Here’s a proposed release regarding upcoming efforts on Mortgage Forgiveness Debt Relief Act:
“While relieved that the Mortgage Forgiveness Debt Relief Act was extended retroactively at the end of 2014, I am not satisfied with the result and understand the industry needs and deserves greater certainty on the tax treatment of short sales transactions in the years ahead. Immediately in 2015, I began meeting with members of Congress to craft the best possible result for the residential real estate investing community.
Senator Dean Heller (R-NV) has introduced legislation that would extend the Mortgage Forgiveness Debt Relief Act through the end of 2016. I have discussed the measure with Senator Heller’s office and am in the process of scheduling an initial 15 meetings with members of the Senate Finance Committee to discuss the merits of the legislation and secure co-sponsors to the bill. After those committee meetings, my efforts will extend to Senate leadership and other key members of the Senate to ensure the measure has the votes to pass.
Ultimately, Senator Heller’s Mortgage Forgiveness Debt Relief Act extension will likely not be voted on as a single bill, but rather rolled into broader tax reform or a tax extenders package. Regardless, it is imperative to garner an overwhelming amount of support for the bill so that whatever form it eventually hits the Senate floor, passage will not be in doubt.
The House may initially push for a permanent extension of the Mortgage Forgiveness Debt Relief Act. While on the surface this may seem like a more preferable option, the politics of this option make little sense. A two-year extension will garner bipartisan support, but especially when our bill is packaged with other more controversial measures, a permanent extension could lose support from both sides of the aisle in Congress. More importantly, the President would likely veto any permanent extensions. I do expect the House will introduce a companion two-year extension of the Mortgage Forgiveness Debt Relief Act and will work to get a vote on the House floor.
There are many dynamics involved in a lobbying campaign of this scale, some predictable and some not. With that caveat, I am currently optimistic about the prospects of obtaining a two-year extension of the Mortgage Forgiveness Debt Relief Act. Given this possible outcome, investors can anticipate a marketplace where it should be easier to market short sales as a viable option for distressed homeowners without the threat of the tax burden. Short sale usage has been flat since Congress has delayed extending the act, and I believe a two-year extension should provide better options for homeowners and investors.”
FHFA – Principal Reduction Efforts and the 3% Down Payment Program
Federal Housing Finance Agency Director Mel Watt was on Capitol Hill testifying before Congress last month and addressed the issue of principal reduction. While Director Watt embraced the concept, he noted that any principal reduction program would have to be extremely targeted in its scope. Translation: FHFA’s principal reduction program should not have much of an impact on the housing market. Director Watt noted the potential negative impact to taxpayers of a broader principal reduction plan as his primary reasoning for keeping any potential plan modest in scope. This should be good news to distressed property buyers as homes in judicial states hit the market and the shadow inventory is unwound. Knowing that there will not be a massive government intervention means knowing that distressed inventories will be available as the housing crisis continues to unwind.
We have also examined the 3% down payment program proposed by FHFA and HUD. The program responds to political pressure about the lack of credit availability and creating more home ownership for lower income individuals. The program does examine borrower credit history and weighs other ability to repay factors, so this program is not akin to the no doc loans associated with the crisis. That said, we should be able to track where the program is being utilized and savvy investors may want to keep an eye on these borrowers as most experts and historical housing data indicate that default rates should be quite high for these borrowers and result in some opportunities for investors.
Existing Home Sales Data: January 2015.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 4.9 percent to a seasonally adjusted annual rate of 4.82 million in January (lowest since last April at 4.75 million) from an upwardly-revised 5.07 million in December. Despite January’s decline, sales are higher by 3.2 percent than a year ago.
Total housing inventory at the end of January increased 0.5 percent to 1.87 million existing homes available for sale, but is 0.5 percent lower than a year ago (1.88 million). Unsold inventory is at a 4.7-month supply at the current sales pace – up from 4.4 months in December.
The median existing-home price for all housing types in January was $199,600, which is 6.2 percent above January 2014. This marks the 35th consecutive month of year-over-year price gains.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage in January fell to 3.67 percent, its lowest level since May 2013 (3.54 percent), and down from 3.86 percent in December. The average annual rate was 4.17 percent in 2014. The percent share of first-time buyers declined to 28 percent in January, the lowest since June 2014 (also 28 percent) and down from 29 percent in December. First-time buyers represented 26 percent of sales last January.
All-cash sales were 27 percent of transactions in January, up from 26 percent in December but down from 33 percent in January of last year. Individual investors, who account for many cash sales, purchased 17 percent of homes in January, unchanged from last month and below January 2014 (20 percent). Sixty-seven percent of investors paid cash in January.
Distressed sales – foreclosures and short sales – were 11 percent of sales in January, unchanged from last month but down from 15 percent a year ago. Eight percent of January sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 15 percent below market value in January (unchanged from December), while short sales were discounted 12 percent (also unchanged from last month).
Properties typically stayed on the market slightly longer in January (69 days) than December (66 days) and a year ago (67 days). Short sales were on the market the longest at a median of 128 days in January, while foreclosures sold in 63 days and non-distressed homes took 68 days. Thirty percent of homes sold in January were on the market for less than a month.
Single-family and Condo/Co-op Sales
Single-family home sales dropped 5.1 percent to a seasonally adjusted annual rate of 4.27 million in January from 4.50 million in December, but are 3.9 percent above the 4.11 million pace a year ago. The median existing single-family home price was $199,800 in January, up 6.3 percent from January 2014.
Existing condominium and co-op sales declined 3.5 percent to a seasonally adjusted annual rate of 550,000 units in January from 570,000 in December, and are now 1.8 percent below a year ago. The median existing condo price was $198,300 in January, which is 5.3 percent higher than a year ago.
Regional Breakdown
January existing-home sales in the Northeast fell 6.0 percent to an annual rate of 630,000, but are 3.3 percent above a year ago. The median price in the Northeast was $247,800, which is 2.7 percent above a year ago.
In the Midwest, existing-home sales declined 2.7 percent to an annual level of 1.08 million in January, but are still 0.9 percent above January 2014. The median price in the Midwest was $151,300, up 8.2 percent from a year ago.
Existing-home sales in the South decreased 4.6 percent to an annual rate of 2.07 million in January, but are still 5.6 percent above January 2014. The median price in the South was $171,900, up 7.4 percent from a year ago.
Existing-home sales in the West dropped 7.1 percent to an annual rate of 1.04 million in January, but are still 1.0 percent above a year ago. The median price in the West was $291,800, which is 7.2 percent above January 2014.NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology
