Greg Wang's Real Estate Blog

As the U.S. government looks under every rock for more spending cuts, here’s an intriguing thought: What happens if Washington takes this opportunity to take down the tax break on mortgage interest?

 “We believe there is a growing risk that the mortgage interest deduction could fall victim to the deficit reduction mantra,” MF Global said in a research note.

We know fiscal asceticism is the new black, but Congress doesn’t have the guts to take on the popular mortgage tax break, which defenders say makes the cost of homes within reach for Americans. The real-estate and mortgage industries also would fight tooth or nail if the deduction moves to the chopping block.

“At this point, we view this more as a headline risk than a real threat,” MF Global said in its note. “Yet curtailing the mortgage interest deduction has been part of President Obama’s budget proposal and it was one of the bi-partisan deficit reduction commission’s recommendations. So we cannot rule out these threats.”

True, everyone from the International Monetary Fund to the Tax Policy Center to the White House fiscal commission have called for the U.S. to cap, redesign or simply get rid of the deduction. The IMF called the mortgage tax break  “expensive and regressive.” But this comes up every few years or so, before everyone realizes it’s impossible to hack away at a cherished part of the tax code.

Critics of the mortgage tax break says the country simply can’t afford to turn down billions of dollars a year for federal and state coffers. The mortgage deduction also may push people to take on risky mortgage they can’t afford, say critics, and isn’t equitable because the deduction applies to taxpayers who itemize their deductions – and benefits higher-income households more.

The National Association of Realtors (NAR) has shown increasing alarm over the possibility of eliminating the deduction over the past months. Last year, the NAR declared eliminating the deduction would decrease home values by as much as 15 percent. The NAR also asked its 1.1 million members to contact their senators and congressmen and voice their concerns over the potential of eliminating or altering the deduction.

As a Homeowner and a Member of the NAR I sent the following letter to my congressmen asking for his support to urge Congress to preserve, protect and defend the mortgage interest deduction before they whittle it down at the expense of other more expedient budget cuts.

Consider the consequences if homeowners and buyers lose the time-honored and cherished mortgage interest deduction. This tax deduction built the dream of homeownership in America. The bottom line is you may well lose personally, and for certain so will your business if it is eliminated or significantly reduced in any way.

We must speak loudly and clearly with one voice to ensure the further recovery of our economy and the housing market and educate every legislator about how much the mortgage interest deduction matters to us.  Therefore, I urge everyone to take action to Preserve, Protect and Defend the mortgage interest deduction.  No economic recovery is possible without a vibrant housing market.

Please Take Action Today!

Immediate changes coming to the foreclosure industry. Lenders being held accountable for improper foreclosure process. ALL foreclosures starting in 2009 to be examined for infractions and owners given compensation….and/ or their homes are to be GIVEN BACK TO THEM.

NOTE: the AG Robo-Signers settlement will be in addition to this…so, more changes coming to the foreclosure process.

The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision released enforcement action against 14 major bank/servicers in the form of consent orders.

Bank of America , JP Morgan Chase , Ally Financial, Wells Fargo, SunTrust, Citibank, HSBC, MetLife, PNC, U.S. Bank, Aurora Bank,   EverBank, OneWest Bank and Sovereign Bank will all be hit with no fewer than 16 new requirements for mortgage servicing and loss mitigation.

These 16 new requirements are more or less what the requirements were always thought to be…. forcing the servicers to improve on foreclosure documentation, oversight, and chain of ownership. Additionally, lenders are required independent reviews and a single point of contact for borrowers facing foreclosure. The action prohibits dual tracking, when one arm of the bank pursues foreclosure while another pursues modification.

Another detail, servicers (banks) will also be held accountable of their third-party vendors, including lawyers, who provide foreclosure services. No more…”that was an outside company we hired…we had no idea they were doing X”. Banks must comply within 120 days of the order. Most of the big banks have already implemented many of these ‘new’ requirements. The second we get an official copy of these 16 new requirements we will publish them.

And now the really interesting news….

Penalties are coming… “The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties.”

And…. The OCC also says the enforcement actions, “do not preclude determinations regarding assessment of civil money penalties.”

In other words, we are talking about potentially huge penalties and judgments from the civil claims.

As part of this new enforcement the banks will be required to engage an independent firm to review foreclosure actions from January 1, 2009 through December, 2010 to assess whether foreclosures complied with federal and state laws and whether there were in fact grounds to foreclose.

You read that correctly, all foreclosures that happened between 01/01/09 and 12/01/10 will be reviewed by (hopefully) independent firms looking for infractions.

And what happens if (when) infractions are found….?

If borrowers were harmed by the foreclosure process the banks will have to remediate the borrowers in some way. Remediation could include monetary damages and even the borrower getting the home back.

