a family later to the age group simply preferring the flexibility and short-term commitments involved in renting.

This Week In Celebrity Real Estate

Jessica Simpson Buys Ozzy and Sharon Osbourne’s Former Home

Jessica Simpson and husband-to-be Eric Johnson have gone into escrow on the home The Prince of Darkness, Ozzy Osbourne, shared with his wife Sharon.  The 11,000 square foot home is located in Hidden Hills, California and was listed at $13 million.  Before you go thinking that it’s going to take months of work and gallons of primer to cover the black painted interior walls, know that the home was decorated by Sharon Osbourne, who is known to have impeccable taste and enjoys things to be light and airy.  However, the first renovation on the books is to convert Ozzy and Sharon’s former walk in closet to a nursery for baby number 2.  The closet is said to be MASSIVE.  The Cape Cod inspired house features a sweeping grand staircase, large windows, a large back yard with an expansive view of Los Angeles and naturally, a pool.

Dave Matthews Picks Up Malibu Pad

Singer/Songwriter Dave Matthews, who owns real estate in Seattle and his hometown of Charlottesville, VA, has plunked down $6.5 million for a beach house in sunny Malibu, CA.  The home is reminiscent of a European country estate, sitting on nearly two acres.  He’ll have plenty of room for the rest of the band with the homes 6 bedrooms and plans to add a 900 sq. ft. guest house.  Hmmm? Could it double as a recording studio?  Finally, the property comes with private beach access rights.  Our take, this home is The Best of What’s Around.

Allen Iverson’s Former Atlanta Home is a Slam Dunk

If you’re looking to score a deal on a well-built home in the Buckhead area, sometimes called the “Beverly Hills of the South”, of Atlanta then look no further.  Former Philadelphia 76ers point guard Allen Iverson built this home in 2009 for $4.5 million but is currently selling it for $2.8 million after finalizing his divorce.  The home manages to squeeze in 6 bedrooms and 6 bathrooms into 10,000 sq. ft.  Neighbors on West Paces Ferry Road include Arthur Blank, owner of the Atlanta Falcons (and co-founder of Home Depot) and the Georgia Governor’s Mansion, currently home to Governor Nathan Deal.  Not too shabby.

President Obama Considering Further Expansion Of HARP Refinance Program

President Obama is considering announcing a major expansion of the HARP 2.1 refinancing program in his upcoming State of the Union speech that would make it possible for underwater borrowers whose loans are not held by Fannie Mae or Freddie Mac to refinance at today’s low rates. The Washington Post, citing Treasury Department sources reported this morning that the President is weighing whether to use his executive powers to expand the program to include non-agency loans in the successful refinancing program. Congress refused to approve such an expansion of the program last year.

HARP has helped about 1.8 million homeowners refinance since April 2009. Some 81,600 borrowers used the HARP program to refinance last month alone, according to HUD. Some 11 million homeowners have been unable to refinance under HARP. The HARP program, which has been modified a number of times since its launch four years ago, is limited by that fact that borrowers’ loans must be held by one of the government sponsored enterprises, Fannie Mae or Freddie Mac. As a result, it has not been able to help millions of homeowners.

The plan, if adopted, would likely be aimed at homeowners who have otherwise kept up with their mortgage payments but have been unable to refinance because the loan against their home exceeds its depressed value. Many Republicans in Congress have balked at the idea amid concerns over the cost to taxpayer, according to the Post. In his State of the Union Speech last year the President proposed an expansion of the HARP program that would provide access to refinancing for all non-GSE borrowers who are current on their payments and meet a set of simple criteria. However, the plan required action by Congress, which failed to materialize. The Post reported that Michael A. Stegman, a senior Treasury Department official, said late last month that the administration would “consider non-legislative means at our disposal to help responsible . . . homeowners access these low rates.”

Check today’s mortgage rates now.

Read more at The Niche Report

Saving Your Tax Refund Wisely

Last week we gave you some tips on ways to spend your tax refund more wisely.  Most of these tips involved reducing debt, improving your financial life and planning for retirement.  This week we have a few more tips that will help you improve your lifestyle and relieve some stress.

Saving for Education

College tuition is expensive, even for in-state students.  Some states offer scholarships for outstanding high school students, but as the number of college-bound seniors increases year after year, many states have been forced to make cuts in the amount of assistance provided.  As we discussed last week, student loans are an option, but the job market has been fairly bleak for those fresh out of college and taking out a loan with uncertainty of how it’s going to be repaid is a daunting decision.  A parent’s gift of college tuition to their child is one that won’t be fully appreciated for many years to come, when they’re surrounded by friends with student loan debts.  Clark Howardrecommends saving for college with a 529 plan.  A 529 plan will allow you to save money tax-free and spend it tax-free on a child’s college education.

