Another email flying around the Internet is causing concern in the REALTOR® community. The email warns that homes sold after 2012 will incur a 3.8 percent tax as part of the Obama administration’s Health Care reform bill. The email includes a link to a Republican Congressional blog to prove its veracity, but unfortunately, the blog, like all propaganda, simplifies the issue and leaves out important information.
According to NAR, “the bill included a provision that imposes a new 3.8 percent Medicare tax for some high-income households that have “net investment income.” Any revenue collected by the tax is dedicated to the Medicare hospital insurance program. This new tax applies only to households with Adjusted Gross Income of more than $200,000 for individuals or more than $250,000 for married couples. Since capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property.
Keeping in mind that the new 3.8 percent Medicare tax is assessed only when the $200K/$250K AGI limits are exceeded, the amount of net investment income subject to tax is the LESSER of 1) total net investment income OR 2) the excess of AGI over the $200K/$250K AGI limits. However, even when the AGI limits are met, the new tax would not be applied to capital gains that result from the sale of a home, since the existing home sale capital gains exclusion rule still applies – $250,000 (individual)/$500,000 (couple). So if the gain from the sale of the primary residence is below that amount, then NO Medicare tax will have to be paid on the gain. The new Medicare tax would apply only to a home sale gain realized in excess of the $250K/$500K that pushes the filer’s AGI over the $200K/$250K income limits.
In spite of Congressional approval of a Continuing Resolution in late September that specifically mentions funding for the USDA Section 502 rural housing program, the USDA announced on October 1 that it would no longer fund the program. Instead, conditional commitments will be issued. On October 13, NAR President Vicki Cox Golder sent a letter to the USDA Secretary, Tom Vilsack, urging that the agency restore the funding. In the current arrangement, lenders are hesitant to offer a loan without a full guarantee of the program, which means that rural families cannot access the program.
State and federal authorities plan to investigate how foreclosures are handled, according to Colorado Attorney General John Suthers. The Federal Deposit Insurance Corp. and the Federal Reserve are among the federal regulators expected to join an investigation announced by the attorneys general of all 50 states on Oct. 13. One of the key issues is whether lenders or their representatives provided improper affidavits in the 23 states that handle foreclosures through the courts.
Colorado is the only state in the nation that relies on public trustees or country treasurers to handle foreclosures. The State requires owners of a mortgage (or a legal representative) to sign two certifications. Suthers said his office will look into whether those attorneys have actually seen the original evidence of debt and the trail of assignments required as a mortgage changes hands from one party to another. Suthers is one of seven attorneys general on the executive committee of the combined state probe. He emphasized that the attorneys general aren’t alleging misrepresentation, but want to test the “veracity” of the process.
Note: During a NAR webinar on the issue, presenters said that in almost all of the cases against the so-called “robo-signers”, problem cases arose when liens were not removed from titles, rather than improper foreclosures on properties owned by people who had not missed mortgage payments. Jeff Lischer, a policy analyst for NAR, said that in spite of widespread media reports, the regulators and banks are working cooperatively to solve foreclosure errors. Government officials say a blanket national moratorium on foreclosure sales would do more harm than good. For its part, NAR argues that the market is already fragile and is urging banks to put more resources into short sales and loan modifications. Lischer said NAR hopes the problem will be solved within a few months but that the situation is fluid and rapidly changing.
CAR lobbyists say the State’s growing budget deficit will be the focus of attention when the 2011 legislative session convenes in January. Lobbyists also expect new bills to be introduced to further reform campaign finance, urban renewal and foreclosure practices.
The City Council unanimously authorized City Manager Roy Otto to negotiate with a national company regarding incentives to locate a district field office at the HighPointe Business Park in west Greeley. The new office would have a $16.3 million payroll and bring 350 jobs to the City. Staff estimates it could provide up to $400,000 in incentives to the company if it decides to move to Greeley.
After three study sessions, the Weld County Commissioners finally decided not to change the County’s existing regulations related to Recorded Exemptions (RE). At issue was a difference of opinion on how the number of lots split off large parcels in agricultural zones should be controlled. The Commissioners agreed that landowners need incentives to encourage thoughtful planning for efficient service delivery and limited road accesses. However, there was no consensus on how the incentives would work or how many lots would be excessive. Note: Currently, the minimum lot size for a recorded exemption in Weld County is 80 acres, which can be split into two parcels.
OnCore Manufacturing Services, which makes precision industrial components used in the defense and health care industries wants to build a new manufacturing facility in Longmont. The company has grown from six to 134 employees since opening its facility in 2003. City Council approval is required because OnCore has requested that the City rebate 100 percent of development fees ($252,000) associated with the construction of the new facility. Before the unanimous vote on first reading to approve the rebate, Council member Sean McCoy wanted to know if “someone” advised OnCore to apply for the rebate and pushed a company representative into saying that a Realtor® had suggested they ask for it. The second and final hearing on the rebate is scheduled for Nov. 9.
After months of discussion, the City Council gave final approval to an ordinance revising Longmont’s campaign regulations. In addition to small increases in the reporting threshold for individual donations and independent expenditures, the revised ordinance eliminates the controversial Election Committee, a citizens’ group originally created to review alleged campaign violations. Discussion concerning the disbandment of the Election Committee and an institution of a 90-day statute of limitations on election violation complaints were the subject of a lengthy discussion during the final hearing. The revisions passed 4-3 after an emotional debate during which Council members Hansen, McCoy and Levison decried the “lack of transparency” in the revised ordinance while Mayor Baum and Council members Santos, Witt and Sammoury countered that the soon-to-be-defunct Election Committee itself had proposed a majority of the changes.
In a letter distributed to NAR members, President Vicky Cox Golder noted that there have been widespread reports of problems related to foreclosures. She said NAR has sent a letter to regulators expressing REALTOR® concerns. NAR’s Leadership Team has held several meetings during the past two months with the heads of major national banks to discuss problems with short sales and the availability of credit to potential buyers. NAR’s position has always been that we want to help homeowners avoid foreclosure, whenever possible. The key points NAR has made during these meetings are:
TransparencyREALTORS need to understand each lender’s policies for underwriting loans, valuing property, selecting brokers for REO listings, and deciding whether to approve a short sale.
ServiceHaving a single point of contact is an extremely important to improve service to the borrower, short seller, and the real estate agent. NAR is urging all lenders to adopt this approach.
BalanceFHA and the government-sponsored enterprises (GSEs: Fannie Mae and Freddie Mac) have become over-focused on safety at the expense of their mission. NAR urges lenders to advocate a return to a reasonable center, now that credit policies have over-corrected.
SpeedWhen a borrower applies for a loan and receives a conditional approval, the conditions are often impossible to meet. It would be better to decline the loan and allow all parties to move on. Short sale approvals often take months. HAFA and other short sales
programs should be implemented quickly.
AccuracyLenders are aware that problems related to the application of new appraisal guidelines have skewed some appraisals. NAR continues to raise these issues with the lenders, regulators, FHA, and the GSEs and seek solutions.
Performance/CompensationReal estate professionals work extremely hard and for many months on a successful short sale. NAR urges lenders to make commissions policies more transparent and to agree not to reduce commissions at or shortly before closing. At the same time, NAR acknowledges that lenders waste time processing short sales that are not real offers, and urges members not to participate in this practice.
President Obama has signed a resolution that included includes a number of unfinished items from a number of committees that will keep the government running until a lame duck session can be held in November. Included in the resolution is a provision extending current FHA and GSE loan limits through September 30, 2011.