n Depth Look at the $7,500 tax credit

The $7,500 tax credit for first time homebuyers was signed into law as part of the 2008 American Housing Rescue and Foreclosure Act. To qualify for this tax credit, you must close on your new house between April 9, 2008 and July 1, 2009.

Now this sounds like a great incentive to help stimulate home buyers into jumping into the real estate market and helping to dry up some of this excess housing we are floating in. I see this tax credit being plastered all over Florida mortgage company and home builders marketing materials. There are some very important aspects of this "tax credit" that is not being disclosed to buyers. If you don't do some homework on your own you may be in for a big surprise when you find out it's not so much a tax credit as it is an interest free loan that must be PAID BACK!

Now before we get into how this payback is structured, let’s first see how much you qualify for. That's right the law says you can qualify for "up to" $7,500, but that is not necessarily how much you will get.

Here is a breakdown of how it works:

The “first-time home buyer credit” is a temporary refundable, repayable tax credit equal to 10% of the purchase price of a home, up to $7,500 for singles and married couples filing jointly. (Singles who buy a house together get only $3,750 each, as do married couples filing their tax returns separately.)

The income limit is $75,000 for a single and $150,000 for joint borrowers. If your income is above those limits there is a convoluted formula that can be used to determine the diminished amount of tax credit you will qualify for.

Confused? Here's an example...

Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out 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 $7,500 by 0.5. The result is $3,750.

Now lets learn about how you repay this government loan (oops... we meant tax credit)

Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.

So be prepared that two years after you claim your "tax credit" you will begin repaying the loan back annually at $500 per year until the loan is repaid or you sell that home.

This is some of the detailed information that you should be aware of prior to claiming your tax credit. We are not suggesting anyone NOT claim the credit merely that you be aware so you are not shocked in two years time when the Gov. begins requesting their money back. Hey... it's still an interest free loan! Oops, we meant tax credit :)

SOURCE: http://www.fivestarsmortgage.com/mortgage-articles/13/

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Feds takover Fannie Mae & Freddie... rates plummet

So the inevitable has finally happened. A few months back the government authorized themselves the power to take over Fannie Mae and Freddie Mac "should the need arise". Yesterday the government finally pulled the trigger on their carefully planned take over of the mortgage giants that are responsible for about $6 trillion dollars in mortgage debt between the two of them. This debt is now no longer held by the independent Fannie Mae & Freddie Mac. It is now you and I, the average tax payer that is responsible for half of the mortgage debt in the U.S.

Make no mistake; this is the largest government bailout of a financial company in U.S. history. The Government will immediately invest about $30M of liquidity into these companies, but in reality most experts agree that the Government will invest at least $250 Billion into the two firms before it is over. These are companies that reported about $14 Billion dollars in losses over the last year.

Why would the Government do such a thing you ask?
They never had a choice!

Had the Gov. not stepped in now and engineered this indefinite Gov. "conservatorship" the fall of these two behemoths was inevitable. Had we seen either or both of these companies fall it would undoubtedly have been the end for the U.S economy and likely a catalyst for a global meltdown. This is big stakes folks. There was no way Uncle Sam was going to let these companies fall, and hey if you are going to bailout the biggest financial firms in the country... why not make a little money while your at it right!

The Gov. will be given nearly 80% of preferred stock in the companies with a guaranteed 10% annual return. All those other investors holding stock are now in 2nd place if anything should happen being Uncle Sam :)

What does this mean to the average Joe?

Well here is the good news. The day after the Feds shot their bazooka at the financial meltdown, the 30 year interest rates fell from 6.25% down to 5.5% overnight! This is in large part because interest rates are risk based. The lower the risk the lower the rates. Now that Uncle Sam is taking charge the market is GUARANTEED by the Fed Gov. to not fail. No matter how much cash it takes to stay afloat Uncle Sam is willing to foot the bill. This means far less risk and therefore far lower rates. We are predicting that very soon we will see par interest rates in the low 5% range!

