Danette O'Neal

Housing is a key driver of the economy. The NATIONAL ASSOCIATION OF REALTORS® estimates that for every two homes sold, one job is created. Plus, housing accounts for more than 15% of the U.S. gross domestic product. In past recessions, a rebound in housing has usually been one of the first signs that economic conditions are improving. Besides stepping up refinancing efforts with banks, the president outlined the creation of a new mortgage fraud unit to investigate misconduct by lenders. “This new unit will hold accountable those who broke the law, speed assistance to home owners, and help turn the page on an era of recklessness that hurt so many Americans,” Obama said.

As we get closer to Election Day, the need for comprehensive housing solutions must not become just populist rhetoric in a speech. Effective housing policy is too important to too many Americans to be lost in election year jockeying. In fact, housing and mortgage issues are make-or-break election issues for many voters and perilous territory for politicians. In a recent survey of voters, 60% believe dealing with mortgage and foreclosure issues is key to stabilizing the economy, including 57% of Republicans and 66% of Democrats. The clearest way for Obama and his Republican opposition to prove to the American people that they’re fighting for the interests of their fellow Americans is to help home owners by making housing a priority.

The rules for using down payment gifts differ depending on which lender you use and whether your loan is guaranteed by Fannie Mae, Freddie Mac, or FHA. If you’re the one making the down payment gift, you won’t have to pay federal income tax, nor will the recipient, as long as you give $13,000 or less in 2011 or 2012. You can give up to $13,000 per person without tax implication to any number of people in one year.

In addition, you and your spouse can each give separate gifts to your child. The IRS calls this gift splitting. For instance, if you’re planning to give to your two children, you and your spouse can each give each child up to $13,000 for a total of $52,000 ($13,000 x 4), says CPA Sue Medicus, owner of Liberty Tax Service in Catonsville, MD. If you want to give more, you still may not owe taxes, but you have to inform the IRS of your gift using Form 709. Check with your tax adviser to see if the amount above $13,000 counts against a lifetime exclusion that we all get to use to pass along assets via gifts and estates, Medicus says. You can’t deduct the value of gifts you make (other than gifts that are deductible charitable contributions) or any federal gift resulting from making those gifts. For more, IRS Publication 950 outlines the rules about gift and estate taxes (Houselogic).

Do you see your energy bills rising even if you’ve implemented up to three projects to save energy? In the first of our two-part Q&A with an expert on consumer attitudes toward energy efficiency, we look at the energy-saving truths many of us ignore. Hint: Replacing windows isn’t your best bet. Many of us are making the wrong judgment calls about how to save energy. Here’s why we’re having a disconnect. Why are we using more energy now — what are the main culprits? Several things. We simply have more stuff plugged in now than we did five or 10 years ago — Xboxes, electronics chargers, iPads — and some of those things are energy hogs. Plasma TVs use as much energy as a refrigerator. They’re getting more efficient now, but if you had the old square CRT and replaced it with a flat-screen plasma, you’re instantly paying the utility much more than you did before. People are buying an Energy Star refrigerator, but then putting the old one in the garage as an overflow or meat fridge. Unplugig these extra appliances can cut your energy bill in half experts say…Well I have not seen that much; however, a year ago I started turning the power strips off at night, and unplugging the TV’s in the bedrooms that the kids no longer occupy. I’ve seen a difference!   (Houselogic 1/24/12)

Unemployed home owners will be allowed to suspend or reduce mortgage payments for as long as a year under a new policy announced by mortgage finance firm Freddie Mac on Friday. The new rules take effect on Feb. 1.

Freddie Mac will give mortgage servicers the authority to provide six months of forbearance to unemployed borrowers without prior approval, and the agency can approve an additional six months of forbearance after that. Homeowners are still responsible for paying off their full mortgage plus interest after the forbearance period ends. The Federal Housing Finance Agency (FHFA) called for the extension, in the hope it would keep more families in their homes. Freddie Mac previously allowed lenders to grant up to three months of forbearance with no payment, or six months at a reduced payment, without the firm’s prior approval. Delinquent borrowers with Freddie Mac owned- or guaranteed-mortgages who are in an existing short-term forbearance plan can be evaluated for an extension under the new policy. If you are unemployed and need financial help, contact your lender or the Homeowner’s HOPE Hotline, 888-995-HOPE.

If you end up having to short sale in 2013, you may be able to escape taxes another way. If what you owe all your creditors exceeds the value of everyting you own, you may not owe tax. Read about the insolvency rule in Publication 4681. Despite its name, a short sale often takes a long time to complete. To ensure you have short sale success before the tax rule changes, work with a real estate agent who has done short sales, promptly give your lender any paperwork it asks for, and pray for patience. You’ll need it.

Tax rules that let you escape paying federal income tax after a short sale expire this year.

If you can’t afford your mortgage and know you’re going to eventually have to sell your home via short sale, you might want to get going on that sooner rather than later. If you complete your short sale in 2012, you won’t owe federal taxes on the transaction. If you wait until 2013, you could owe a hefty federal tax. In a short sale, the lender lets you sell your house for less than what you owe on the mortgage.  Before the 2007 law passed, you had to pay federal income tax on forgiven debt. If your lender forgave $50,000, the IRS said that $50,000 was income. If you were in a 28% tax bracket you’d owe $14,000 (.28 x $50,000) in federal income taxes. Here we are 12 months away from the deadline, and it’s anybody’s guess whether Congress will renew that no-taxes-on-forgiven-debt rule. It’s just one of literally trillions of dollars of tax benefits expiring at the end of this year, and there’s no signal yet as to what, if anything, Congress will do about any of them.

Credit Unions are usually willing to lend money since they, unlike their traditional banking counterparts, they have not been bogged down with bad loans made during the housing crisis. Credit unions, which typically hold their loans in their own portfolio instead of selling them to a third party, were often more careful lenders during the boom.
the real bonus is that members have free checking and receive dividends; once you make that first deposit, you become a stakeholder.
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• Over a two-and-a-half year period beginning in May 2009, Bankrate.com says that rates on a $30,000 HELOC averaged 1.2 percentage points less at credit unions than at banks or thrifts.
• The one area where there’s a dead heat between banks and credit unions is in mortgages, owing to the large role played by the secondary market.” (Mortgage giants Fannie Mae and Freddie Mac have historically been able to help keep rates lower compared with the private sector.)
• Credit unions can pass on lower rates, waive fees, and deliver good customer service experience because they’re non-profits designed to serve their members rather than answer to profit-demanding shareholders as banks must do.