The loan programs are provided to low-income families to help them buy bank homes. So far, about 200 families were helped by the loan programs to purchase foreclosure houses in Brooklyn Center and Minneapolis.

In Minneapolis, about 147 families have availed of the interest-free loans to buy properties in foreclosure-infested neighborhoods, mostly located in the northeast, north and south-central areas of the city.

In Brooklyn Center city, nearly 50 families purchased foreclosure properties since it started its interest-free loan program in March. After receiving positive feedback on the program, the city council of Brooklyn Center decided to extend it.

The Brooklyn Center loan program is funded by nearly $1 million in new taxes from the commercial tax increment. Mayor Tim Wilson said that other cities have shown interest on the program, particularly on the source of its funds. He said that the program is a good opportunity to attract homebuyers, especially first-time buyers.

Meanwhile, Minneapolis apportioned an additional half a million to its loan program after its initial $500,000 was distributed to 50 home buyers last year, during which, no income limit was set for participants.

The second installment of the Minneapolis fund requires home buyers to have 120 percent or less of the $81,000 median household income in the metropolitan area. An additional $1.5 million was added by the city from the Federal Home Loan Bank grant. Furthermore, eligible buyers may avail of the $8,000 funds per household provided by the Pohlad Family Foundation.

Meanwhile, in Brooklyn Center, a 2008 legislation allowed the city to fund the program using 15 percent of the new property taxes from a commercial tax increment. Only low-income, first-time buyers are eligible for the city’s ReNew Loan program.

Under the program, as much as $10,000 is given to buyers to use as down payments or closing costs for vacant houses that have been registered by the seller with the city. City officials noted that since the loan program to buy bank homes was launched, sale prices of foreclosed houses in the area increased by over $10,000.

But the success of raising more investments will be determined by the price and how fast it can sell its first renovated foreclosed property in Rialto in San Bernardino County, California. The Rialto property is the litmus test on whether the organization can generate a reasonable profit for its investors.

Inland Empire executive director Robert Hooker said that potential investors are waiting for the outcome of the organization’s project after it bought and renovated 10 or more properties on bank foreclosure listings. The organization is a venture between the private investors, county and local governments.

Recovery corporation organizers have been preventing large real estate firms from purchasing foreclosure properties in bulk. There are concerns that real estate firms might sell these distressed properties to corporate landlords or rent them out, thus pulling down local property values even further.

On the other hand, the recovery organization needs to show to lenders that it can save them money. It purchases Inland Empire foreclosed houses from banks at huge discounts. All the administrative costs and rehabilitation-related details are handled by the organization.

Meanwhile, private investors are still trying to determine whether or not the organization can generate profit from its venture before they put in their money. Hooker said that so far, about $60 million private investment capital has been pledged.

Sierra Capital Investment Partners has committed $50 million while Glaeser Builders Inc. plans to invest as much as $10 million on the venture. Hooker said that a number of smaller investors have shown interest by committing as much as $3 million dollars. He said that many of these investors are from Southern California, adding that the organization is trying to entice large hedge funds and pension funds nationwide.

Hooker said that the biggest challenge in negotiating with banks is investors and stockholders. He said that they are concerned about selling houses at discounted prices for fear of litigation from their investors.

Industry experts said that the region has posted 130,000 properties on bank foreclosure listings since March 2007, and an additional 140,000 homes are projected to go into foreclosures until 2012.

Kelly Matthews, economist at Wells Fargo and Co., said that the current Utah market condition is a historically better opportunity to purchase houses, adding that the dramatic decline in property prices and low mortgage rates are incentives that potential homebuyers should not ignore.

Matthews said that the average property prices in the county of Salt Lake dropped to $278,472 during the last quarter of 2008, compared with $286,250 in the same period in 2007. However, he noted that the average home price in the county last year was still higher compared with the 2004 average price of $198,394.

He pointed out that home affordability today is similar in 2004 because interest rates which was 6 percent five years ago, is nearing 5 percent this year. He said that a family purchasing today would shell out the same amount for mortgage payment, which is 24 percent, compared with almost 23 percent in 2004.

