Daniel Hannan: Devalued Prime Minister Speech

Here is British MP Daniel Hannan’s speech in Europe in which he exposed Gordon Brown’s liberalism for its destructive power. The question now becomes who will tell Obama the same?

What Daniel Hannan tells us about Obama

The British have a governmental system in which the Prime Minister comes from the ranks of legislators. In a democratic sense it is superior to our own system in that the Prime Minister is held accountable by the People’s elected representatives like Daniel Hannan.

So Brown attends Parliament sessions weekly in which barbed questions are thrown at him like grenades. And if he doesn’t have the confidence of the legislative branch, there is a mechanism for early elections. This very British tradition extends to the European Parliament of which Daniel Hannan is a member and which Brown attended this week.

Our Founding Fathers thought differently. If a president is so easily held accountable to the people, he might be frozen with inaction. For better or worse, we are paying for this lack of accountability under President Obama.

What Daniel Hannan said to Gordon Brown could just have easily been said to Barack Obama. Our president is, after all, pursuing the same largess spending policies which have brought England to financial ruin. Every child in England is born today owing 20,000 British pounds.

The British government continues to expand by hiring more workers while the public sector lays productive workers off in droves. While Brown spent on health care and education, the deficit increased, taxes went up at exactly the wrong time, and everyone lost their jobs.

The only difference is that Barack Obama is enacting his ruinous socialist policies in 2009. Gordon Brown enacted them before. History has already judged him one of the worst Prime Ministers in English history. The same destiny probably awaits Obama, but the nation is destined to suffer until the Daniel Hannans of our country rise. Where is the Daniel Hannan in our U.S. Congress?

As a biography, Daniel Hannan was born in Lima Peru as a British national. He was president of the Oxford University Conservative Association. He was the youngest member of the European Parliament. He is also a writer and blogger, whose work you can find here.

Read every word of the full transcript and see the video. Substitute Barack Obama’s name for Gordon Brown and you will have a good sense of what socialist policies do during recessions.

At the very least Daniel Hannan’s brilliant oration has created a new conservative star on the world stage. He has the eloquence, sharp wit (and the accent) to remind us of a young Bill Buckley.

Seniors Now Able to Tap Reverse Mortgage for Home Purchase

Seniors Now Able to Tap Reverse Mortgage for Home Purchase

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China's Remarks May Mean Higher Mortgage Rates

The mortgage market got off to a very strange start Friday.

China's Premier Wen Jiabao said publicly that he's concerned about the safety of U.S. government debt. He went of to say that he thinks China should aim to "fend off risk" by more broadly diversifying its $1.95 trillion investment portfolio. China holds almost a third of their foreign exchange reserves in U.S. Treasuries.

The "so what" factor attached to this event is significant.

Now that the Chinese, one of the largest foreign buyers of U.S. debt instruments, are hinting that they may not be quite as aggressive buyers at future Treasury auctions -- the prospects for notably lower mortgage interest rates ahead has faded a bit more. The connection between the price of government debt instruments and the trend trajectory of mortgage interest rates is incontrovertible. You can "take-it-to-the-bank" that mortgage investors, already fretting about the gargantuan amount of government debt that has yet to make its way into the capital markets, will pace the floor a little more briskly as they consider the "what ifs" related to the potential diminished appetite of a major financier of American debt. Mortgage investors are keenly aware of the irrefutable connection between rising yields on Treasury obligations and the corresponding rise for mortgage interest rates.

Whether the Chinese Premier's comments were nothing more than a bit of off-the-cuff personal crumbling or truly a "heads up" with respect to a change in the Chinese government's attitudes toward U.S. Treasury debt has yet to be determined. Even so, it will likely serve to limit (at least near-term) the ability of mortgage interest rates to move notably lower from current levels.

Looking ahead to next week the Federal Open Market Committee will meet in a two-day session beginning on Tuesday and ending on Wednesday at 2:15 p.m. ET with the release of the committee's post-meeting statement. Market participants are virtually certain that the Fed will choose to leave short-term interest rates unchanged -- but observers will be interested to see what, if anything the Fed has to say regarding the possibility of the Federal Reserve Bank becoming a direct buyer of Treasury obligations. Next week's economic calendar includes the release of the Producer Price Index on Tuesday and the companion Consumer Price Index on Wednesday. Both measures of inflation pressure are expected to remain benign and should therefore exert little if any influence on the direction of mortgage interest rates.