Imagine all the folks who lost their homes to foreclosure that will be filing claims. Lenders will be required to create a system where by anyone who feels they suffered financially can submit a claim.

Click on this link to watch the video from CNBC News: CNBC Video on Fed Cracks Down On Mortgage Servicers, Bank

Source:  Real Estate Insiders News By: Tim and Julie of Harris Real Estate University.

If $1 million seems like a lot for a home, try $100 million — the final price paid by Russian investor Yuri Milner for a French chateau-style mansion in Silicon Valley.

According to the Wall Street Journal, the purchase is “highest known price paid for a single-family home in the U.S.” and is a sharp contrast to the median home price in the U.S. which hits at $177,200 (at this writing), and even above Los Altos Hills home values that are presently a whopping $2,064,000. The sale was first reported to be $70 million by TechCrunch, which is still a remarkable price.

Milner’s new 25,500-sq ft home in Los Altos has views of San Francisco and is within driving distance of many Silicon Valley tech companies, including one of Milner’s investments, Facebook. But despite his new purchase, the 49-year-old founder of Digital Sky Technologies (DST) doesn’t plan on moving to California anytime soon. His primary residence is a home in Russia that he shares with his wife and two children.

The limestone 5-bed, and 9-bath house, pictured above, sits on 11 acres and includes indoor and outdoor pools, a full wine cellar, and outdoor tennis court. Previously owned by Fred Chan, founder of ESS Technology, and Chan’s wife Annie, this enormous piece of Los Altos Hills real estate was designed in 2001 and completed around 2009. The home was never publicly listed for sale, and Chan reportedly accepted a $50 million note on the house. The Chans currently reside in Hawaii.

While the purchase won’t create a jump in normal home sales, it may be an indicator of a rebound in the luxury home market. This should give hope to Candy Spelling, who listed the Spelling Manor for a whopping $150 million in March 2009. Although only 4.7 acres, the Spelling Manor lists 56,500 square feet of “elegant living” including a billiard room, two-lane bowling alley, and arcade room as well as indoor and outdoor pools.

Source: Business Insider

Have you noticed that the national focus on the housing crash has subsided….

…Its almost like Americans have simply come to accept that home prices continue to crash with no clear end in sight. Housing news no longer makes the headlines…almost makes you start to believe that the housing crash is over.

Not even close.

The real bottom line question is…when will home values stop falling…and start leveling off?

Based on an expert panel of 111 leading housing economists there won’t be any sort of bottoming until…2013. Home prices at the national level are now less than 1 percent away from establishing a new post-crash low. Obviously, more home value loss pushes more homeowners underwater. It’s expected that this year there will be 20,000,000 homeowners underwater, 40% of all homeowners with a mortgage.

What will the historic continued erosion of home value value lead to? A huge increase in REO Listings. Also reported today, the Federal government confirmed that January home prices nationally have fallen to the lowest point since May 2004 and they are 16.5 percent below the April 2007 peak during the housing boom.

The Federal Housing Financing Administration found that prices fell 0.3 percent from December to January and for the 12 months ending in January, U.S. prices fell 3.9 percent. Robert Shiller, co-founder and chief economist of MacroMarkets, the firm conducting the monthly survey of experts. The survey is based upon the projected path of the S&P/Case-Shiller U.S. National Home Price Index over the coming five years.

“This uninspiring view must be influenced by the persistently weak market fundamentals – high unemployment, supply overhang, an unabated foreclosure crisis, and constrained mortgage credit”

More from MacroMarkets:

“Many more experts are now projecting a double-dip after witnessing the double-dead cat bounce that came in the wake of expired government stimulus programs. In December, only 15% of our panelists were projecting that a new post-crash low would materialize for national home prices. Now, just three months later, almost 50% foresee a double-dip happening this year, and not a single panelist expects national home prices to recover to the pre-bubble trend in the coming 5 years”

The table below summarizes the panel’s March projections for home prices for the coming 5 years.

Expected Home Price Changes By Year

S&P/Case-Shiller U.S. National Home Price Index

(Mean of all Panelist Responses)

Year-over-Year Cumulative

Year (Q4 vs Q4 Prior Year) (Q4 vs Q4 2010)

2011 -1.38% -1.38%

2012 1.26% -0.09%

2013 2.72% 2.67%

2014 3.19% 5.98%

2015 3.42% 9.64%

Source: MacroMarkets Home Price Expectations Survey, March 2011

On Tuesday, data released by CoreLogic Inc., a leading provider of information, analytics and business services, stated that nearly 23.1% or 11.1 million of all U.S. residential mortgage properties were underwater in the 4th quarter of 2010. The figures stood even higher than the 22.5% or 10.8 million households’ loans that were underwater in the preceding quarter.