However, some economists are cautioning prospective buyers that the market may have not yet reached its bottom. They do not suggest purchasing properties as investments. On his part, Matthews said that good candidates to buy an existing or foreclosed house today are families in need of a roof under their heads or growing families.

Meanwhile, University of Utah’s Bureau of Economic and Business Research director Jim Wood said that the market is closer to its bottom but is not yet there. He noted that there is no strength or improvement yet in the single-family home market.

Wood believed that home prices will take a long time to budge from its current slump even if the housing market recovery begins and property values stop its decline. He said that home price gains will start modestly, perhaps 3 percent annually.

He pointed out that there will be no price appreciation until the economy shows some growth. This is because the job market in the state is in serious condition than previously thought and foreclosure continues to rise unabated.

Economists said that if Utah’s foreclosure problem gets worse, it would unravel whatever progress in the recovery the state has made so far.

JPMorgan Chase is set to gain $29 billion due to an accounting rule that allows it to transform bad loans into income. The bad loans were part of JPMorgan’s acquisition of Washington Mutual.

Also set to make some profits from home lending acquisitions are Wells Fargo which purchased Wachovia, Bank of America which took over Countrywide Financial and PNC Financial Services Group which acquired National City.

The acquisition deals provide a total of $56 billion in accretable yield, which represents the difference between the cash flow banks are expected to produce and loan values on their balance sheets.

With the escalating foreclosure and unemployment rates in the country, the banking companies have no choice but to invoke the accounting rule that standardizes the way they book acquired loans that have depreciated credit quality.

Former executive at Lehman Brothers Holdings, Robert Willens explained that banks can earn revenues by applying the rule to commercial and mortgage loans that have lost value during the financial crisis.

Meanwhile, when JPMorgan acquired Washington Mutual for $1.9 billion, it used the purchase accounting method to allow it to record deteriorating loans at fair value. This created a mark down of 25 percent on almost $118.2 billion assets.

JPMorgan is expecting to earn $29.1 billion as borrowers are starting to pay their debts. RBC Capital Markets analyst Gerard Cassidy explained that the purchase-accounting regulation offers incentive to banks to mark down troubled loans they acquire.

JPMorgan acquired Washington Mutual’s loans and deposits after that latter was seized by regulators in a widely-publicized bank failure. A total of $29.4 billion in write downs of Washington Mutual’s holdings was taken over by JPMorgan, with majority for home-equity loans and adjustable-rate mortgages.

The lender said that Washington Mutual’s loans produced $1.26 billion revenue and gave it a potential accretable-yield balance of $29.1 billion.

The said tax credit is an actual tax credit to be deducted from taxes owed by the first time homebuyer. Homebuyers have also the option to claim the tax credit on their 2008 tax returns or on their 2009 tax returns.

On the other hand, the tax credit of $7,500 offered to first time homeowners who purchased their homes within the period from April 8 to December 30 in 2008 under the Housing and Economic Recovery Act is not a true tax credit. It is an interest-free federal government loan offered to the homebuyers to help them pay their taxes.

The $8,000 tax credit has made first-time homebuyers within the prescribed period winners while making first-time home buyers outside the prescribed period losers. It is similar to the situation of persons losing their homes to tax foreclosures but are not helped by the government.

The tax credit case of Indiana homebuyer Jeremy is a good illustration of misfortune and luck in home buying. Jeremy bought his first home in December 2008, about 14 days before January 1, the start of the prescribed period for the $8,000 tax credit. He has been asking whether he can still be considered for the $8,000 tax credit since his purchase date is just a few days before January 1.

The answer however is a big disappointment for Jeremy. The IRS announcement for the $8,000 tax credit specifically stated that the tax credit does not include first time homeowners who purchased their homes between April 8, 2008 and January 1, 2009.

This is where the concept of luck and misfortune in home buying enters especially so when the difference is only a few days. What is also difficult to imagine are the feelings of first-time homeowners who completed their home purchases just hours before the first day of 2009. Feelings of being unfairness surely would come out.