This not only provides lower rates but also more liquidity into a strangled credit market. The spigot just got opened a little further and we are now drizzling mortgage financing instead of dripping it. So in addition to lower rates and more liquidity we are predicting that the actual cost of banks lending money will decrease which should drive some investor interest back into the mortgage backed securities. This "could" result in slightly less stringent underwriting standards allowing more people to snatch up some of the excess housing inventory that is hammering home prices.

New construction has already decreased significantly so lower rates, more affordable loans, and more accessible financing could be the catalyst to get us on the road to a housing recovery.

What about the future of Fannie & Freddie?

This is where the Gov. is flying blind. Their hands were forced to step in and their "conservatorship" is open ended. This means that the truly hard decisions will be left to whoever becomes president of the United States in our next elections cycle and their Congress. Senator McCain has hinted that he would like to see the companies broken up or at the very least down sized considerably. Senator Obama on the other hand has seemed to tend toward more regulation but allowing them to remain more unchanged.

Yet another reason to stay on top of politics this year and delve deeply into the policies of our two candidates!

Here is to hoping you and your family can take advantage of the lower rates and cheaper financing... hey... you paid for it!

Source: http://www.fivestarsmortgage.com/mortgage-articles/12/

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Is a Florida Cash out Refinance for you?

There are many factors that you should consider before doing a cash out refinance. Overall one typically cashes out to pay off other debts and consolidate them for monthly savings. Some people just want to have extra cash to do remodeling projects or to take a dream vacation. The reasons for cashing our on your home are as varied as the families that take out the loans!

One school of thought is that the equity in your home does nothing for you while it sits there. Especially in today's declining real estate market. The average depreciation on home values this year has been 13% nationwide. That is money lost to those with equity in their homes! Consider that by taking out as much cash as possible and investing it into money making ventures such as stocks, other business ventures, other real estate, etc... one can actaully use the equity as a means of making more money. The cost of taking the money must be weighed by the ability to pay it off and make a profit with the monies taken against the mortgage of the house. We have seen calculations that show by cashing out equity in your home and using those funds to make more money you can cut as much as 15 years off of the life of the loan. It requires a good game plan and a very strict hand to accomplish this, but for many this concept can be the key to a future of self employement and early retirement.

For others owning the home is the primary concern. They want to pay off the house as early as possible just for the pride of knowing they own their home and don't have to share ownership with a bank or lender. The above mentioned methods are one way to accomplish this in record time. If you lack the knowledge or willpower required to do that then perhaps a cash out refinance is not for you.

The number one reason for doing a florida cash out refinance is to save money monthly by paying off other debts. Cashing out and paying of car loans, credit cards, student loans, medica debts, and other bills not only saves money monthly but it also builds your credit score. The key to saving money is to ensure that you get the lowest rate possible on your new loan. It is important to work with a reputable company that can acquire the lowest rates possible on your new loan. For many families in the U.S. doing a cash out refinance free's up montly expenses and allows them to finally be debt free and save money monthly for a rainy day.

One cannot stress enough the predicament we are in with our housing market in the U.S. With equity disappearing faster than most could have ever predicted it is vitally important to act quickly if you are considering a cash out refinance in Florida. Our market is declining at a rate far quicker than the national average. Some areas of Florida are seeing values declined at a rate of 3% monthly. Don't leave equity on the table if you have been thinking of doing a refinance NOW is the time.

More information is available on the web at http://www.fivestarsmortgage.com/cash-out-refinance.

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Federal Reserve officials disagreed sharply in early December about whether the Fed should cut interest rates aggressively or not at all, according to minutes released Tuesday of Fed board meetings held in November and December.

Ultimately, the Fed board of governors and the Federal Open Market Committee decided to cut two key interest rates by a quarter-percentage point on Dec. 11.

Three of the 12 Fed regional banks requested a relatively large half-point cut in the largely symbolic discount rate at the Dec. 11 meeting, while two requested no cut at all, the minutes released Tuesday showed. The other seven banks requested a quarter-point cut.

The minutes reveal more disagreement about the course the central bank should take than had been seen in either the Dec. 11 statement or in the minutes of that day's FOMC meeting.

Subprime lending has all but vanished in the wake of last year's meltdown. 100% Florida mortgages are still available at increasingly lower rates due to these ongoing rate cuts.

