In this week’s “Good News”:

Why Should Sellers Hire A Realtor?

In 2007 more than 40 percent of FSBO sellers sold their home to someone who they knew, most without the aid of a real estate agent. However, for those sellers who did not sell to someone they knew, one-quarter of them enlisted the aid of a real estate agent for the sale of their home.

Historically, FSBO seller numbers have decreased over the last 10 years. In 2007, the portion of homes sold by FSBO sellers was at a mere 12 percent. It appears that the value of hiring a real estate professional is becoming increasingly apparent.

As a side note: FSBO sellers, who were at first not assisted by an agent, but later were, the sales price of the home was typically lower, with the listing time being longer, than those who were assisted by an agent all along.

IRS Tax Break for Foreclosure, Short Sale and Mortgage Debt Forgiveness

Thanks in great part to U.S. Senator Debbie Stabenow, of Michigan, homeowners who went through a foreclosure, short sale or a deal for working out their mortgage debt with their lender, should pay attention to a new tax break: The Mortgage Forgiveness Debt Relief Act of 2007.

In the past, troubled homeowners usually would have to pay taxes on any mortgage debt that was forgiven or canceled by a lender. If you were the recipient of mortgage relief last year, you may be able to take the tax break when filing your 2007 federal income tax returns. Given the painful housing slump, though, it's essential to know that this tax break would apply in the future for mortgage debt relief given in 2008 and 2009. This applies to Primary Residences Only!

YOU DO NEED TO KNOW that you do not get a federal income tax break just because the value of your home has fallen. It also does not apply to second homes, vacation homes, credit cards, etc.

To take advantage of this tax break, look for IRS Form 1099-C Cancellation of Debt, from your Lender. Look in Box 2 for the amount of debt forgiven, or canceled. You will then need to get and fill out IRS Form 982 and attach it to your tax return. You can obtain this form from www.irs.gov, or contact the IRS by telephone at 800-829-3676.

Form 982, must be filled and attached to your tax return to get this tax break. If you do not fill out this form, the amount of debt forgiveness will be taxed as Ordinary Income.

RESPA’s New Overhaul

Recently, HUD (the Dept. of Housing and Urban Development) unveiled a proposal to simplify and clarify the mortgage process for borrowers with measures such as a standardized Good Faith Estimate (GFE) for all loan originators.

This proposal would include a single GFE (Good Faith Estimate) disclosure that would include loan amount, initial payment, rate lock period, adjustable rate features, prepayment penalties, loan term and whether or not taxes and insurance are included in the mortgage payment.

Over the course of my research it looks appears that they are melding the old GFE and TIL (Truth-in-Lending) forms together in a more comprehensive and easy to read format for borrowers. All mortgage brokers, bankers and lenders would be required to use this standardized form."A lot of the mortgage problems we see today are directly related to the fact that few people fully understand this [loan application and fee disclosure] process," said HUD Secretary Alphonso Jackson.

HUD estimates that consumers will save an average of $668 at the closing table from the simplification changes, resulting in a total savings of $8.35 billion a year.

According to Secretary Jackson, “Consumers have had no assurance that the loan terms and closing costs they are offered will reflect what they confront at the settlement table, and that's been one of the factors driving the current housing downturn."

"The higher reward for shopping, along with the increased ease with which borrowers can compare loans, should lead to more effective shopping, more competition, and lower prices for borrowers," said the agency.

The National Association of Mortgage Brokers (NAMB) applauded the proposed changes.

In a recent statement by the NAMB, "We are encouraged to see that HUD is broadening its definition of a mortgage broker to include all those who broker mortgage loans, whether they work at a federal or state bank, lender, credit union, or mortgage broker,"
 

In this week’s “Take It How You Will News”:

FBI Ramping Up Its Investigation of Major Firms

Stemming from the great and ongoing mortgage debacle, the FBI's criminal probe of the mortgage lending industry has grown to 17 firms, involves large companies, and could take years to conclude, bureau officials said on yesterday in a Reuters interview.