Obama's Homeowner Affordability & Stability Plan (part 2)

Yesterday I wrote the first of two parts on the Homeowner Affordability & Stability plan that was released by the Obama administration on Wed March 4th. Which contained two major parts they hoped would have an impact on assisting homeowners with troubled mortgage. The first part of the plan which I blogged about yesterday is a modification program that Servicers will offer to borrowers with high debt-to-income ratios or who are at risk of foreclosure. The second part of the plan which I am blogging about today, a refinance program for existing Fannie Mae or Freddie Mac loans.

As I stated yesterday 1st Metropolitan Mortgage CEO, Daniel Jacobs and others are still assessing the details of the Homeowner Affordability & Stability plan to determine our next steps, but in the mean time we are trying to provide a summary of its major points so that it might help other to better understandable it. So here we go:

The second part of the plan is a refinance program for existing Fannie Mae or Freddie Mac loans. Fannie Mae is offering two different programs:

1. The Refi Plus Program that requires the servicer of the loan to be the originating lender.
2. The DU Refi Plus Program (DU is the Automated Underwriting System for Fannie Mae) that allows any lender using DU to originate the loan as long as the existing loan is a Fannie Mae loan.
   

Freddie Mac requires the servicer of the loan to be the originating lender. Some specifics of the program are:

• Existing mortgage must currently be a Fannie or Freddie loan.
  
• Existing loan may not be considered ineligible (must get an Approved/Eligible from DU). Ineligible loans include existing mortgage loans that received a DU Expanded approval (EA).
  
• Maximum LTV for 1-2 unit properties is 105% and require an appraisal.
  
• Maximum LTV for 3-4 unit properties is 80% and also require an appraisal.
• No maximum CLTV.
  
• Existing mortgage must be current and have acceptable mortgage payment history. No minimum FICO score is required although borrower must meet bankruptcy and foreclosure requirements. In addition, borrower must demonstrate credit worthiness.
  
• Rate and term refinance only (No Cash Out) - purchase money seconds MAY Not be included.
  
• Loan level price adjustments (points) will apply (determined by credit score on credit report)
• MI required (same coverage factor of existing loan) for mortgage loans that had original LTV’s greater than 80%.
  
• DU Refi Plus must receive Approve/Eligible and will not be available until April 4. Income and employment verification is required.
  
• Refi Plus is a manual underwrite and requires verbal verification of employment. Lender must determine that the borrower has a reasonable ability to repay the mortgage based on current information provided by borrower.

There it is in a nut shell. I actually have higher expectations for this part of the plan then I do for the Loan Modification part. This part of the plan stands a chance to actually help those who have good credit and have little to no equity in their property. But I do not see it doing anything for those who are in areas that property values have taken a noticeable hit, and 105% LTV is not going to do anything for them. Also this does offer a second option, to use FHA, which will allow a borrower to go to a 96.5% LTV on a No Cash Out Refi.

While I think that this plan might actually help a few people, but it will be a source of false hope for many more. As I ended my last post, the purpose for providing this information is so that those who read it may have a better understanding of the "Homeowner Affordability & Stability Plan", and help them come to their own conclusion.

Making Home Affordable Plan Expected to Help 4-5 Million Homeowners Refinance

I have been inundated with calls and emails from my client base as to how the new homeowner relief program, President Obama's Homeowner Affordability and Stability Plan can help them. I have spent many hours researching the specifics so I could coach my clients with full knowledge of their options... here's what I found.

Like so many of the bills, proposals, proclamations, and guideline changes that have come out over the last 9 months, the official documentation that surfaces from the specific agencies (or Congress), reads much like a press release, and not a detailed prescription or recipe on how it will work and, more importantly to many, when. The answers to these very important questions are not available at the date of this post, however, the program is broken doen into two (2) areas:

1. The Home Affordable Refinance
2. The Home Affordable Modification

The Home Affordable Refinance

Who Qualifies:

• In short:If the home you want to refinance is your primary residence,
• The loan on your home is controlled by Fannie Mae or Freddie Mac (it must be a conforming loan — you can call Fannie at 1-800-7FANNIE and Freddie at 1-800-FREDDIE or submit online forms with Fannie and Freddie), and
• If you’re current on your mortgage payments (meaning you haven’t been more than 30 days late on your mortgage in the last 12 months)
• If you have sufficient income to support a new mortgage…
  

.. then, you might qualify.

