Federal regulators have been busy trying to help out in the current housing situation...

Federal regulators have been busy trying to help out in the current housing situation. Here are some recent developments:

1. The Federal Reserve Board lowers interest rates for home buying and refinancing:

Federal Reserve Board (“the Fed”) has been lowering interest rates for home buyers and homeowners who need or want to refinance; and is purchasing large quantities of agency debt and mortgage-backed securities. In addition, actions by the Federal Housing Finance Agency and the Department of the Treasury have helped to drive down interest rates.

These efforts are positively impacting housing affordability, home valuations, and the nation’s overall economy, and providing support to the mortgage and housing markets. Mortgage rates have averaged in excess of 6 percent in the third quarter, but have recently fallen into the 4 percent range in some parts of the country. This is the lowest rate in nearly 50 years and should be instrumental in bringing buyers back to the market.


2. A Kinder, Gentler IRS?

The Internal Revenue Service recently announced a number of new steps to help financially distressed taxpayers who are having difficulty meeting their tax obligations. Some of the features of the program:

A. Subordination of IRS Liens: When homeowners are selling or refinancing a property, they must generally pay off an existing federal tax lien. But, because of the current economic conditions, many homeowners don't have the ability to do so. The IRS has announced that, for a refinance, the homeowner may request that the IRS make its tax lien subordinate to the lien of the lender providing the refi loan. For sales, the IRS has stated that, in certain circumstances, they will discharge its claim upon a request of the taxpayer/seller to do so.

B. Expedited Levy Releases: The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. With this announcement, the IRS should be able to help agents and their clients more quickly resolve federal tax liens in their sale and refi transactions.

C. Postponement of Collection Actions: In instances when a taxpayer has lost a job, is relying solely on welfare or Social Security income, or is facing significant medical bills and/or a devastating illness, IRS case workers will have broader authority to suspend collection actions where taxpayers are unable to pay because of the hardships they face.

D. Added Flexibility for Missed Payments: Where individuals have an existing Installment Agreement to make payments to the IRS on taxes due, and have previously been in compliance, the IRS is allowing more flexibility for taxpayers who have difficulty making payments because of a job loss or other financial hardship. Taxpayers in a difficult financial situation should contact the IRS.

E. Additional Review for Offers in Compromise on Home Values: An Offer in Compromise (OIC) is an agreement between the IRS and the taxpayer which settles and resolves the taxpayer’s tax debt for less than the full amount owed. However, in many cases, the equity in the taxpayer’s home can be a barrier to the IRS accepting an OIC. Now, however, the IRS recognizes that the distress in the housing markets make the perceived equity valuation questionable. So, in those cases, the IRS is creating a new, second level of review to determine if they should accept an OIC where the equity in the taxpayer’s home is in question.

F. Prevention of Offer in Compromise Defaults: Taxpayers who have an OIC but are unable to meet the agreed-upon payment terms will be able to contact the appropriate IRS office and discuss available options. The IRS is prepared to work with these taxpayers to avoid default on the OIC.

3. Tenants in Fannie Mae-Owned Properties Can Stay:

A new Fannie Mae policy will allow qualified renters occupying foreclosed properties at the time Fannie Mae acquires the property to remain in those Fannie Mae-owned properties should they choose to do so. The new policy applies to renters of any type of single-family property including residents of two-to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing. Eligible renters will be offered a new month-to-month lease with Fannie Mae, or they may be qualified for financial assistance for transition to new housing should they choose not to remain in their rental unit.

4. Freddie Mac Extends its No-Foreclosure Policy:

Freddie Mac’s previous policy of suspending all foreclosure sales and evictions involving occupied single family and 2-4 unit properties with Freddie Mac-owned mortgages has been extended through January 31, 2009.

NOTE: These summaries of new laws are for general information only, and should not be interpreted as legal or tax advice, nor should these summaries be applied to any individual situation. Prior to acting, please consult your legal or tax advisor for information on how any of these laws affect you, your property or your decisions.


Copyright Broker Risk Management 2009