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Bush Says U.S. Economy Sound, People `Concerned' About Housing

``I'm concerned about the fact that Americans see their costs going up,'' Bush said today at a White House news conference. ``I know Americans are concerned about whether or not their neighbor may stay in their house.''

Although the nation's economic ``fundamentals are strong,'' the president said, his administration will ``consider all options'' to prevent a recession. He didn't give any specifics.
The economy has been battered by a slump in housing and a credit collapse caused by losses in the market for subprime mortgages. New York Senator Charles Schumer is among the Democrats in Congress and on the presidential campaign trail who have ripped Bush for what Schumer yesterday called the administration's ``serious mishandling'' of the economy and its response to mounting foreclosures.

Bush pointed to actions already taken to confront the housing slump. He and Treasury Secretary Henry Paulson earlier this month announced a plan negotiated with lenders and regulators to help as many as 1.2 million people keep their homes by freezing rates on some subprime adjustable-rate mortgages. He also signed legislation today to protect homeowners from being taxed on canceled debt when they refinance to head off a foreclosure.
Homeowners

``I made it clear we're not going to bail out lenders, and we're not going to help speculators, but we will help creditworthy people stay in their homes,'' he said.
Bush said he isn't troubled by Wall Street institutions turning to Asian and Middle Eastern governments for $25 billion to prop up balance sheets as they book losses on investments in securities that contain subprime home loans.

Morgan Stanley yesterday wrote down its subprime-infected mortgage holdings by $9.4 billion and received a $5 billion cash infusion from state-controlled China Investment Corp. Citigroup Inc., Bear Stearns Cos. and Zurich-based UBS AG also have received cash infusions from sovereign funds.

``I'm fine with capital coming in from overseas to help bolster financial institutions,'' Bush said today. ``What would be a problem is to say we're not going to accept foreign capital, or we're not going to open markets, or we've become protectionists.''
Subprime Losses

The losses from subprime mortgages are going to ``have to work through the system'' and Wall Street firms must be transparent about investments that have gone bad, he said. ``If there's some write-downs to be done, they need to do it now.''

The U.S. housing recession has slowed U.S. economic growth. The economy probably will slow this quarter to a 1 percent annual rate from a 4.9 percent pace in July to September, according to surveys of economists by Bloomberg News. Fed officials are predicting the expansion will slow to as little as 1.8 percent by the end of next year.

During the news conference, Bush congratulated Congress for finishing work on a ``good energy bill'' and making an adjustment to the tax code to prevent the alternative minimum tax from increasing levies on some 23 million households.

He expressed disappointment that lawmakers passed a measure to fund government operations in a catch-all spending bill. The legislation passed yesterday included funding for 9,800 pet projects of lawmakers, he said.

Florida Bad Credit Mortgage company Five Stars Mortgage provides alternatives to sub prime mortgages for their Florida clients.

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Financial Firms Hunt for cash

As Citigroup Inc. was dealing with billions of dollars in subprime bad credit mortgage-related losses and the departure of Chief Executive Charles Prince, it got an unexpected call from a prominent investment banker suggesting a merger with Bank of America Corp.
Citigroup's board dismissed the informal approach "totally out of hand," and no discussions have taken place, says a person familiar with the matter. "When you're looking for a CEO, that's no time for a transaction," this person says.
Bank of America says it never authorized a formal overture to Citigroup.

Citigroup's board, meanwhile, gave a green light to a smaller transaction -- a $7.5 billion capital infusion from an investment arm of the Abu Dhabi government. In exchange, the Abu Dhabi Investment Authority will receive a 4.9% stake in the form of convertible stock.
More broadly, the Abu Dhabi deal shows that after years of doling out money to corporate clients and consumers, financial companies now need some fresh cash of their own.
Faced with massive losses linked to the subprime-mortgage crisis and accompanying credit crunch, several of the nation's financial institutions -- from Wall Street investment firms to bond insurers -- are assessing their need for new sources of capital. And they are likely to intensify their fledgling efforts in coming months amid signs that they could face billions of dollars in additional losses as the mortgage-market fallout persists.

