HARP
HARP 2.0
Home Affordable Refinance Program 2.0 is intended to help homeowner's who are current on their mortgage payments and qualify under the income and credit guidelines, but are considered "underwater" because the value of their home may have declined significantly and are unable to refinance due to loan program restrictions. This program is not intended to help homeowners who cannot afford their current home.
These homeowners bought their homes several years ago borrowing at an interest rate in the 6% range, put 20% down and now want to refinance at the current rates of 4% or below. Unfortunately, they are not able to do so because the values in their neighborhood declined to the extent that their equity is gone and despite the large down payment, their loan is over 100% to value.
What prevented the success of the original HARP program?
1 Under the original program, the homeowner could not refinance their loan if they owed more than 125% of what their homes were worth
1 Second mortgage lenders were reluctant to agree to resubordinate behind a new mortgage
1 Private mortgage insurers were reluctant to transfer the insurance policy to the new mortgage
1 Fannie Mae/Freddie Mac added price adjustments that eroded the benefits of refinancing
1 Lenders still had a high liability on the higher LTV's
HARP 2.0 actually encourages homeowners to go into a shorter term loan such as a 15 or 20 year vs. the traditional 30 year, which helps them build their equity faster and pay off the loan faster. This minimizes the reluctance of the subordination of the second mortgage lenders and that of the private mortgage insurers. The Fannie Mae/Freddie Mac price adjustments are eliminated; the lenders are no longer liable for following the rules of the program as designed and the LTV cap of 125% is no longer applicable.
Who is eligible?
1 The mortgage must have been sold to FannieMae/Freddie Mac before June 1, 2009
1 They must be current on the mortgage and have no late payments in the last 6 months. A late payment is defined as one that’s more than 30 days overdue
1 Must not have had more than one late payment in the past 12 months
1 This must be the 1st refinance through the HARP program
This program is a WIN for thousands of underwater homeowners who now have the opportunity to lower their monthly mortgage payments.
For more information about programs, current interest rates, and how to attract more qualified buyers or sell more homes, call your Sovereign Mortgage Development Officer, Tiffany Liebsch at 603-502-1080.
A Beautiful Back Yard
A Beautiful Back Yard
Tuesday, July 17, 2012
Is There a 3.8% House Seller Tax in the Health Care Bill?
This article answers many questions about the tax implications of selling your home... The answers may not be what you expect.
Is There a 3.8% House Seller Tax in the Health Care Bill?
Is There a 3.8% House Seller Tax in the Health Care Bill?
by The KCM Crew on July 17, 2012 · 0 comments
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The political rhetoric surrounding the presidential election has renewed the debate about the Administration’s Health Care Bill. We are again getting many questions about a possible 3.8% tax on home sales that some claim is in the bill. To answer these questions, we have decided to re-run a blog we posted earlier this year. – The KCM Crew
We have received many questions about a possible 3.8% tax which will be put on home sales beginning in 2013. We want to do our best to clarify this situation for everyone. We are not accountants and give you this information just as a simple answer to the misconception. Understand that, when it comes to IRS regulations, you should check with your accountant for the most accurate and up-to-date information.
A little history on the confusion
Fact Check.org explains it this way:
The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.
We can understand how this misconception got started. The law itself is couched in highly technical language that only a qualified tax expert can fully grasp. (This provision begins on page 33 of the reconciliation bill that was passed and signed into law.) And it does say the tax falls on “net gain … attributable to the disposition of property.” That would include the sale of a home. But the bill also says the tax falls only on that portion of any gain that is “taken into account in computing taxable income” under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence (or $500,000 in the case of a married couple) is excluded from taxable income already. (That exclusion doesn’t apply to vacation homes or rental properties.)
The Joint Committee on Taxation, the group of nonpartisan tax experts that Congress relies on to analyze tax proposals, underscores this in a footnote on page 135 of its report on the bill. The note states: “Gross income does not include … excluded gain from the sale of a principal residence.”
And just to be sure, we checked with William Ahern, director of policy and communications for the nonprofit, pro-business Tax Foundation. “Some home sales would see a tax increase under this bill,” Ahern told us, “but it would have to be a second home or a principal residence generating [a gain of] more than $250,000 ($500,000 for a couple).”
Simple Explanation:
The following simple explanation comes from midiShaw:
The tax will affect those sellers of real property who will be otherwise taxed on capital gains under current tax laws. Under current laws, if you sell your primary residence and meet the ‘time ‘ criteria, you are exempt up to $250,000 or $500,000 (filing individually or jointly). Any amount realized OVER that amount is taxable under current tax schedules based on income. As such, this new tax will apparently be added to the current capital gains tax burden IF your income is over $200,000/$250,000 (filing individually or jointly). For those selling second homes and investment properties, the tax, once again, will be applied to the amount of gain realized.