The total amount of underwater mortgages was $751 billion in the fourth reported quarter, up from $744 billion in the earlier quarter, but down from $800 billion in the year-ago quarter. CoreLogic used data related to 48 million properties with a mortgage (85% of all mortgages in the U.S.) as the base.

In December, home prices had fallen to its lowest point since the housing bust. This was the driving factor behind the 3% rise in underwater mortgages during the quarter. Additionally, about 2.4 million borrowers’ home value was merely 5% more than the loan value (close to underwater).

As per CoreLogic’s report, Nevada had the highest rate of underwater mortgage. About 65% of the mortgaged home property in Nevada was underwater, followed by 51% in Arizona, 47% in Florida, 36% in Michigan and 32% in California. However, there were just nine states that had less than 10% of their total mortgaged home property underwater.

When a mortgage is underwater, the homeowner cannot refinance the loan and has almost no alternative but to continue making payments with a hope that the property will finally regain its original value. But with high levels of foreclosure and unemployment, home prices are further expected to fall by another 5%-10% this year.

With further declines in home prices, the biggest rises in underwater mortgages are expected in Alabama, Idaho and Oregon as they have the largest number of properties that are close to underwater presently.

Moreover, underwater mortgage slows down home sales. Homeowners, who would have otherwise sold their houses, will now wait for the home prices to rise before selling. Also, at times the mortgage providers do not allow the borrowers to sell their property at lower price than owed on the mortgage.

Further, many banks require about 20% of the home value as down payment, which again makes it increasingly difficult for the home owners to sell their property. However, Obama administration is planning for a 10% down payment requirement on loans guaranteed by Fannie Mae and Freddie Mac.

At present, underwater mortgage is one of the menacing problems confronted by the U.S. financial markets. Despite the introduction of Home Affordable Modification Program (HAMP) by the government in 2008, underwater mortgage problem has not diminished.

Currently, state attorneys general are trying to resolve issues related to improper mortgage foreclosures with various large mortgage providers such as JPMorgan Chase & Co. and Bank of America Corporation.

We believe that until underwater mortgages fall and foreclosure mess is resolved, the recovery in the housing and mortgage markets will remain very slow.

If you are an individual who has considered getting into the Real Estate business, you have probably asked yourself a hundred times, if NOW is a good time to become a licensed Realtor. Everyone around you is probably telling you NO, but if you asked any successful Realtors, they would probably tell you different.

If you asked any successful Realtors they would tell you that NOW is in fact the perfect time to become an agent. How is this possible you might ask? Upon asking many successful Realtors if NOW would be a good time to become a Realtor, they would presumably tell you that if you can survive and make money in this market, when the market takes a turn for the better, you will reap the benefits of all the hard work you put in during the not so easy market.

Keep in mind, if you are considering getting into the market now, you will have to work much harder than you would, and you will have to affiliate yourself with a Company that can offer you the Management support, the training, and the high tech products and services that the Consumers want these days. As a new Agent, training and Broker Manager Support should be at the top of your list because this will be the key to your success.

Many of the agents, who have been in the Market since it was at its peak will most likely tell you to reconsider Real Estate and not get involved at this time. The truth is this market has taken a toll on these agents, causing a lot of them to give up, finding new careers or an easier ways of making money. Back in the 1990’s, it seemed like properties sold themselves, and agents just got buyers in the door, people would come to them. Now days, the agent has to seek out the client, put in actual work, so to speak. Most of them are not used to this, and just don’t put in the effort they should and consequently they end up out of the Business.

Being an agent takes a certain type of person. You have to keep a positive attitude no matter what kind of market it is. I know that becoming a Realtor in this Market can work for a new agent. Being educated on the market conditions and the high tech products and services that the Consumers want will help you to become a successful agent, if not now than when the Market picks up again. Hard work in this business really pays off, no matter how rocky the real estate market may be. Just like in a good market, you only get what you put into it.

Therefore, if you are considering becoming an agent, simply because you think it’s a lot of money, for so little work then now is not a good market for you. You have to be willing to put in the hard work in order for it to payoff the way you expect. Even in a good market, the harder you work, the more successful you will be. I often remind my Fellow Agents and Broker that Real Estate is the highest paying hard work and the lowest paying easy work.

The “Market” should never determine how successful you will be in any given market. Don’t let the media and all these news reports on the Market scare you. Take all the necessary training classes and speak with your Broker or Manager anytime you start to feel frustrated. If you work with the right Company you always have the support that you need right at your finger tips.

So the next time you ask yourself , if NOW is a good time to become a licensed Realtor, the answer to this question is YES! Take a chance and reap the benefits of this lucrative Business that we call Real Estate. I did!