"It's a bitter pill to swallow to admit that the problems in the market have reached the point that companies that traditionally could fund themselves now need external sources of capital," says David Honold, who invests in financial stocks at Turner Investment Partners in Berwyn, Pa.

Of course, one way to tap external capital is to merge operations. The merger boom that fizzled out this summer was driven by cheap and plentiful financing in the debt markets and a booming stock market. With credit increasingly tight and the stock market looking shakier, Wall Street may now see a round of opportunistic deal making.

Bank of America, based in Charlotte, N.C., has long been one of the most opportunistic acquirers in the banking industry. In the past couple of years, it has scooped up retail bank FleetBoston Financial Corp., credit-card issuer MBNA Corp., wealth-management firm U.S. Trust Co. and, most recently, LaSalle Bank.

This wasn't the first time Citigroup received an overture involving Bank of America; it got a feeler from the bank several months ago, according to a person familiar with the matter. The latest one, though, was quickly disavowed. "Bank of America did not authorize any investment banker to approach any company over the last six weeks," a Bank of America spokesman said.

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What is a Bad Credit Mortgage Loan?

Five Stars Mortgage has posted an article explaining the mysteries of the bad credit mortgage loan.

Below is an exceprt from the article:

"Bad credit mortgage is no different from an ordinary mortgage except for the fact that it's given to people having a bad credit history. A bad credit mortgage serves as a boon for people having a bad credit history that could have happened due to non payment of debts in time, bankruptcy, black mark from any credit agency, court cases, or even in accurate information or credit fraud. Bad credit mortgage is also referred to as adverse credit mortgage, sub prime mortgage, non standard mortgage, poor credit mortgage or credit impaired mortgage. These are the same as bad credit mortgage refinace, bad credit mortgage home loans, and foreclosure refinance situations. Lenders generally shy away from people having a bad credit. But the situation has changed rapidly and many home mortgage lenders and bad credit mortgage company have sprung up that offer bad credit home mortgages to people having a bad credit history, with almost the same interest rates (just a marginal difference) and terms as in a normal mortgage loan. "

To read the entire article on bad credit mortgage loans in Florida visit: http://www.fivestarsmortgage.com/mortgage-articles/1/

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The nation's fourth-largest bank, which lost $1.3 billion in the third quarter tied to market turmoil, reported a $1.1 billion drop in the value of its asset-backed debt just in October alone.
Bankers' write-downs

The Charlotte, N.C.-based company said in a filing with the Securities and Exchange Commission that it's anticipating loan losses of $500 million to $600 million in the fourth quarter, citing anticipated loan growth and the impact of continuing credit deterioration in its loan portfolio.

"The expected credit deterioration will likely be focused in certain geographic areas that have recently experienced dramatic declines in housing values," the company's filing says.
At last check, shares of Wachovia dropped 1% on trading volume of more than 17 million shares.
Due to the October market deterioration, Wachovia's asset-backed collateralized debt obligations, or CDOs, experienced further declines in value in October 2007 by an amount it currently estimates to be approximately $1.1 billion pre-tax, the filing said.

In the third quarter, market losses totaling $1.3 billion pre-tax included $347 million of subprime-related valuation losses on CDOs.
As of Oct. 31, Wachovia said it had remaining exposure of $676 million to asset-backed CDOs, compared with $1.8 billion the previous month. Wachovia has exposure to subprime residential mortgage-backed securities of $2.1 billion, according to the filing.
Write-downs related to CDOs and subprime mortgage-backed securities totaled $1.11 a share during October, Wachovia said. Net write-downs for the third quarter were 35 cents a share.
The market for these assets "have remained extraordinarily volatile in the first week of November with additional rating agencies' downgrades ... and credit spread widening and illiquidity."

More write-downs coming out of Wall Street have heightened fears the fallout from the subprime turmoil is spreading deeper into credit markets. American International Group Inc. (AIG:
American International Group, Inc earlier this week joined the chorus of firms disclosing subprime-related losses.
"While it is unclear if these write-downs are enough, the remaining CDO exposure of $676 million is well below that of others," wrote analysts at Deutsche Bank in a research note on the Wachovia filing. They estimated that Morgan Stanley has $6 billion in CDO exposure, Merrill Lynch & Co. has $42 billion.