Detailed Explanation:
The following also comes from midiShaw in a comment to the above answer.
Beginning in 2013, the national health care reform legislation that became law in March, 2010, imposes a new 3.8 percent tax on certain investment income. The new tax will apply to single filers with incomes over $200,000 and married taxpayers with incomes over $250,000. Under the law, the investment tax provisions in Chapter 2A of the Internal Revenue Code are placed under the heading “Unearned Income Medicare Contribution.” In general, this new Medicare tax will apply to investment income that is subject to income tax, which includes capital gains. Pursuant to IRC Section 1402 (C)(1)(A)(iii), the investment income to which this new tax applies includes “net gain” (to the extent taken into account in computing taxable income) attributed to the disposition of property that qualifies as a capital asset under Section 1221 (capital gains), as well as gains on other property that are considered part of ordinary income.
We offer this just as an explanation. Remember, when it comes to IRS regulations, you should check with your accountant for the most accurate and up-to-date information.
Is There a 3.8% House Seller Tax in the Health Care Bill?
Is There a 3.8% House Seller Tax in the Health Care Bill?
by The KCM Crew on July 17, 2012 · 0 comments
Comment
31
inShare
The political rhetoric surrounding the presidential election has renewed the debate about the Administration’s Health Care Bill. We are again getting many questions about a possible 3.8% tax on home sales that some claim is in the bill. To answer these questions, we have decided to re-run a blog we posted earlier this year. – The KCM Crew
We have received many questions about a possible 3.8% tax which will be put on home sales beginning in 2013. We want to do our best to clarify this situation for everyone. We are not accountants and give you this information just as a simple answer to the misconception. Understand that, when it comes to IRS regulations, you should check with your accountant for the most accurate and up-to-date information.
A little history on the confusion
Fact Check.org explains it this way:
The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.
We can understand how this misconception got started. The law itself is couched in highly technical language that only a qualified tax expert can fully grasp. (This provision begins on page 33 of the reconciliation bill that was passed and signed into law.) And it does say the tax falls on “net gain … attributable to the disposition of property.” That would include the sale of a home. But the bill also says the tax falls only on that portion of any gain that is “taken into account in computing taxable income” under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence (or $500,000 in the case of a married couple) is excluded from taxable income already. (That exclusion doesn’t apply to vacation homes or rental properties.)
The Joint Committee on Taxation, the group of nonpartisan tax experts that Congress relies on to analyze tax proposals, underscores this in a footnote on page 135 of its report on the bill. The note states: “Gross income does not include … excluded gain from the sale of a principal residence.”
And just to be sure, we checked with William Ahern, director of policy and communications for the nonprofit, pro-business Tax Foundation. “Some home sales would see a tax increase under this bill,” Ahern told us, “but it would have to be a second home or a principal residence generating [a gain of] more than $250,000 ($500,000 for a couple).”
Simple Explanation:
The following simple explanation comes from midiShaw:
The tax will affect those sellers of real property who will be otherwise taxed on capital gains under current tax laws. Under current laws, if you sell your primary residence and meet the ‘time ‘ criteria, you are exempt up to $250,000 or $500,000 (filing individually or jointly). Any amount realized OVER that amount is taxable under current tax schedules based on income. As such, this new tax will apparently be added to the current capital gains tax burden IF your income is over $200,000/$250,000 (filing individually or jointly). For those selling second homes and investment properties, the tax, once again, will be applied to the amount of gain realized.
Detailed Explanation:
The following also comes from midiShaw in a comment to the above answer.
Beginning in 2013, the national health care reform legislation that became law in March, 2010, imposes a new 3.8 percent tax on certain investment income. The new tax will apply to single filers with incomes over $200,000 and married taxpayers with incomes over $250,000. Under the law, the investment tax provisions in Chapter 2A of the Internal Revenue Code are placed under the heading “Unearned Income Medicare Contribution.” In general, this new Medicare tax will apply to investment income that is subject to income tax, which includes capital gains. Pursuant to IRC Section 1402 (C)(1)(A)(iii), the investment income to which this new tax applies includes “net gain” (to the extent taken into account in computing taxable income) attributed to the disposition of property that qualifies as a capital asset under Section 1221 (capital gains), as well as gains on other property that are considered part of ordinary income.
We offer this just as an explanation. Remember, when it comes to IRS regulations, you should check with your accountant for the most accurate and up-to-date information.
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