I just bought my house and Homeowner mortgage write-off may be in jeopardy

Decisions in coming weeks by the 12-member bipartisan congressional committee tasked with reducing the federal deficit could affect mortgage interest deductions.

If you take mortgage interest tax deductions, the next 100 days could have significant financial implications for you because of Congress' new federal debt ceiling plan.

Although the compromise legislation itself involved no new taxes, it created an unusual mechanism — an evenly split, 12-member bipartisan super-committee that could call for major cutbacks on real estate write-offs by Thanksgiving.

All it will take is a single vote by a lone senator or House member who breaks with his or her party to put the mortgage interest deduction into serious play.

Here is what's about to unfold and how it could affect you: The legislation signed by the president Aug. 2 calls for a two-step increase in the federal debt ceiling plus spending cuts of about $917 billion. It also created the Joint Select Committee on Deficit Reduction with the goal of slashing an additional $1.5 trillion from the deficit during the coming decade.

The committee is required to vote on a plan to achieve these objectives by Nov. 23, using revenue increases, spending cuts or a combination. If the committee members cannot agree on a plan or if either chamber of Congress votes it down, automatic and severe spending cuts of $1.5 trillion will be imposed equally on the Department of Defense and domestic programs including Medicare provider payments.

Membership consists of six Republicans and six Democrats — three each from the Senate and House — chosen by party leaders. To approve a final package of deficit cuts and extend the debt ceiling, all that will be needed is a simple majority — seven votes.

House and Senate leaders selected their six members last week: Democratic Sens. Patty Murray of Washington, Max Baucus of Montana and John F. Kerry of Massachusetts; Democratic Reps. James E. Clyburn of South Carolina, Xavier Becerra of California and Chris Van Hollen of Maryland; Republican Sens. John Kyl of Arizona, Pat J. Toomey of Pennsylvania and Rob Portman of Ohio; and Republican Reps. Jeb Hensarling of Texas, Dave Camp of Michigan and Fred Upton, also of Michigan.

The selections appear to include members who have taken stances in the past that are consistent with party positions — Democrats typically favor revenue increases to help close the deficit, whereas Republicans generally want to slash spending without raising taxes. But there is a real possibility that one or more members on either side could be concerned enough about the prospect of painful automatic military or social-program spending cuts that they would go with their conscience and break party ranks.

That compromise might well involve new revenue — one of the lowest-hanging sources of which is the mortgage interest deduction. Lobbying groups who seek to preserve housing write-offs already are gearing up for battle on Capitol Hill.

The National Assn. of Realtors sent an urgent alert to its 1.1 million members asking them to directly "engage their members of Congress on the importance of preserving real estate tax provisions" during the coming several weeks. Officials acknowledge that the super-committee's structure — with its guaranteed punishments for failure aimed squarely at Republicans (military spending) and Democrats (social programs) — makes it more difficult than usual to influence the final outcome.

After decades of being considered politically sacrosanct, why are homeowner mortgage write-offs suddenly on the chopping block? No. 1 is sheer size. The congressional Joint Committee on Taxation estimates that the home mortgage interest deduction will cost the federal government $100 billion during fiscal 2011 and $107.3 billion in fiscal 2012. Between 2008 and 2012, the cumulative write-offs for mortgage interest are projected to total just under half a trillion dollars.

Among the options open to the super-committee: Lower the maximum mortgage amount eligible for interest deductions to $500,000 from the current $1.1 million; replace the deduction with a tax credit that would be usable by lower- and moderate-income owners as well as those with higher incomes; eliminate interest deductions on second homes; and phase out the deductibility of homeowner property tax payments.

Defenders of the write-offs argue that high levels of homeownership are essential to economic growth and social stability, and fully justify the tax system preferences they receive. National opinion polls regularly find widespread support for the write-offs, even among renters. Also, academic and trade group studies project that any abrupt, across-the-board reduction in the deductibility of mortgage interest would have a severe effect on home values, possibly sending them plummeting as much as 15%.

Critics, on the other hand, consider the write-offs inherently unfair: They're skewed to benefit upper-income owners disproportionately, and are highly concentrated geographically along the West Coast, the Northeastern states and mid-Atlantic.

Where's this debate ultimately headed? It's much too early to predict. But any way you look at it, real estate write-offs could be in greater political jeopardy in the next three months than they have been at any time in the last 25 years.

If you own a home, and this plan is successful, the current Administration is attempting to partially fund their monetary decisions with your tax writeoffs, whether you agree or not; AND if you don't own a home, it will be exponentially more difficult for you to realize the American dream.

This decision could create an even wider gap between the rich and the rest. Now's the time, even if you've never done this before to write your Senator and Congressman to let them know your opinion... and as always -

Keep the faith!