It gets a little more complicated, though: You can’t be too far underwater on your mortgage (owe more than the home’s market value) to qualify for the refinance. You can owe between 80-105% of the current value of your home, but no higher than 105%. (This plan assumes that if you owe less than 80% of your home’s value, you probably can refinance without government assistance.)

What Do I Need to Provide?

If you think you might qualify to refinance, you’ll need to give the following documents to your mortgage lender:

• Your monthly gross (before taxes) income of your household, including recent pay stubs.
• Your last income tax return.
• Information about any second mortgage on the house (you can only refinance your first mortgage under the plan, but having a second mortgage won’t automatically exclude you).
• Account balances and minimum monthly payments due on all your credit cards.
• Account balances and minimum monthly payments for all your other debts, like student loans or car loans.
  

How Will They Decide What My Home is Worth Today?

Official word on how your home will be valued for the refinance portion of the Obama housing plan hasn’t been released yet. It’s possible that lenders are expected to use their traditional procedures, but it hasn’t been spelled out in the documents. One lender has some ideas how they will arrive at 105%.

When Will This Help Me?

When it comes to refinancing under the Making Home Affordable plan, patience is going to be a virtue. With so many homeowners in some sort of distress (one in six American homeowners has negative equity, and foreclosures and home values fell 11.6% nationwide last year), there is likely to be a flood of applications and queries for lenders.

What If I Don’t Qualify to Refinance?

Don’t lose heart — you might qualify for a loan modification under the plan. Another blog post with the ins and outs is coming in a later post.

Is Credit Repair An Ethical Solution To A Big Problem?

Many wonder if it's unethical to attempt to remove valid bad credit issues from a credit report. I say, “Yes, it is,” and here’s why.

The credit reporting and ranking system has been and continues to be unfair to American consumers. We are forced to participate in something we did not volunteer for and are punished for mistakes whether they are ours or not. We cannot opt out of this system and no consideration is made for circumstances that are beyond our control. However, "credit repair" is a term that has gained a negative reputation, and has been connected with credit fraud and credit schemes. As a result, I’m often put in the position of having to defend my efforts to help others repair their credit.

Problems contained in a credit report can lead to feelings of being in credit prison; however, there are solutions. A credit report should not be viewed as proof of bad credit, but rather simply an allegation.

Unfortunately, consumers rarely challenge the allegations. When my clients sign on to use our preferred attorney network for their defense, they are basically saying “prove it” to the credit bureaus and entering a plea of not guilty.

Putting the credit bureaus in the position of having to prove their allegations is one of the functions of our preferred attorneys. If the bureaus say they have already looked into and confirmed the charge then our attorneys will appeal the decision. It is eventually discovered that most credit report allegations are falsely based, and at that point the negative items are removed.

Our society has its roots in capitalism and the credit bureaus feed on this and use consumer information to their advantage. The bureaus are not motivated by the terrible consequences bad credit can have on a consumer. Profit margins - not consumer rights - are what motivate them.

Our legal system takes an oath to truth, equity and the common good; credit bureaus do not take this oath. Why should any citizen be obliged to support any company, let alone massive public corporations, when doing so could ruin his credit and financial standing? The credit bureaus would cling to every bit of credit data, true or false, forever if federal law didn't force them to delete many items after seven years time. Lucky for us, the government forces the bureaus to correct your credit at the end of seven years. If an item HAS to be removed after seven years, what would be wrong with removing it sooner?

My contention is you cannot always judge someone's credit worthiness by their credit history. It hurts and affects everyone when good people are pegged as deadbeats. The policies of the credit bureaus have been so grossly unfair to the consumer and that is why I feel it is fair to oppose the current system of credit reporting. It is just totally unfair to punish the consumer with seven years credit bondage (10 years for bankruptcy and some court decisions). Especially when there have never been any studies that say seven years is magic number for the time it takes to restore good credit.This seven-year mark is completely random.

"It is our understanding that computer models that predict credit information find that most information that is more than 2 year sold is nonessential,” says Dr.Bonnie Gution, consumer affairs advisor to President Bush.

I totally agree. Many of my clients feel that seven years is way too long. Most consumers are able to recover fully from a financial crisis within 2 to 3 years. Despite this, for the next 4 to 5 years they are often forced to live a reduced life-style, rent homes and pay high interest on other loans while being denied credit based on bad reports.

