Mortgage Rate News

One of the big issues right now revolves around foreclosures, and efforts to stop foreclosures. Various programs, from Hope Now and Project Lifeline to the recently passed housing relief bill are designed to help stall the flood of foreclosures and get distressed homeowners out of trouble. (Whether or not they are working is a completely different discussion.)

Part of the efforts to help homeowners include some mortgage lenders offering some measure of canceled debt through partial loan forgiveness or some other means. And, unfortunately, that sort of canceled debt is considered by tax laws to be income. The good news, reports Chris Bibey at the Tax Center, is the following:

If you find yourself in this position, you should be aware of the options for excluding this “extra income” from your tax return. There are three exclusions: one for bankruptcy, one for a case of insolvency, and one for mortgage debt. The mortgage exclusion is most commonly used, and for this reason should be understood by anybody in this position.

A few months ago, Congress passed a tax relief bill aimed at helping homeowners who found themselves in a position where canceled debt may be a reality. The bill prevents these folks from finding themselves in even more trouble as they struggle to pay income tax on money that they never actually got to use as income.

Something to consider, though: The provision expires in 2009. Also, there are some restrictions as to the type of canceled debt that applies. Consumer debt (including cash home equity loans) is not included in the tax relief bill. It is a good idea to consult a knowledgeable tax attorney or accountant so that you know exactly whether or not you qualify.

Tags: home equity loans, home equity, home mortgage loan, mortgage lenders,
tax relief, mortgage forgiveness, tax laws

A lot has been said about subprime lending and the crash that resulted from shoddy lending practices to those with poor credit. But what about the next expected wave of mortgage loan defaults? The next mortgage market crash is expected to come thanks to Alt-A loans — loans that were made to people with good credit.

The New York Times offers some insight into how the next mortgage market crash may come about:

Defaults are likely to accelerate because many homeowners’ monthly payments are rising rapidly. The higher bills come as home prices continue to decline and banks tighten their lending standards, making it harder for people to refinance loans or sell their homes. Of particular concern are “alt-A” loans, many of which were made to people with good credit scores without proof of their income or assets.

“Subprime was the tip of the iceberg,” said Thomas H. Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. “Prime will be far bigger in its impact.”

Indeed, it does appear that the confluence of economic slowdown and falling home values is likely to cause a real problem. As real wages fall, and prices rise due to inflation, more pressure is being put on household budgets. Add climbing unemployment numbers to the mix, and things could get ugly for those who could formerly afford their home mortgage loans. Where does the mortgage payment fit? After you pay the transportation costs to get you to your job? After you have bought food for your family? Or do you make sure your mortgage is paid and cut back everywhere else?

And, without the ability to refinance…well, you can see where things are headed on that front.

So, even though we appear to be recovering from the subprime lending crash, it may come just in time to feel the effects of the next mortgage market crash.

Tags: subprime lending crash, mortgage market crash, home mortgage loans, Alt-A loans,
unemployment numbers, refinance

One of the reasons that we have such a severe mortgage market crisis is the high incidence of mortgage fraud. While it is true that some homeowners made very poor decisions (and should have known better), there are also plenty of other homeowners who were hoodwinked and swindled and didn’t have access to reliable and accurate information. It is time for financial literacy to become an important part of education in this country. Too many citizens are overwhelmed by slick presentations and monetary calculations and decisions. Too many people are left at the mercy of those who know how to game the system.

CNN Money reports on some of disturbing mortgage fraud schemes seen over the past few years:

Mortgage schemes come in many flavors, but the most common by far are conducted by industry insiders. Some 80% of all fraud losses involve collaboration or collusion by professionals, which is known as “fraud for profit,” according to the FBI.

Often the schemes involve inflated appraisals, falsified documents and fake buyers. The crooks take as much equity as they can out of a house before they stop making mortgage payments, usually leaving the lender stuck with the property.

In order to bring the perpetrators to justice — and to send warnings to those considering such a path in the future — the FBI’s Mortgage Task Force is working hard on the local, state and federal level to find those who are responsible for defrauding their fellow citizens.

This is encouraging right now, but what happens when things calm down a bit? Will the FBI remain vigilant? Also, are there better regulations in place to prevent such things from happening again? Some of the laws, rules and regulations passed in recent requiring stricter lending standards and greater accountability. The mortgage industry has proved that it can’t police itself; it obviously needs someone else to do the policing.

Tags: mortgage fraud, FBI mortgage fraud, home mortgage loan, mortgage loan blog,
financial literacy, mortgage market crisis