Month: September 2011

How Long is Credit Information Retained on Your File

September 29, 2011

A Credit Reporting Agency may report negative information for seven years.

exceptions:

  • Crminal convictions may be reported without any time limitation.
  • Bankruptcy – up to 10 yrs.
  • Response to application for a job with a salary > $75,000 – no time limit.
  • Information reported re: an application for > $150,000 worth of credit or life insurance –  no time limit.
  • Lawsuit or an unpaid judgment – the longer of 7 yrs or until the statute of limitations expires.

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FICO score is as follows:

  • 35 percent payment histories
  • 30 percent amount of debt (e.g. don’t use over 50% of a credit line).
  • 15 percent length of time credit line has been open (a longer history is better if there have always been timely payments).
  • 10 percent very recent history including new applications for credit.
  • 10 percent type/mix of credit, includes installment loans (like car loans), leases, mortgages, credit cards, and so on.

FHA APPRAISAL REQUIREMENTS

September 29, 2011

Effective April 1, 2009, FHA appraisers must now provide the following:

  • The Market Conditions Addendum (Fannie Form 1004MC/Freddie Form 71)
  • At least two comparable sales that occurred within 90 days of appraisal date
  • A minimum of two active listings or pending sales in addition to the three closed comparables
  • Bracketed listings using both dwelling size and sales price when possible
  • Adjusted active listings to reflect the list-to-sales price ratio
  • Adjusted pending sales to reflect contract sales price when possible
  • The original list price and any revised list prices
  • Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales
  • Absorption rate analysis
  • Known or reported sales concessions on active and pending sales

This update includes this warning: “Direct Endorsement Lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible equally with the appraiser for the integrity, accuracy and thoroughness of an appraisal submitted to FHA.”

Exclusion from Taxation of Mortgage Debt Forgiveness

September 28, 2011
The Mortgage Forgiveness Deb Relief Act lets homeowners pay no taxes for mortgage debt forgiveness.

Previously, if a lender forgave all or part of a mortgage, the borrower was considered to have received taxable income

Currently, a taxpayer may exclude up to $2 million of income from the debt on a principal residence that is forgiven during the years 2007 through 2012. This includes a mortgage refinance as well as a foreclosure.

(CAUTION: DON’T confuse this with future liability for the debt itself vs taxation….you may still find the bank hooking up to the family car in the middle of the night 5 or 10 years out, yes it does happen regularly !)

The rule applies only to acquisition indebtedness, which would be funds for the purchase or improvement of the home. Home equity loans not used for improvements do not receive the benefit.

The lender who forgives a mortgage must send the taxpayer a Form 1099C or 1099A that should show the fair market value of the home and the amount of the loan. The difference would normally be the income received. If audited, the taxpayer will have to document that funds were spent for the purchase or improvement of the home.

More:

U.S. Internal Revenue Service (The Mortgage Forgiveness Debt Relief Act and Debt Cancellation):

http://www.irs.gov/individuals/article/0,,id=179414,00.html

FED INCOME TAXES / Capital Gains Tax on Investment Property

September 28, 2011

Long-term capital gains (held more than 12 months) are taxed at a maximum rate of 15 % ( 5% for persons in the 15% tax bracket).

CAUTION: When investment property is sold, depreciation taken during the holding period is “recaptured” & taxed at 25 %.

  • Assume an apartment bldg. purchased nine years ago for $300,000.
  • The building represented 80% of the total.
  • The property is sold this year for $510,000 with selling costs of $10,000.
  • Depreciation, using a 27½-year life, is approximately $78,545 ($300,000 × 80% ÷ 27.5 = 9 years).

What is the tax liability?