Although credit bureaus claim an error rate of less than 1%, that isn't necessarily true. Studies performed by independent agencies show that mistakes occur at a rate nearing 79%!!!! One credit bureau admits to an error rate of more than 50%, but they still choose to err on the negative side than the positive.

Credit reporting systems are commonly used in other countries. However, unlike America, most countries doll out credit based on a consumer’s current credit status. For example, in England, Equifax and Experian are not allowed to keep credit information for more than five years. The point to all of this is this - the American credit reporting system needs changing. With this in mind, realize that it's not unpatriotic to want to ensure your credit report is accurate. And it is NOT unethical either.

When people can’t buy things because of a poor credit report, our country’s financial system suffers. That’s why I offer to help my clients recover from this devastating hardship. My clients are excited to fix their credit and to return to the credit economy and be fiscally trustworthy. My goal is to help my clients escape from people who prey on people with bad credit.

Bad credit costs a person thousands and thousands of dollars and forces many into a vicious cycle that is very difficult to escape. They are forced to rent (where they pay someone else’s mortgage), to buy items at a higher interest rate (cars, credit cards) or to take unfulfilling jobs. Sadly, even one negative item on your credit report can have far more impact than a lifetime of good credit!

In short, because of poor data collection, reporting and validation, many people suffer unnecessarily from the ill effects of a bad credit report. So to answer the question posed at the beginning of this article, yes, it is ethically sound to remove the record of a negative credit item from your credit report.

Larry Benton, Certified Mortgage Consultant^® with 1^st Metropolitan Mortgage, specializes in helping release his clients from the “credit prison” that too many people find themselves in. If you, a friend, a family member or a colleague find yourself needing real answers and real solutions to credit issues, you can confidentially contact him at 877-805-2905 or at larry@themortgagecoach.net .

Is Credit Repair A Legal Solution To A Big Problem?

Our society seems to decide our value by our credit line or credit worthiness. With a good credit report, you will participate in and enjoy many of the finer things in life. However if your credit report is “challenged”, you probably will not.

Few creditors, if any, will extend individuals with bad marks on their credit history loan options. But what if you had no other option? What if you were forced to choose between buying food, and making the payment on your car? What if you were prevented from making timely payments by a lack of employment, a medical emergency or some other personal crisis? Should just one late payment result in up to ten years of being punished by having to pay higher rates and fees?

One wonders why this system is allowed to operate as it does. In a court of law, judges will give you a chance to defend yourself before deciding your fate - this is one very important difference not to forget. In America, we are guaranteed the right to face our accusers before judgment can be passed. With your credit record, however, this is completely untrue.

The credit bureaus have the final say on your credit report. Unknown to us, creditors and credit bureaus have been trading information about us for a long time. They trade your personal information (name, address, social security number), they trade your private information (who pulled your credit, what you purchase, and the terms of your loan) and they trade your painful information (late payments, liens, bankruptcies.) Much of it amounts to hearsay, which can end up bringing you financial hardship.

Under the current credit system, your credit file is stamped with negative and damaging information, whether it is yours or not, before you have the opportunity to defend yourself. Ironically, YOU are expected to prove whether negative or erroneous information on your report is wrong. Remember, the credit bureaus will assume that you are guilty unless you can be proven innocent. This is a direct contrast to the common American principle that one is innocent until proven guilty.

Why do the credit bureaus not offer us this same courtesy?

It doesn't seem fair that we don't have any chance to defend ourselves before negative information is put on our report. The truth is that consumer rights would decrease the credit bureaus profits.

Credit bureaus exist to make a profit and their product is your credit file. Credit bureaus sell your credit information, which their buyer’s (credit card companies, etc…) rarely question. Creditors, in return, give the bureaus whatever data they may have collected about you. Mistakes, however, are frequent. It doesn’t matter if the credit report is right or not, it will be hard and expensive for you to prove that your information is false.

What can you do about it?

Every person living in a democratic nation is entitled to a defense. Consumers have the legal right to retain an attorney to defend themselves against unfair accusations. Instead of you being forced to disprove negative items, the credit bureaus should have to provide information verifying the accuracy of their report. The law and Congress are in agreement. Because of the unfair nature in which your information is collected and distributed, credit repair is both a legal and ethical right of every American.

You will probably need more than just a standard form letter to corroborate your credit worthiness. This is where our preferred attorneys come into the picture. Just as you may choose not to repair your own vehicle, you do not have to repair your own credit either. Using an attorney will strengthen your chances of having negative items removed from your credit report. After all, are you more likely to act if you get a letter from an attorney or a letter from an ordinary person?

