For 2008, Relief and Resolutions to Help Home Buyers

By Benny L. Kass
Saturday, December 29, 2007

This year added another phrase to the real estate lexicon: mortgage meltdown.

Many of us used to call some of the practices that led to the meltdown "predatory lending." But because most of the people who were preyed upon were poor, uneducated and, often, minorities, our national leaders largely ignored the problem. We kept hearing that no one really could define the concept of "predatory."

But now that millions of Americans are facing foreclosure, politicians are trying to find solutions. Recently, President Bush announced that his administration has brokered a deal with the mortgage industry whereby some loan rates would be frozen for up to five years.

Certain adjustable-rate mortgages that were originated between Jan. 1, 2005, and July 30, 2007, and were scheduled for payment increases between Jan. 1, 2008, and July 31, 2010, would remain at their original rates.

The government "should not bail out lenders, real estate speculators or those who made the reckless decision to buy a home they knew they could never afford," the president said. "Yet there are some responsible homeowners who could avoid foreclosure with some assistance."

Details of the loan-freeze program are available through the Hope Now Alliance, a private-sector group of lenders, loan servicers and mortgage counselors whose function is to help "struggling homeowners find a way to refinance" their existing subprime mortgages.

For more information, call 888-995-HOPE or go to the alliance's Web site, http://www.hopenow.com.

The tax code has included a major problem facing homeowners who arrange with their mortgage lender to forgive a portion of their debt. To add insult to injury, those people had to pay income tax on the money they did not have to pay their lenders, sometimes called phantom income.

Congress finally got its act together, and on Dec. 20, Bush signed into law a temporary change to the tax code. From Jan. 1, 2007, through Dec. 31, 2009, homeowners will not have to pay tax on any mortgage debt that is canceled.

The law does not protect speculators or investors. It applies only to principal residences, that is, situations in which the taxpayer has owned and lived in the house for two or more years. Only the original loan can be canceled debt-free; if you have a second mortgage, the tax will still apply.

The law also extended the right to deduct private mortgage insurance for three more years.

All of these actions will help with the current mortgage crisis. But as we enter a new year, there are other real estate issues. Here are some New Year's resolutions I am recommending for legislators, lenders, appraisers, title companies and -- most important -- consumers:


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