Mortgage Rates Post Biggest Increase in 14 Years

PR Newswire let us know that on Feb. 20th, mortgage rates had their biggest increase in 14 Years. Not quite the news you want to read on a Monday morning...

Mortgage rates spiked this week, with the average conforming 30-year fixed mortgage rate now 6.37 percent. According to Bankrate.com's weekly national survey of large lenders, the average 30-year fixed mortgage has an average of 0.4 discount and origination points.

The average 15-year fixed rate mortgage popular for refinancing leapt to 5.87 percent, and the average jumbo 30-year fixed rate soared to 7.55 percent. Adjustable mortgage rates increased, but in a less pronounced fashion, with the average one-year ARM rising to 5.56 percent, and the average 5/1 ARM jumping to 5.77 percent.

Mortgage rates posted the largest one-week increase since April 1994, and over the last four weeks has increased by the largest amount since mortgage rates shot up from record low levels in the summer of 2003. Despite the pronounced move in mortgage rates, there wasn't one single factor that spurred the increase, but rather several contributing to the upward movement in recent weeks. The realization that the world hasn't come to an end is leading bond investors to unwind positions taken in January when economic and financial pessimism reigned. Inflation continues to percolate, as evidenced by $100 per barrel oil and yet another troubling uptick in the Consumer Price Index. But mortgage rates have increased much more than Treasury yields as investors reassess mortgage-backed securities in light of higher conforming loan limits to be announced in March.

The above text was quoted from this article.

Let us hope that this trend does not continue for too long...

Tax Relief for Foreclosures and Canceled Debts

Here are some more of the details about the Mortgage Forgiveness Debt Relief Act of 2007 and how it impacts your taxes. Here is a snippet...

Highlights of Mortgage Debt Relief

* Exclude up to $2 million of debt forgiven or canceled by a mortgage lender on a main home.
* Both mortgage restrucuring and foreclosures qualify
* Available for the years 2007, 2008, or 2009.
* Claim the tax relief using IRS Form 982 (PDF)

What is Canceled Debt Income?
Anytime a lender cancels, or forgives, your debt, that is considered income to the debtor. The tax laws considers this income, and the debtor is taxed on forgiven debt unless an exception applies.

Canceled Debt That is Taxable
Anytime a lender cancels or forgives debt, that is usually a taxable event. "Generally, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income." (Source: Publication 525)

Debt forgiveness is reported by the lender using Form 1099-C, Cancellation of Debt. Individuals report the forgiven debt on their Form 1040, Line 21 as other income.

The tax laws provide several exceptions to the tax treatment of forgiven debts. Tax-free treatment of mortgage debt is the most generous and easiest to calculate.

The whole article can be seen here.

Mortgage Workouts, Now Tax-Free for Many Homeowners

The nice people over at the IRS has some good news for all the troubled homeowners. Lets hope that it helps...

Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service.

Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on IRS.gov.

“The new law contains important provisions for struggling homeowners,” said Acting IRS Commissioner Linda Stiff. “We urge people with mortgage problems to take full advantage of the valuable tax relief available.”

Here is the link to the full article...

Two New 2007 Tax Breaks

While taking a look around SFGate, I saw a headline that could brighten up a Monday Morning. "Two new 2007 tax breaks help struggling homeowners" of course sounds goods, but what does it really mean?

In a year of bad mortgage news, there's a bright spot or two for homeowners: Foreclosure comes with a tax break, and 2007 mortgage insurance payments may be tax-deductible.

Congress acted on both provisions late last year, extending the mortgage insurance deduction for three more years and creating a tax break for homeowners facing foreclosure.

The mortgage insurance deduction will help certain low- and moderate-income homeowners, especially first-time home buyers and those struggling with higher house payments as adjustable-rate mortgages reset.

This type of insurance should not be confused with the insurance you take out on your home and its contents in case of fire or other disaster. It's also not the same thing as mortgage protection insurance, which is a form of life insurance some people buy to pay off a mortgage when they die.

So now if you are facing down the barrel of a foreclosure shotgun, you at least have something to smile about :(

Here is the article...