George Souto

Last week at McCue Mortgage we held our 2nd Annual Mini Golf Fundraiser. Now this is not played on your ordinary mini golf course, it is held right in our office. Each hole is designed by each department, and is located in between their cubicles. They are very creative in creating their mini golf hole, and they are as tough if not tougher then the holes that you would have at a regular mini golf course.

The participants are Realtors, Attorneys, Appraisers, and other Vender's that do business with McCue Mortgage, and are invited by our Loan Officers. I invited two Realtors who's office is located near McCue Mortgage Valerie Osterhoudt and Silvia Garafalo. When I invited Valerie and Silvia I did not realize that I was inviting two ringers, they are more then just pretty good.

Everyone had a good time and we raise $3,200 for the Connecticut Humane Society. Many of the departments are already planning their holes for next year, and I am hoping to have Valerie and Silvia back, as well as a few more Realtors that I do business with.

Most of the country is aware by now of a truly historic event that took place yesterday. Treasury Secretary Paulson and Federal Housing Finance Agency (FHFA) Director Lockhart announced that "FHFA has placed Fannie Mae and Freddie Mac into conservatorship." The government (FHFA) will now be managing Fannie Mae and Freddie Mac for the foreseeable future.

What does this mean:

In order to stabilize and to stimulate the housing and financial markets, the Federal Government is taking the following key steps.

• The GSE's will be allowed to increase their mortgage-backed securities (MBS) portfolios through the end of 2009.

• The Treasury will be initiating a program to purchase GSE mortgage-backed securities (through December 31, 2009).

• Treasury has established a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

What the long term affect of this action will have on the Banking/Mortgage Industry, only time will truly tell, but in the short term we have already seen a decrease in the interest rates today. Hopefully as more of this develops I will be able to post about it, and keep those who follow my blog informed.

Many of you by now have heard of the recent Housing Bill (H.R. 3221) that was signed by President Bush on July 30th, and goes into effect on October 1st, which made a $7,500 Tax Credit available to "First Time Home Buyer" who purchase a home between April 8, 2008 to July 1, 2009. A first-time homebuyer is defined as an individual who has not had an ownership interest in a principal residence in the previous three years. There is an income limit for individuals with adjusted gross income of no more than $75,000, and $150,000 on a joint return. Individuals with incomes greater than the $75,000 or $150,000, can still receive a partial Tax Credit if their individual income is below $95,000 and below $170,000 a joint return. This Tax Credit is also only available for a principle residence and is not available for investment properties, and the property must be located within the United States. Properties outside the United States are not eligible.

The Tax Credit works like this, if the "First Time Home Buyer" was going to receive a $1,000 refund when they file their Federal Tax Return in 2009, they will now be eligible for an additional $7,500 if they choose to receive it (it is not mandatory to receive the new tax credit, the First Time Home Buyer can decline to receive it). This means that their tax return will be $8,500 instead of $1,000. Likewise if they were going to have to pay $1,000, they would now receive $6,500.

This new Tax Credit is not a $7,500 gift, because it must be paid back within 15 years, however, it is interest free. The statute specifies that the repayment amount will be 6.67% of the credit amount each year. Thus, a buyer who qualifies for the full $7500 credit will repay a minimum of $502.50 each year starting with their 2010 tax return (which will be filed in 2011). If the purchaser sells the house before he/she has totally paid back the Tax Credit, the remainder will be due at the Closing and reduced from the proceeds of the sale. For example, if an individual still owes $3,000, and makes $30,000 on the sale of the house, the $30,000 profit will be reduced to $27,000 and $3,000 will be sent to the IRS.

There is an exception. "First Time Home Buyers" who meet the income requirements for this new Tax Credit, but who have a mortgage that is funded by "Tax Free Bonds", like the Connecticut Housing Finance Authority (CHFA), here in Connecticut, DO NOT qualify for the new Tax Credit. So a "First Time Home Buyer" needs to take this into consideration. What is more of a benefit to them, the low interest rate that CHFA offers, or the opportunity to receive a Tax Credit of $7,500.

Some of the initial advantages that I see that a "First Time Home Buyer" can gain from this new Tax Credit are:

• Mom and Dad might want to help with the purchase of the house, but don't want to outright give them the money. They now could quickly give Mom and Dad back up to $7,500 when they receive their tax return.

• Downpayment tends to be a big problem for "First Time Home Buyers", and most do not like taking money from their 401K's to come up with the money. Well now they could borrow the money from their 401K, knowing that they could quickly pay up to $7,500 within a few months.

• Houses sometimes need things done that a "First Time Home Buyer" might not have the money to do. Once again within a few months they will have up to $7,500 available to do some of those things.

I see this new Tax Credit as one of the few positives that have come out of the new Housing Bill, and one that I will be talking about with the Buyers, and Realtors that I work with here in Middlesex County. The other major positive that I feel the new Housing Bill has done, is the elimination of the DPA's such as Nehemiah and AmeriDream. But that is a topic for another day. By the way this does not eliminate the DPA programs such as the one provided by CHFA here in Connecticut.

I hope that this helps to shed some light on this new provision to those who have taken the time to read this blog. Please feel free to contact me if you have any questions on this program that I have not addressed, or if you should need clarification on anything I stated.

Even though FHA made major change to their appraisal requirements, some Realtors are still concerned about Loans that require an FHA Appraisal. Most of these Realtors still have concerns because they are not aware of the changes that occurred in January of this year, or they have not seen these change first hand yet.

I have done several CHFA, and FHA Loans since these change and I can truly say that there is very little difference between an FHA Appraisal and a Conventional Appraisal today. Since Januare I have only had one CHFA Loan that need repairs, and they wer minor. Here are some of the major changes that occurred in January:

Examples of MINOR property conditions that no longer require AUTOMATIC repair for existing properties are:

• Examples of Missing handrails;

• Cracked or damaged exit doors;

• Cracked window glass;

• Minor plumbing leaks (such as leaky faucets);

• Defective floor finish or covering (badly soiled carpeting);

• Rotten or worn out counter tops;

• Crawl Space with debris or trash;

• Defective paint surfaces in homes constructed Post 1978

Examples of tests that may no longer be REQUIRED:

• Wood Destroying Infestation Report-required if there is evidence of READILY OBSERVABLE ACTIVE infestation;

• Well (Individual Water Test)-Required if there is knowledge that well water may be near sources of contamination;

• Septic Test-required if evidence of system failure.

As you can see these were major changes!!