The analysts said the extra loan-loss provisions of between $500 million and $600 million are related to Wachovia's acquisition of mortgage company Golden West Financial. "As such, we believe the company is trying to get ahead of likely higher future mortgage losses in California," they wrote. Last year, Wachovia bought Golden West for $26 billion.

"Nevertheless, we consider this to be negative news," Deutsche Bank said. "Per the investment bank, management indicated that it would stay the course but we wonder if additional changes could be needed. Second, per Golden West, it now becomes even more obvious that Wachovia purchased the thrift at the wrong time of the cycle."

"Perhaps more important than the valuation write-downs is the need to build the loan loss reserves for credit quality deterioration," wrote Stifel Nicolaus & Co. analysts in a report Friday. "The need for additional valuation write-downs was becoming evident in recent weeks, so the Street knew it was coming. But the credit losses may not have been as expected."

The analysts lowered their fourth-quarter profit estimate for Wachovia to 55 cents a share from $1.10.

"Everyone keeps hoping that the worst is over, but we expect to see continued negative news as the fallout from the subprime lending spree spreads," said Walter O'Haire, senior analyst at financial research and consulting firm Celent.

"The hangover is not only painful, but there is no near end in sight," he said. "To complicate matters, there is still disagreement on how to best arrive at a 'market value' for various complex debt derivatives [and] securities, since almost no one wants to own the paper and there is little to no market for it today."

Stated income loan in Florida

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Merrill hedge-fund arrangement in question

After hitting five-year lows a day earlier, financial stocks continued to slide on Friday as investor concerns focused on Merrill Lynch and Washington Mutual. In the past few days, concerns seemed to shift from the companies' poor judgment and weak risk management to the possibility that business practices may not pass regulators' tests.

Shares of Merrill Lynch & Co. fell more than 7% Friday, retreating in the face of a Wall Street Journal report that the company has engaged in deals with hedge funds to delay when it had to record losses on risky mortgage-backed securities.

Washington Mutual may have to set aside some $412 million to $2.1 billion in extra reserves if a lawsuit filed by New York state's attorney general against the mortgage lender succeeds, a Keefe Bruyette & Woods analyst estimated on Friday.

U.S. stocks on Friday shifted in and out of positive territory as investors weighted a surprisingly strong October jobs report and an unexpected rise in factory orders against ongoing credit-related upheaval in financial stocks.

Deutsche's Mayo estimates $10 bln in fourth-quarter write-downs
Deutsche Bank analyst Mike Mayo estimates there will be more than $10 billion in new write-downs during the fourth quarter, including $4 billion each at Citigroup bln subprime hit, Goldman estimates

UBS may take a subprime-related hit of $5.2 billion in the fourth quarter, according to Richard Ramsden, an analyst at Goldman Sachs. He calculated the estimated write-down based on the performance of credit-default spreads since the end of September.

Senate Banking Committee Chairman Christopher Dodd says Merrill Lynch & Co.'s $161.5 million exit package for former Chairman and Chief Executive Officer Stan O'Neal may revive efforts in Congress to give shareholders more power to curb CEO salaries.

Meredith Whitney, whose downgrade of Citigroup Inc. shares helped wipe out $369 billion in U.S. stock market value, said she was the only analyst on Wall Street with the guts to say the bank may cut its dividend.

Commercial Mortgage Lender Five Stars Mortgage continues offering cutting edge products to the National Mortgage Markets. Hard Money Commercial Loans are also being offered by the Commercial Loan Provider.

Shares in Barclays fell as much as 8% to hit two-and-a-half year lows on Friday amid market talk of funding worries and speculation it is telling analysts to trim profit forecasts.

Men like Jim Chanos and Bill Ackman will be watching the collapsing share prices of companies such as Ambac and MBIA with a sense of triumph -- and the warm glow that comes from turning a fine profit. Both hedge-fund managers have long held short positions on the equities of one or other of these bond insurers -- known as monolines -- and have not been shy about condemning their business models or risk positions.

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