Our attorneys question everything. If the credit bureaus issue statements that items have been verified, they are not accepted and our preferred attorneys will continue to press for validation of all negative items.

Credit bureaus have been in the driver’s seat for too long. They continue winning unless you take action, so don't put it off. If you are tired of being in “Credit Prison”, contact me now for solutions.


Larry Benton CMC,CSA is a recognized expert specializing in helping release his clients from the “credit prison” that too many people find themselves in. Larry can be reached at 410.573.0909 or through his website www.themortgagecoach.net
He licensed mortgage broker in the states of MD, DC, VA, DE, PA, GA, TN, FL, CA, & AZ.

Myths The Credit Bureaus Want You To Believe

Myth No. 1 - It is easy to dispute a credit report. Consumers can resolve their own issues.

To be honest, it IS simple to challenge a credit report. However, as an everyday person, it's amazingly difficult and frustrating to get results from the credit bureaus. Here's why.

This is a little-known fact. More complaints to the Federal Trade Commission involve credit bureaus than any other type of company. The major credit bureaus have paid fines of $2.5 million over the years due to failure to respond properly to charges.

The main objective of credit bureaus is to protect their profits. They are NOT government agencies. They are for profit organizations. Anytime they have to investigate a consumer disputes it eats into those profits. Investigations take up time and energy too. The credit bureaus do everything in their power to make restoring your credit exceedingly difficult, short of sparking more massive lawsuits.

Attempting to restore your own credit means you must be willing to spend time learning about the process. This is why it is so difficult when you are inexperienced. It most cases you may be less effective than if you hired a professional. Realize that credit restoration will most likely take longer than you expected.

Myth No. 2- A negative item that is successfully removed from your credit report will simply reappear again.

The reality is that a creditor has 30 days to verify a dispute. If the credit bureau has not heard from the creditor within that timeframe, they must delete the item from your report. Sometimes the bureaus will perform a soft delete. This is where they delete the item from your report but, will reinsert the item if they hear from the creditor within a week or two of the 30 days.

If this happens, the item can be disputed again. However, most of the time, once an item is deleted, it is gone for good. By using our preferred attorneys, you can be sure your item will be disputed over and over again until it is removed. We have experienced a 96% success rate with this.

Myth No. 3- Bankruptcies, foreclosures and tax liens can never be taken off your credit report.

Approached correctly, any negative listing can be removed. That is why it is best to work with a professional. They have the experience and know how to remove these items.

Myth No. 4- The credit agency permits a 100-word paragraph to be entered on an account to explain the situation. Creditor's take this statement into consideration when they're weighing their options about extending credit.

This seems reasonable, but it's not correct. When we talk about creditors, we're talking about companies who are loaning money for credit cards, mortgages, cars, department store credit cards. Very few of these companies will consider any information you submit in a paragraph explanation. The only items verified on the statement are the negative items on your report.

The first thing we want to delete from your credit file would be the 100-word explanation. In essence, the explanation is seen as an admission of guilt. It's actually the last thing you want to do. It verifies that something happened. You don't want to do that.

Myth No. 5- Paying off a past-due account (like a collection account or a charge off) will change your account to a "paid" status and it will no longer reflect negatively.

It is nearly impossible to completely fix your credit unless you settle your unpaid debts. However, as strange as it may sound, paying off a debt can have a negative impact on your credit rating. Aside from bankruptcy, which can appear on your credit report for up to ten years, negative items may be kept on your report for up to seven years. The date of last activity starts the 7 or 10-year time period. Making a payment "resets" the clock because it is considered new activity. So if this item was two years old, when you make a payment on the collection, the two years are wiped away and you start at day one again. It appears to the credit scoring computer as an item that happened yesterday.

Anything that happened yesterday affects your credit score more than something from two years ago does. This will damage your report, as it looks like the credit bureau forced you to pay up. Since you can do more harm than good, even though your intentions are right, it is always best to work with a professional when trying to restore your credit.

Myth No. 6- Some people believe that a poor credit report can be off-set by building new credit.

Even one negative item on your credit report can have serious negative consequences. In today's computer world, the decision to approve a new loan is rarely made by a human being. Your score is determined by a computer program. One negative item can send interest rates soaring.

