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October 3, 2007
NAR
Calls for Elimination of
Phantom Tax
The U.S. House Ways and Means Committee last month passed H.R. 3648 –
the Mortgage Cancellation Tax Relief Act as a means of helping families
facing foreclosure. The National Association of REALTORS® has been
supporting such reform since the early 90s.
If passed, the
bill would eliminate the current law that requires borrowers to pay
income tax on mortgage debt forgiven on or after January 1, 2007. Under
the current law any amount of mortgage debt forgiveness is treated as
income by the Internal Revenue Service and is taxed (also known as a
phantom tax) at ordinary income rates up to 35 percent.
Eligibility would
be as follows:
-
All borrowers
would be eligible for the relief, regardless of their income;
-
The relief only
applies to the principal residence;
-
There is no cap
on the amount of forgiven debt;
-
Refinanced debt
qualifies, so long as the debt does not exceed the original amount of
the debt.
The committee
decided to pay for the tax break by restricting homeowners’ ability to
avoid or reduce the taxes on the sale of second homes.
At present, when a
person sells his or her primary residence and converts a vacation home
or rental property to their principal residence they may exclude as much
as $500,000 of the gain from taxation at the time of the sale, provided
they meet the two-year residency requirement for the property.
However, under the
proposed legislation, as of January 1, 2008, homeowners who convert a
rental or vacation property to their principal residence will be
required to pay capital gains taxes on the appreciation attributable to
the time the property was used as an investment property. The owner
still receives the benefit of an exclusion, but the amount excluded from
the tax will be a fraction, determined at the time the vacation/rental
property is sold.
It is estimated
that the gain in revenue from these revisions would roughly equate to $2
billion over 10 years. The bill, which
has broad bipartisan support, next goes to the full U.S. House of
Represenatives for a vote and must still be considered by the U.S.
Senate.
New
Provision Will Allow GSEs to Aid Subprime Borrowers
Last month the Office of Federal Housing Enterprise Oversight (OFHEO)
announced it is modifying the formula used to establish what amount of
mortgage assets Fannie Mae and Freddie Mac (government sponsored
entities – GSEs) can hold in their retained mortgage portfolios.
The change allows
the GSEs more flexibility in monitoring their portfolios and enables them
to assist subprime borrowers or others having mortgage trouble.
The OFHEO believes
over the next six months this new flexibility will let them purchase or
securitize nearly $20 billion of subprime and refinanced mortgages for
those with lower credit scores and affordable multifamily housing
mortgages.
The GSEs can only
purchase mortgages with a principal amount at or below the conforming
loan limit, which is $417,000. The National Association of REALTORS®
has been urging Congress to increase that limit for high cost areas,
such as Boston.
Senate Banking Committee Passes Homeownership Act
Late last month the
U.S.
Senate Banking Committee passed the Building Homeownership Act.
The bill was written by Senators Chris Dodd (D-CT) and Mel Martinez
(R-FL)..
If passed, the bill
would increase
the Federal Housing Administration’s (FHA) loan limits to 100 percent of
the area median home price and capped at 100 percent of the conforming
loan limit; reduces the downpayment requirement to 1.5 percent,
streamlines the purchase of condominiums; and eliminates the caps on
Home Equity Conversion Mortgages (HECMs). The
legislation is expected to be on the Senate floor in October and will
then be sent to a congressional Conference Committee.
Similar
legislation – the Building American Homeownership Act of 2007 – was
passed through the U.S. House in September. Notably, the legislation is
co-sponsored by Bay State Congressmen Barney Frank (D-Newton) and Edward
Markey (D-Malden). For a side-by-side comparison of the two pieces of
legislation, click
here.
Nationally-recognized Technology Expert to
Present at GBAR Course
On October 25 Matthew Ferrara, CEO of Matthew Ferrara Seminars, Inc., will present his exclusive
Ultimate Technology Certification Course at Regis College
in Weston from 9:30 a.m. – 4:00 p.m. The
course contains the “best of the best” techniques on using technology
for prospecting, listing presentations, direct marketing and multimedia
advertising. You’ll learn about Prospecting on the Web, Enhancing
Listing Presentations and Tapping into Text Messaging. Early bird
registration price is $275 before October 11 and $299 afterward. Don’t
miss these exciting opportunities – we’ll see you there!
Upcoming GBAR Events
8:30
a.m. – 3:30 p.m. at Regis College – 1st
time offered in this area!
This class will
help REALTORS® understand:
-
The process of
foreclosure and how it occurs;
-
Counseling
buyer-clients to help them avoid foreclosure proceedings;
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Working with
bank-owned real estate in pre- and post-foreclosure.
Cost:
$150
9:00 – 11:00 a.m.
– Real Estate Finance (taught by Amy Green)
11:15 a.m. – 1:15
p.m. – Real Estate Advertising Compliance and the Law (Bill Mullen)
2:00-4:00 p.m. –
Probate of Estates (Bill Mullen)
Cost $45 single
class/$105 all day
9:30 – 11:30 a.m.
– Lead Law (taught by Joe Stallone)
11:45 a.m. – 1:45
p.m. – Commercial Basics (taught by Rob Nahigian)
2:45 – 4:45 p.m. –
Commercial Leasing (taught by Rob Nahigian)
Cost: $45 single
class/$105 all day
MAR
Hosting Commercial Marketing Session
On October 16 the Massachusetts Commercial Investment Council will
present a Commercial Marketing Session. Members and guests will have
the opportunity to share their “wants and needs” in commercial real
estate by marketing their listings and providing information on what
their buyers are looking for. Each participant will be given time to
address the group. The program will be held at the Worcester Regional
Association of REALTORS® at 492 Washington Street in Auburn from 9:00
a.m. – 12:00 p.m. (registration is at 8:30 a.m.). The program is free
for Massachusetts REALTORS®. To register call Gail Cronin at (781)
839-5523 or via e-mail at
gcronin@marealtor.com.
MOC
Sponsoring Informational and Networking Breakfast
Join the Massachusetts Oilheat Council (MOC) on October 17 for its
Oilheat-Realty Partnership Program breakfast event. This free event is
designed to foster an increased level of interaction and understanding
between real estate professionals and Oilheat companies. The
presentation will cover a market overview of oilheated homes, the
benefit of today’s modern oilheat; the past present and future of energy
prices; oilheat tank safety and the environment and a Q&A session with a
oilheat professional. Notably, you’ll also get a free preferred real
estate professional listing on MOC’s Realty website (www.mocrealty.org).
The event will be
held at The Hampton Inn in Natick on 319 Speen Street from 9:00-11:00
a.m. to register call 800-796-3342 or visit
http://www.mocrealty.org/index.mv?screen=events. |