Another area where feelings of unfairness enter is the questions of tax foreclosures. During the economic downturn, more Americans are losing their homes to tax foreclosures because of job losses and other family troubles. But unfortunately, they are not included in the assistance program. Their case is even more difficult because they have only 10 days to settle their taxes before their homes are lost to tax foreclosures. Oftentimes also, homes lost to tax foreclosures are easily sold because of the bargain prices attached to them.

Allowing some big troubled banks to close and funneling the relief funds to the housing market will come a long way in helping streamline foreclosed homes.

In an interview on ABC’s program “This Week”, Shelby pointed out that financially distressed banks are already hopeless and should be permitted to rest.

Meanwhile, in an interview on the “Fox News Sunday”, McCain said that major banks should be permitted to close even if it means shareholders will suffer as a consequence.

Some industry experts believed that allowing major banks to fail would divert some of the capital infusion to programs that will help abate the flood of foreclosure homes.

A bank rescue program unveiled by Treasury Secretary Timothy Geithner includes a plan to generate about $1 trillion in new consumer lending and to eliminate up to $1 trillion of banks’ bad assets.

The program also includes housing support and prevention of the spread of foreclosure homes. The federal government will expand efforts to lower mortgage rates to reduce foreclosure homes statistics. It will also commit about $50 billion to prevent foreclosures of middle-class houses still occupied by their owners by reducing payments.

Meanwhile, the FDIC issued a directive requiring banks as well as other financial institutions to monitor how the funds from the federal government will help them and distressed homeowners who do not want their properties to be added to the growing list of foreclosure homes.

On the other hand, some industry experts questioned Shelby and McCain’s suggestion to allow banks to live out their existence. They pointed out that the suggestion runs contrary to the goal of the government after it provided almost $90 billion in financial rescue funds and loan guarantees.

Both Shelby and McCain cited as example Bank of America and Citigroup which they claimed have done extensive damage to the country’s economy that they should not be allowed to go on with their current operations.

Shelby explained that closing big banks is one way to send a message to the financial market that it must shape up or ship out. He also hoped that if people will see that aggressive efforts are used to address the financial crisis, it would encourage them to invest in banks again.

A tax credit of $7,500 was granted by the government to entice first-time buyers to purchase homes from tax foreclosure property listings. The tax credit is a component of the law, Housing and Economic Recovery Act of 2008 which aimed to boost and strengthen the housing market.

First-time buyers who are eligible for the tax credit are those who acquired homes from tax foreclosure property listings between April 8, 2008 to January 1, 2009. Qualified first-time home buyers can apply the tax credit on their 2008 tax filing.

However, this tax credit used to entice first-time buyers to buy homes from tax foreclosure property listings is more like a government loan without interest. Eligible individuals will have to repay the $7,500 on installment basis for 15 years, starting 2010. In a nutshell, first-time home buyers who avail of this tax credit plan will have to pay $500 in additional tax for 15 years.

Furthermore, when the first-time home buyer decided to sell or stop using the house he bought from tax foreclosure property listings as his primary residence, the remaining balance of the $7,500 become due the tax year that it happens.

Meanwhile, another tax credit for first-time home buyers is contained in the American Recovery and Reinvestment Act, an economic stimulus bill which also has foreclosure prevention as one of its goals.
Unlike the tax credit mentioned above, the $8,000 is real a tax credit and not a loan in the sense that first-time home buyers need not repay it provided that they remain in the house they bought from tax foreclosure property listings for at least 3 years from the date of purchase.

The $8,000 tax credit applies to houses purchased from January 1 to November 30, 2009. However, unlike the $7,500, this tax credit can be claimed by first-time home buyers on their 2008 tax return, according to the Internal Revenue Service (IRS).

These two tax credits do not apply to single first-time home buyers who receive more than $95,000 in gross income and married couples with combined income of $170,000.

Related Information:

• Tax Foreclosures
• Tax Deed Sales
• Florida Foreclosures
• Tax Lien Sales
• Cheap Houses for Sale

It was made apparent to lawmakers by Obama’s economics adviser Jason Furman that Obama believes the alleged “cramdown” stipulation would sacrifice GOP votes and jeopardize bipartisan support in the Senate.