Read Clark Howard’s 529 guide here.

Save for a Down Payment on a Home

With changes in mortgage regulations and lender’s tightening their belts, it’s more difficult than before to purchase a home with zero money down.  FHA loans require a minimum down payment of 3.5% for new purchase loans.  The required down payment may increase based on credit worthiness.  When shopping for conventional loans, you’ll get a better interest rate with a larger down payment.  If you can save up enough to put a 20% down payment on your home, you’ll have enough equity to avoid having to pay a monthly private mortgage insurance (PMI) premium.  Saving for a down payment in a traditional bank savings account earning less than 1% interest won’t do much for you.  If you plan on purchasing a home within the next few years, consider a money market account or CD with upwards of 5% APY.

Check current mortgage rates from AmeriSave here.

Invest In Your Home

If you’re already a homeowner and plan on staying a while, put the money back into your home to make it more enjoyable.  A $3,000 tax refund will go a long way towards refreshing a powder room or guest bathroom with a new vanity, toilet, paint and lighting.  Even installing new tile can be done by the relatively inexperienced and save a boatload, consider practicing by installing a new tile backsplash in your kitchen first.  If you enjoy spending a lot of time outdoors in the spring and summer, spend that cash on a new deck or patio with brick pavers.  Don’t forget to add some landscaping, outdoor lighting and a new grill!

Preventative Services

If you’re relatively secure in all the other areas mentioned, think about which expenses always leave you pulling out your credit card unexpectedly.  Preventative maintenance on expensive items like HVAC systems can save you money down the road and keep you from losing air conditioning suddenly at the height of summer.  Having your car inspected by a reputable mechanic can also prevent you from being stranded by a broken belt or water pump.

Rebuild Your Emergency Fund

If you’re recovering from a financial disaster, you’re not alone.  Job losses and real estate losses have been rampant the past few years.  If you’ve depleted your emergency fund, you know the value of having one, which may make the sacrifices you’ll go through rebuilding one easier to swallow.  Don’t delay in the rebuilding process, lest you get tempted to splurge on those luxuries you’ve denied yourself.  Set an initial goal and contribute to it monthly.  Setting up an automatic draft the day following payday can mentally make it seem like you aren’t loosing anything at all.

Make Your Tax Refund Work For You

It’s the time of the year where the most eager tax filers are starting to find their tax refund has been delivered to their mailbox or directly deposited to their checking account.  The average federal refund has been about $3000 for the last two years, according to TurboTax.  That amount of money is sure to leave a lot of people with scorched pockets across the country and retailers like Best Buy are sure to reap the benefits as people upgrade to the newest, thinnest LCD television available.  Guess what folks, by Christmas that new television will be replaced by one that will actually make you breakfast and clean up the mess. Let’s examine some smarter uses for your tax refund shall we?

Adjust Your Tax Withholding

Some taxpayers like the idea of a tax refund, if they make enough to live comfortably during the year; a tax refund is a welcome surprise.  Others don’t like the idea of giving the US government what is essentially an interest free loan for 12 months.  If you’re the latter of the two types, use this calculator to adjust your tax withholding to increase your take-home pay.  If you received the average refund of $3,000, you could increase your monthly take-home pay by about $250!

Tax Withholding Calculator

Prepay Your Mortgage

Applying your refund to your mortgage principal won’t reduce your monthly payment, but doing this consistently over time can drastically reduce the number of years you have to pay on it. Take this scenario for example:  You have a balance of $150,000 on a 30 year fixed mortgage at an interest rate of 3.25%.  If you applied an extra $250.00 per month to your mortgage principal, you would pay your loan off in just 18.5 years (222 months), instead of 30 years (360 months).  This move would save you over $35,000 in interest over the life of your loan.

Try the AmeriSave mortgage payment calculator.

Pay Off a Credit Card

A recent survey by the Federal Reserve Bank revealed there are 609.8 million credit cards held by US consumers.  71% of the population reports that they have one, and the average person has between three and four.  The average household has $15,956 in credit card debt, sometimes spread over multiple cards.  One popular and wise use of a tax refund is to eliminate the balance on one of your credit cards, freeing yourself of the burden of that payment.  Tip: To make this strategy really work for you, put your refund towards the card with the highest interest rate, then apply the monthly payment you’d normally make on that card to another credit card.

Pay Down Student Loans

Did you know that nearly 60% of the 20 million Americans who attend college every year borrow annually to help cover the costs?  There are currently approximately 37 million student loan borrowers with outstanding loans, and the under 30 age group has the most borrowers at 14 million.  The average income for someone in the under 30 age group with a bachelor’s degree is $45,000.  If you’re in this age group, or even if you’re not, and you have student loan debt consider applying your tax refund to your student loans.  The sooner you’re free and clear of student loans, the better.  This outstanding debt can affect your ability to take on other types of consumer debt such as auto loans or mortgages.