As stated by Neil Power, economic crimes unit chief of the FBI, "The corporate fraud cases are pretty large entities," "The majority I would think we're looking at years."

The FBI has assigned 100 agents to investigate corporate fraud aspects of the housing crisis, including subprime lending and insider trading. Another 150 are looking at related securities fraud, and 153 are looking at loan originations, officials said.

The investigations are being conducted out of local field offices. The majority of cases are in New York and California, he said.

Power declined to comment when asked if the FBI was looking into the collapse of Bear Stearns, which led to an emergency sale to JPMorgan Chase last weekend. However, he said, "common sense would indicate that we would look at something that big."

Billionaire to Acquire Option One Mortgage

According to H&R Block, WL Ross will pay $41 million for the mortgage servicing rights, another $942 million plus $100 million of retained receivable for the $1.1 billion of advances and $65 million for $85 million of other servicing related assets.

The $1.1 billion deal for H&R Block's troubled Option One mortgage servicing business will give billionaire investor Wilbur Ross the second largest nonprime portfolio in the nation upon the successful completion of a January acquisition of the servicing operations of collapsed lender American Home Mortgage Investment Corp.

"Notwithstanding the problems of the subprime lending industry, we regard mortgage servicing as an attractive business and believe that there are considerable economies of scale attached to it," said Ross. WL Ross & Co. is known for making huge profits from bottom-feeding off collapsed companies.It is estimated that a “substantial portion" of current Option One employees will be offered comparable positions following the deal, which includes the sale of a call center in India.Although Option One was shut down after attempts by H&R Block to sell the money-losing unit fell through, it currently services about $53 billion of subprime mortgages.

In this week’s “Wait and See” news:

Restrictions on Fannie and Freddie being eased?

It is expected that Fannie Mae and Freddie Mac will get further financial leeway from the government, enabling the mortgage-finance companies to expand their roles in the stricken housing market. This move could greatly aid the slumping housing market, by enabling Fannie and Freddie to purchase more loans, easing tension on the ‘flight to quality’ by current mortgage lenders.

Under a deal with their regulator that could be announced later this week, the cash cushion Fannie and Freddie are required to maintain would be reduced, people familiar with the matter said Monday. They spoke on condition of anonymity because the move by the Office of Federal Housing Enterprise Oversight has not yet been finalized.

Fannie Mae and Freddie Mac still would face the up hill battle raising additional funds.

It should be noted, that Fannie and Freddie, which together hold or guarantee around $4.9 trillion in home-loan debt, are still having great difficulty lining up buyers for their mortgage-linked securities amid plunging home prices and rising foreclosures.

In this week’s “Not So Good Right Now” news:

Washington Mutual and National City Shares Plunge

As Buyout prospects are beginning to fade for ailing mortgage banks, on March 17 (Bloomberg) -- National City Corp., Ohio's biggest bank, fell the most in 24 years in New York trading, while Washington Mutual Inc., the largest U.S. savings and loan, fell to its lowest since 1995 on waning prospects for takeovers.

National City fell as much as 47 percent and sold for $7.52 as of 4:15 p.m. yesterday, down $5.63 in New York Stock Exchange composite trading. Washington Mutual declined 13 percent to $9.24.

It was the second straight session in which they led the list of worst performers in the 24-member KBW Bank Index. JPMorgan Chase & Co.'s $240 million purchase of Bear Stearns Cos. removed one of the largest potential buyers from the market.

Analysts are saying that losses on home loans made Washington Mutual and National City takeover targets. The price for Bear Stearns -- 90 percent less than the firm's market value last week -- cast doubt on the value of other companies tied to mortgage lending. National City, which once ranked among the nation's biggest subprime home lenders, has been raising capital after losing $333 million in the fourth quarter. The bank is seeking a buyer, Dow Jones reported March 13, citing unnamed sources.

It should also be noted: Large U.S. banks including Citigroup Inc. and Wachovia Corp. may tumble as much as 50 percent because of more loan losses and writedowns of securities, Oppenheimer & Co. analyst Meredith Whitney said in a Bloomberg TV interview on Tuesday.