You can have a small amount of negative credit a year or two ago. The last year or two has been great. A couple of those older accounts, regardless of how much good credit you now have, can cause you to be declined for additional credit, make you pay higher interest rates and waste thousands of your hard earned dollars.

Myth No. 7- Credit bureaus are part of the government and are unquestionable.

The credit bureaus are in business to make an impression on their stockholders since they are publicly traded companies. They are NOT agencies of the government. In fact, the industry is one of the most heavily regulated. It has recently been revealed in a survey, by an independent group, that over 70% of all credit reports have an error on them. Due to the prevalence of mistakes, consumer protection legislation has been drawn up which allows the consumer the right to challenge the bureaus and force them to remove any incorrect data, information that is out-of-date or data that cannot be verified.

Myth No. 8- It is against the law for creditors to remove a negative-listing on my credit record. Negative-listings are required by law to remain on the credit report for at least seven years.

When talking to collection agencies, credit grantors or the credit bureaus, keep in mind that you can expect to be given all kinds of quasi-legal drivel by people who are over worked and under trained. The law states that negative information must be removed after seven years. It sets a maximum, but not a minimum. The credit bureau can remove an item whenever it suits them.

Myth No. 9- Many people share a belief that by getting a federal tax ID or altering a few numbers of their social security number, a new credit file will be created.

It's extremely difficult to create a new credit file by this scheming, not to mention illegal, activity. A lot of people do it, but a lot of people also get into big trouble for doing it. This is not something that you want to do.

It might have worked 10, 15 or 20 years ago. But because of all the computer linking systems now, giving fraudulent information on a credit report is nearly impossible to get away with, let alone the fact that it's a criminal offense.

It's in your best interest to hire adequate representation. Face the music and confront the credit bureaus, armed with the rights that Congress has granted you through the consumer protection laws.

Myth No. 10- Credit counseling services can help you restore your credit.

Credit counseling services are agencies that are set up to help you renegotiate your credit cards and other debt. They put you on a budget and you make one payment to them. They in turn pay all the bills for you.

People who are in debt or who are trying to avoid going bankrupt can seek help from these nonprofit consumer credit counseling services. (CCCSâ€^TMs) However, these companies are controlled and funded by the credit bureaus and the credit grantors, like the big credit card companies. They actually fund these agencies.

Your creditors will usually make a note on your credit report if you're working with one of these consumer credit counseling services. Potential credit grantors are scared off by this almost as much as a Chapter 13 bankruptcy. Some of the worst credit reports out there have been participants in a credit counseling service or similar program.

Larry Benton CMC, CSA with 1^st Metropolitan Mortgage, specializes in helping release his clients from the credit prison that too many people find themselves in. When you or one of your friends finds yourself needing real answers and real solutions to credit issues, you can confidentially contact him at 410.573.0909 or larry@theMortgageCoach.net

Partial Tax Credit Formula-Exceed the Income Limits & Still Get a Tax Credit

There is a little-known provision in the American Recovery & Reinvestment Act of 2009 that authorizes a PARTIAL TAX CREDIT if a first-time home buyers income EXCEEDS the adjusted gross income (AGI) limit of $75,000 for a single person and $150,000 for a married couple.

Two important things you need to know:

1. “Income” is defined as the Adjusted Gross Income “line” on 1040, 1040A and 1040EZ. Yes, it actually says those words within the line item.

2. The “Partial Tax Credit Income Cap” is $20,000 — and by the way, that’s the dollar basis for the formula we’re about to share with you.

Example: Married Couple’s AGI is $159,000

Subtract Maximum AGI $150,000 For Married Couple = $9,000

Divide $9,000 by $20,000 = .45

Subtract .45 from 1.00 = .55

Multiply .55 x $8000 (max credit) = $4,400

Yes, $4,400 is the tax credit this couple can get–even when their income exceed the so-called maximum income amount. Even at $19,000 over the AGI, this couple could still get a $400 tax credit! Use the exact formula for a single home buyer!

Be sure to check with a tax advisor but as a first-time home buyer, this is awesome incentive to buy a home by December 1, 2009.

FAQ’s About the 2009 Home Buyer Tax Credit

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009. The following questions and answers provide basic information about the tax credit. If you have more specific questions, I strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1) Who is eligible to claim the tax credit?

First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.

2) What is the definition of a first-time home buyer?

The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit.

However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter.

Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

3) How is the amount of the tax credit determined?

The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

4) Are there any income limits for claiming the tax credit?