Check today’s mortgage rates.

Contribute (up to $5000) to an IRA

You can contribute up to $5,000 to an IRA (or $6,000 if you’re age 50 and up).  If you’re single and your modified adjusted gross income is less than $125,000 (or $183,000 or less if you’re married and filing jointly), then you can contribute to a Roth IRA, which lets you withdraw the money tax-free upon retirement.  If you earn too much for a Roth, contribute it to a traditional IRA, and convert it to a Roth later.

Enjoy these tips? Check back next week for more!

Hot Features New Home Buyers And Builders Want

As we’ve written before, the housing forecast looks strong for 2013.  There are three strong indicators to look at for new home construction:  Building permits authorized for privately-owned housing units hit 866,000 in October 2012, representing a nearly 30% gain from October 2011.  Housing starts for October 2012 reached 894,000 units, representing a 42% increase from October 2011.  Finally, housing completions in October 2012 came to 772,000; A 33.6% increase over figures from October 2011.  So the 2013 housing outlook is looking strong, and rates are likely to remain low, at least for the first part of the year.  If you’re considering building or buying a new home, you might want to move that time line up!

Click here to get today’s mortgage rates.

The surge in new home building is sure to have home buyers dreaming up all sorts of amenities and features for their new homes.  We posed the question to our Facebook fans and asked a local architect: If you were buying or building a new home, what is one feature you’d really like to see?

Here were the most popular responses:

The old front porch, revisited

Front porches are making a big comeback and there’s one reason; they help create a sense of community that is lacking, especially in suburban areas.  Front porches are also necessary to help new homes blend with older homes when doing “in-fill”, which is adding a home or a few homes to vacant lots in in-town neighborhoods with older homes built in an era where the front porch was the most important part of a home.  The front porch can be more than a place for newspapers to stack up while you’re on vacation.  The perfect front porch is a welcoming extension of the home. A place to drink morning coffee, chat with passing neighbors and meet new ones.

A greener, more efficient place to call home

Energy efficiency has been a hot trend for a few years and hopefully it will continue.  Green efficiency takes many forms, from the ground breaking to the shingles on the roof, there is an environmentally friendly option for nearly every product or process involved in building a home. Builders are adding better insulation in the walls, energy efficient dual layer windows with simulated divided lites and low-energy LED lighting.  As far as finishing touches go, you can even specify low VOC (volatile organic compounds) paints, recycled carpets and renewably sourced hardwoods with water based stains.

Read about the ultimate in green living here, Laura Turner Seydel’s (daughter of Ted Turner) EcoManor, located in Atlanta, Georgia.

The heart of the home

The home kitchen has come a long way from being tucked away in the back corner of the house.  Heck, kitchens used to be completely removed from the house in a separate building.  Given the nature of fires originating in the kitchen, outdoor kitchens would probably make insurers very pleased.  But we digress, the open kitchen has been popular for some time.  Homeowners often entertain from both the kitchen and family room, so they want the kitchen to be open and flow well with that space.  Organization is the key to a well-functioning kitchen, so often you’ll see vegetable prep areas near the main sink, a baking station with a lift-up mixer in the base cabinets, a bar area with a second sink and mini fridge integrated into the island.  The most well organized kitchen might even include a designated charging area/docking station for a whole family’s mobile devices.

 For man years to come

Those buying or building a custom built home are often thinking about designing a home that will serve a family as it grows and changes over the years.  Atlanta architect Adam Stillman of Adam Stillman Residential Design frequently gets two requests from new home builders.  Adam says most young couples specify a second family room in close proximity to the guest bedrooms.  When children are young, this room functions as a playroom and as they grow up, it transitions into a space for weekend guests to relax and enjoy some space without interfering with their hosts.  Adam adds, “Another very common request is for a large study or living room with a full bath attached.  This room is designed to do double duty as a bedroom for elderly parents when they come to stay for an extended period.”  While we’re on bathrooms, our Facebook commenters suggested the following; dual sinks, linen closets in the bathroom, heated floors and even a urinal.

 Strange overtones

If all of these new home features seem ordinary to you, check out a couple that are a little more off the wall.  Architect Adam Stillman says there is a growing trend of new home builders asking for vaults to be built under their concrete front porches.  These vaults are accessible through the basement and have concrete walls and ceilings.  What they’re for is anyone’s guess.  Uses range from eyebrow raising safe-rooms to more mundane wine and fur storage spaces.

For those who love their upholstery and carpets as much as they love their dogs, the solution is a designated dog washing station in the garage or mudroom.  If you have a dog, you know the only thing worse than him shaking water all over you and your bathroom after a bath is when he comes bounding in with excitement after playing in the mud and leaves a trail of paw prints all over the house.