reproduced from a Kenneth R. Harney article - Reporting From Washington—

HUD ruling brings new hope and higher 'Cash for Keys' to BofA borrowers

The Department of Housing and Urban Development has reached a settlement with Bank of America that releases the company from liability for failing to adequately provide alternatives to foreclosure on 57,000 delinquent government-insured mortgages.
The agreement, a draft of which was obtained by American Banker, was previously undisclosed. It has been forged on a separate but parallel track from continuing settlement talks between Bank of America, state attorneys general and other regulators over alleged mortgage origination and servicing failures.
B of A's pact with HUD requires it to waive a minimum of $10 million in unpaid mortgage payments and vet each of the 57,000 delinquent borrowers for a possible loan modification, short sale or other foreclosure alternative.
"Our total costs for the program will be multiples of that" $10 million minimum, B of A spokesman Dan Frahm said. The deal calls for measures to "ensure these customers have every opportunity to stay in their homes," he added.
After such outreach, the settlement paves the way for B of A to foreclose on homes that borrowers could not afford even after a mortgage modification and those that have been left vacant by owners.
In forging the agreement, HUD decided to forgo steep monetary damages or admissions of error from the bank.
Instead, it pushed for the lender to implement steps that in most cases it was supposed to have already taken under the terms of its FHA-guaranteed loans, with the apparent aim of minimizing foreclosures and related insurance claims.
"We took the borrowers into account first," said HUD general counsel Helen Kanovsky. "We think that that's really the best thing for the FHA [insurance] fund as well."
The agreement is HUD's first involving settlement of claims in which a servicer failed to offer loss mitigation to borrowers. It does not, however, prevent HUD from seeking damages from B of A for unrelated origination and servicing failures.
"We fought for as narrow a [legal] release as possible and as much money as possible," Kanovsky said.
Under HUD's standard terms, borrowers must be less than 12 months delinquent to qualify for loan modifications. With the B of A settlement, the minimum of $10 million the bank agreed to pay will go to covering past-due arrearages and giving borrowers who are more than a year behind the possibility of qualifying for foreclosure alternatives.
The agreement was signed July 11 by B of A senior vice president Robert Gaither, who directed queries to a company spokesman.
All of the 57,000 borrowers covered by the agreement are 12 to 24 months delinquent. They account for only 4% of the total 1.5 million FHA loans that B of A services but a substantial portion of the company's seriously delinquent loans. B of A holds $19.8 billion in FHA-insured loans that are 90 days or more delinquent, and another $3.1 billion in FHA loans 31 to 89 days delinquent, the bank said in its second-quarter earnings release.
Under its terms with HUD, B of A will have to pay an independent monitor to review its modification work and report to HUD. It is also obligated to seek borrowers through database searches, letters, phone queries and visits to properties. Borrowers who fail to qualify for loan modifications, will receive from B of A $4,000 for a short sale and $7,500 for a deed-in-lieu of foreclosure.
The deal reflects the high levels of financial uncertainty surrounding such negotiations. In May, B of A agreed to pay $20 million, or double the minimum for the latest settlement, for improperly foreclosing on a relatively few 160 homes of military service members.
The settlement is "not a lot of money for the potential losses that the federal government may have to make good on," said Diane Thompson, an attorney for the National Consumer Law Center.
The minimum $10 million payment of borrowers' arrearages is unlikely to defray the FHA's losses on foreclosures, she said.
But if Bank of America is "able to identify the loans, and if people are still in the homes, and if they waive payments over past 12 months, then that's more valuable than a big fine for Bank of America," Thompson said. "But there are a lot of ifs there."
The largest banks hold billions of dollars of delinquent FHA loans on their balance sheets for which they have not yet filed claims. This may be because of concerns that they may have violated stringent HUD servicer requirements and could be held liable for treble damages related to false claims. One sticking point in settling such claims is that the FHA requires all servicers to have employees conduct face-to-face interviews with FHA borrowers once they become 60 days delinquent, a procedure most servicers either did not undertake or cannot document.
As part of the deal HUD has also agreed to pay any mortgage insurance claims and waive any pending administrative actions against B of A, its officers, directors or employees "in connection with servicing or loss mitigation deficiencies." The only exclusion is for allegations involving improper transfers of titles.
B of A also has agreed not to claim expenses on any FHA insurance claims for taxes, liens or property preservation incurred from November 2010 through July 2011.

BofA offers to lower the balance of distressed mortgages ... if you qualify

If you're a cash-strapped homeowner in California with a mortgage serviced by Bank of America, you may have a chance at getting your principal lowered through a state program that helps people stay in their homes.

The California Housing Finance Agency said earlier this week that Bank of America is now part of Keep Your Home California’s principal-reduction program, making it the largest loan servicer involved in lowering loan balances for those with economic hardships.

A servicer is a company homeowners make their mortgage payments to every month. Bank of America serves more than two million home loans in the state, agency officials said.

Other servicers involved are the California Department of Veterans Affairs, the California Housing Finance Agency, Community Trust/Self Help, GMAC, Guild Mortgage Company and Vericrest Financial.

Agency officials hope that list continues to grow.

"We believe principal reduction can be an appropriate tool for helping qualified homeowners obtain an affordable and sustainable modification," said Claudia Cappio, California Housing Finance Agency's executive director, in a statement.

Keep Your Home California’s principal-reduction program is one slice of a $2 billion effort to help struggling homeowners avoid foreclosure.

Qualified homeowners could be eligible for up to $50,000 in assistance from the Keep Your Home California program, which requires the mortgage investor to match dollar-for-dollar the amount provided by the program.

For instance, if the program agrees to reduce the principal by $50,000, then the mortgage investor must match that $50,000 reduction, resulting in a total $100,000 reduction.

Bank of America borrowers who don't qualify for the principal-reduction program will be evaluated by bank representatives to explore other options, including a loan modification.

Keep Your Home California is funded by the U.S. Treasury Department.

If you have questions, call 888.954.KEEP (5337) or visit KeepYourHomeCalifornia.org.