The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

5) What is “modified adjusted gross income”?

Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted.

On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains. To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

6) If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?

Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.

7) Can you give me an example of how the partial tax credit is determined?

Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

8) How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?

The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous “credit” was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.

9) How do I claim the tax credit?

Do I need to complete a form or application? Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.

10) What types of homes will qualify for the tax credit?

Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

11) I read that the tax credit is “refundable.” What does that mean?

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit. For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

12) I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?

Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.

13) Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?

Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009. In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

14) Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?

Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.

15) I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?

No. You can claim only one.

16) I am not a U.S. citizen. Can I claim the tax credit?

Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.

17) Is a tax credit the same as a tax deduction?

No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS. A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.

18) I bought a home in 2008. Do I qualify for this credit?

No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit.

19) Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?

Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment. Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding.

Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.

20) If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?

Yes. The law allows taxpayers to choose (”elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

21) For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

New rules make HECM Reverse Mortgages a better deal?

Retirees concerned about their decimated savings should take a second look at reverse mortgages.Beginning February 21, 2009, homeowners everywhere may tap into their home equity up to $625,000. Previously, the Home Equity Conversion Mortgage program assigned various lending limits, ranging from $200,160 in rural areas to $362,790 in the most expensive housing markets, and then $417,000 beginning October 31, 2008. This new February HUD Mortgagee Letter, revises upwards the maximum amount to $625,000 nationwide. Existing reverse-mortgage borrowers may be able to refinance their loans to take advantage of the higher lending limit. Plus, the new rules cap the origination fee, previously set at 2% of the loan value, at $6,000. And, in a major policy change, retirees will be able to use a reverse mortgage to buy a new home starting in 2009. "This provision could really transform the industry", says Peter Bell, President of the National Reverse Mortgage Lenders Association in Washington, DC. How it works With a reverse mortgage, homeowners 62 or older can tap the equity in their home in the form of a lump sum, line of credit, monthly payout or a combination of all three. You retain the title to your property and must continue to pay property taxes, insurance premiums and home-maintenance costs. Payouts are tax-free, but the income you receive may make you ineligible for certain state and federal benefits, including Medicaid, which is a major payer of nursing-home costs. A reverse mortgage need not be repaid until the last homeowner moves out or dies, at which point the home may be sold to pay off the debt. Interest and fees accrue over the lifetime of the loan and could wipe out any remaining equity. But the loan-repayment amount may never exceed the market value of the home; even if home prices decline, your heirs cannot be held responsible for any shortfall. Retirement-income solution John and Phyllis Farrelly decided to take out a reverse mortgage to tap the equity in their paid-off home near Richmond, valued at about $300,000. They’re using the money to finance about $60,000 worth of needed improvements and to boost their monthly retirement income. ”We can do some extra things now, such as travel,” says John, 75, who enjoys working in his home sculpture studio and cruising in his ’82 T-top Corvette. We discussed it with our children and they said, "It\s your money — enjoy it,” says Phyllis, 72. As baby-boomers move into their retirement years with fewer pensions, inadequate savings and increasing health-care costs, reverse mortgages are well positioned to serve as a financial solution, says Brian Montgomery, commissioner of the Federal Housing Administration. Bell agrees. ”We expect the growth of reverse mortgages to accelerate as seniors look for additional sources of income,” he says, ”and because the new provisions of the Homeownership Act of 2008 broaden the market and make them more attractive.” To estimate the potential payouts and costs of a reverse mortgage — which can be substantial — and compare actual offers from several lenders, use the Reverse Mortgage Cash Calculator at AARP (www.rmaarp.com) Buying a new home Although the Department of Housing and Urban Development hasn’t officially announced the change, new rules allowing a reverse mortgage to be used to buy a home are expected to take effect January 1, 2009. Like traditional reverse mortgages, the maximum loan amount will be based on a combination of the value of the home, the homeowner’s age and prevailing interest rates. Say an elderly couple lives in an old, two-story house. The house needs repairs, and they\’re having a hard time negotiating the stairs. Instead of having to stay in a house that no longer meets their needs, they could sell the old house and use a reverse mortgage plus cash to buy a new, single-story home. Here’s how it works. Assume the couple’s current home is worth $700,000, and they want to downsize to one that costs $500,000. If they pay cash, which many seniors choose to do, they’ll have $200,000 left to live on. But if they use a reverse mortgage to cover some of the purchase price — say, $200,000 — and pay the $300,000 balance with proceeds from the sale of their old home, they’ll double their cash reserve to $400,000 without ever having to worry about repaying the reverse mortgage while they live in the house. Beware of scams But reverse mortgages also have a dark side. In recent years, some unscrupulous lenders have pressured elderly borrowers into using their new found cash to buy annuities and other financial products that imposed high fees and limited access to their money. The new rules prohibit lenders from requiring reverse-mortgage borrowers to purchase additional products or services as part of the loan agreement. In a recent investor alert, the Financial Industry Regulatory Authority, or FINRA, warned seniors to consider all of their options carefully before committing to a reverse mortgage. \”Home equity is often a homeowner\’s most valuable asset and most precious source of retirement security,\” the FINRA alert states. \”Consider all the risks and explore all of your options before taking out a reverse mortgage, and even then, use the loan funds wisely.\”

