Harvey Realty, Inc.

California short sellers to pay tax on mortgage debt
Governor Schwarzenegger last week vetoed a bill that would have prevented California homeowners who sold their homes via short sales or received loan modifications in 2009 from being taxed on the forgiven mortgage debt. Schwarzenegger vetoed the bill, which would have aligned much of the state’s tax code with that of the federal government’s, because it contained an unrelated provision regarding tax refunds for the state’s largest businesses. Although the governor vetoed this particular bill, he expressed his support for banning taxation of forgiven mortgage debt, and immediately called for the legislature to send him a bill to provide tax forgiveness prior to the April 15 tax-filing deadline.

The California Association of Realtors currently is supporting two stand-alone measures, AB 1779 (Niello) and SB 14 (R. Calderon and L. Correa) of the Sixth Extraordinary Session, that would fully conform to the federal rule extending "phantom" income debt forgiveness through December 31, 2012.

Effective immediately, if a project has been previously FHA approved, the lender must certify that it has no knowledge of circumstances or conditions that might have an adverse effect on the project or cause a mortgage secured by a unit in the project to become delinquent.

Lender to Obtain a completed HOA Questionnaire to determine that the project is still in compliance with the following:

· Investor ownership: No more than 10% of the units may be owned by one investor.

· HOA Dues: No more than 15% of the total units be in arrears (no more than 30 days past due.)

· Owner Occupancy Rate: At least 50% must be owner occupied.

· FHA loan Concentration Rate: No more than 50% concentration level (for cases assigned through December 31, 2010). See the concentration level when you pull the FHA Approved Condo list.

· No Pending special assessments.

· No Pending legal action against the condominium association, or its officers.

Obtain a “walls in” coverage policy (HO-6 policy) if the master policy does not include interior unit coverage.

Affordable home prices, tax credits for home buyers, historically low interest rates, and a large number of distressed properties prompted many first-time home buyers to enter the market in 2009, according to California Association of Realtor's 2009-2010 “State of the California Housing Market” report released today.

California’s median home price hit bottom in February 2009 at $245,170. Since then, the median home price has increased steadily in month-to-month comparisons, but remained below 2008 levels throughout 2009. The annual median price is projected to increase to $280,000 in 2010 from $271,000 in 2009.

Homes priced $500,000 or less dominated the sales mix throughout 2008 and early 2009, but peaked at 85 percent in January 2009. Meanwhile, the market share of homes sold for more than $500,000 increased from 15 percent in January 2009 to 25 percent in July 2009, holding steady around that figure for the remainder of last year.

The number of homes listed for sale increased in many metropolitan areas in February.

The supply of homes available for sale in 27 major metropolitan areas at the end of February was up 4.2% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The ZipRealty data cover all single-family homes, condominiums and town houses listed on local multiple-listing services in metro areas where the firm operates.

On a national basis, inventories typically rise in February from the January level as people put houses on the market in anticipation of the busy spring home-shopping season. Over the past 27 years, the average increase in February has been 3.4%, according to Ivy Zelman, chief executive of Zelman & Associates, a research firm.

Inventory Data

View Interactive

Compared with the year-earlier month, the February inventory in the 27 metro areas covered by Zip was down about 19%.

These inventory data don't capture the entire potential housing supply. Around eight million households are behind on their mortgage payments or in the often lengthy process of foreclosure. Many of those homes eventually are likely to be put on the market as banks foreclose or owners are forced to sell.

Builder confidence in the market for newly built, single-family homes declined one point to 18 in October, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

NAHB attributes the decline to the quickly approaching deadline of the Federal First-time Home Buyer Tax Credit. Industry groups, including NAR and C.A.R., are calling on their members to contact their congressional representatives and urge them to extend this home-buying incentive.

“This is the first time since November of 2008 that all three component indexes of the HMI have declined,” noted NAHB Chief Economist David Crowe. “Clearly, builders are experiencing the effects of the expiring tax credit on their sales activity, since it would be virtually impossible at this point to complete a new home sale in time to take advantage of that buyer incentive before Nov. 30.”

Crowe also noted that immediate congressional action to extend the tax credit and expand its eligibility beyond first-time buyers could substantially boost sales activity. “In a special questions section of our HMI survey, 85 percent of respondents said that expansion of the tax credit would have a positive impact on their sales,” he said. “That would amount to a very effective stimulus to housing demand and a needed boost to the overall economy.”

The above is curtesy of the Califorinia Association of Realtors.