On the other hand, key supporters of the cramdown stipulation believe the issue has to be dealt with the soonest. Although risky, it may even be worth sacrificing some Republican cooperation to aid homeowners in the foreclosure problem.

With the bankruptcy provision, homeowners nearing foreclosure who owe more than what the value of their house is can seek assistance and can report for bankruptcy. A bankruptcy judge can lessen the home loan into the original worth of the home.

Democrats have urged for the change in the law as a means of aiding homeowners trapped in the foreclosure problem, compelling lenders to adjust more home loans rather than letting a bankruptcy judge reduce payments more harshly. However, lenders argued that the law would initiate a rise in mortgage rates due to an increase in loan charges that might be soon revised by a judge.

Lenders such as Citigroup and Durbin gave their approval to the change in law for as long as it is restricted to loans prior to endorsing the bill. According to Matt Gleischman, Durbin’s spokesman, there are high expectations of the bill to be passed in both the House and Senate.

A possibility could be including the cramdowns into an “omnibus” spending proposition to complete the appropriations work left unresolved by Congress last year. The House is expected to review the bill as soon as it passes the stimulus to the Senate. Cramdowns can also be set in legislation revising terms of the $700 billion bailout ratified in the fall. Still, there are some who are not confident that the bill will be passed in the Senate.

None the less, many people are giving up their homes because of foreclosure each day. It is important that the provision will be approved as soon as possible.

However, Democrats are asking for $100 B of the $350 B for a more aggressive foreclosure plan among other stipulations, while Republicans say that the money is not going anywhere.

Rep. Barney Frank, House Financial Services Chairman and Democrat, says that he is negotiating with Obama’s team regarding the changes Democrats want to see before releasing the money. Legislation regarding the matter was set to be brought to the House floor last January 15.

Meanwhile, House Republican leader Rep. John Boehner and Rep. Spencer Bachus, another Republican from the House Financial Services Committee, have already expressed strong opposition to releasing more of the foreclosure aid. In a January 9 interview, Bachus said that the financial situation was no longer shaky and that to release any additional funds would be irresponsible.

To help soothe worries, Obama’s top economic adviser Larry Summers sent a letter to both parties assuring a more controlled use of the remaining $350 billion Troubled Asset Relief Program (TARP). According to Summers, the Treasury Department will be asked to be stricter and more sensible regarding executive compensation. He also assured that more money will go to small businesses and community banks, and that there would be more transparency in the use of the remaining funds. It could be remembered that Treasury Department Secretary Henry Paulson was severely criticized last year for his foreclosure program which used the first $350 billion to inject capital into troubled banks and automakers.

If the legislation that Frank proposed pushes through, lenders will be required to submit a quarterly accounting of the use of the TARP money, while Obama would be required to enact a plan to limit foreclosures of mortgages by April 1.

In a welcome development, the National Association of Realtors has announced that the pending home resale index has gone down in November by only 0.5 percent. Although the decline is the index’s third consecutive drop, the decline is much smaller than the previous month’s drop.

Historically, the sale of previously owned houses accounts for nearly 90 percent of the housing market and the sale of new houses accounts for the rest. Both of these types of sales declined in October and November, with the sale of new homes falling to its lowest mark in 17 years.

According to the Mortgage Bankers Association, one in ten homeowners became delayed in monthly payments or was in foreclosure during the third quarter of 2008. This default rate has led to the highest number of foreclosed properties nationwide in 29 years, plunging the housing market to its lowest level. Real estate businesses, especially home builders, sellers and insurers, have been struggling for the longest time and have contributed to the high rates of job losses.

LandAmerica Financial Group Inc., considered the country’s third largest title insurer, was forced to file for Chapter 11 bankruptcy filing after suffering four consecutive quarterly losses largely due to the foreclosure crisis.

President-elect Barack Obama has promised to help troubled homeowners and slow down the rate of foreclosures after his assumption to the country’s highest position in January 2009. It is expected that Obama will use the $350 billion remaining in the foreclosure prevention fund approved by Congress in October 2008 to start his own economic rescue efforts.