Protecting Your Credit During Divorce

When a marriage ends in divorce, the lives of those involved are changed forever. During this time of upheaval, one thing that shouldn’t have to change is the credit status you’ve worked so hard to achieve.

Unfortunately, for many, the experience is the exact opposite. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication frequently lead to the annihilation of at least one spouse’s credit. Depending upon how finances are structured, it can sometimes have a negative impact on both parties.

The good news is it doesn’t have to be this way. By taking a proactive approach and creating a specific plan to maintain one’s credit status, anyone can ensure that “starting over” doesn’t have to mean rebuilding credit.

The first step for anyone going through a divorce is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian®, and TransUnion®. It’s impossible to formulate a plan without having a complete understanding of the situation. (Once a year, you may obtain a free credit report by visiting www.AnnualCreditReport.com.)

Once you’ve gathered the facts, you can begin to address what’s most important. Create a spreadsheet, and list all of the accounts that are currently open. For each entry, fill in columns with the following information: creditor name, contact number, the account number, type of account (e.g. credit card, car loan, etc.), account status (e.g. current, past due), account balance, minimum monthly payment amount, and who is vested in the account (joint/individual/authorized signer).

Now that you have this information at your fingertips, it’s time to make a plan.

There are two types of credit accounts, and each is handled differently during a divorce. The first type is a secured account, meaning it’s attached to an asset. The most common secured
accounts are car loans and home mortgages. The second type is an unsecured account. These accounts are typically credit cards and charge cards, and they have no assets attached.

When it comes to a secured account, your best option is to sell the asset. This way the loan is paid off and your name is no longer attached. The next best option is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can assume payments on their own. Your last option is to keep your name on the loan. This is the most risky option because if you’re not the one making the payment, your credit is truly vulnerable. If you decide to keep your name on the loan, make sure your name is also kept on the title. The worst case scenario is being stuck paying for something that you do not legally own.

In the case of a mortgage, enlisting the aid of a qualified mortgage professional is extremely important. This individual will review your existing home loan along with the equity you’ve built up and help you to determine the best course of action.

When it comes to unsecured accounts, you will need to act quickly. It’s important to know which spouse (if not both) is vested. If you are merely a signer on the account, have your name removed immediately. If you are the vested party and your spouse is a signer, have their name removed. Any joint accounts (both parties vested) that do not carry a balance should be closed immediately.

If there are jointly vested accounts which carry a balance, your best option is to have them frozen. This will ensure that no future charges can be made to the accounts. When an account is frozen, however, it is frozen for both parties. If you do not have any credit cards in your name, it is recommended you obtain one before freezing all of your jointly vested accounts. By having a card in your own name, you now have the option of transferring any joint balances into your account, guaranteeing they’ll get paid.

Ensuring payment on a debt which carries your name is paramount when it comes to preserving credit. Keep in mind that one 30-day late payment can drop your credit score as much as 75 points. It is also important to know that a divorce decree does not override any agreement you have with a creditor. So, regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties. The message here is to not only eliminate all joint accounts, but to do it quickly.

Divorce is difficult for everyone involved. By taking these steps, you can ensure that your credit remains intact.

Larry Benton Is a Certified Mortgage Consultant (CMC), a Certified Senior Advisor (CSA) and affiliated with 1^st Metropolitan Mortgage, a Licensed Broker in MD, DC, VA, DE, PA, TN, GA, AZ. & CA. If you would like to obtain a free Consumer Credit Scoring Booklet or learn more about how to protect your credit, please contact Larry at (877) 805-2905 or visit on the web at www.theMortgageCoach.net