monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, December 2010
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In Issue 33 We Touch On:
Banks Lending On Illegal Structures
Year End Donation Tips
Using Power Of Attorney
The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family. You can make your own comments and feedback as well. Time for the news…
Mortgage Market: Banks Lend On Illegal Structures With A Lot Of “Buts”
It is hard to find good news for consumers regarding mortgage requirements. Lenders have tough standards that borrowers must meet. For example, take a look at this recent announcement by a lender that on the surface looks consumer friendly since it allows loans for properties with unpermitted living areas or illegal structures. However, there are a lot of “buts” in this language.
“Building permit requirements for unpermitted living areas are waived under the following circumstances:
-The addition does not cause the subject property to be in violation of zoning.
-The property may be rebuilt.
-The appraisal does not include comments that the addition was completed in less than a workmanlike manner or that there is any impairment to the soundness, structural integrity or livability of the property.
-Any applicable hazard insurance covers the addition.”
The policy continues into illegal additions added to a property…
“A one- or two-unit property that includes an illegal additional unit or accessory apartment (often referred to as a mother-in-law, mother-daughter, or granny unit) is permitted when the following conditions are met:
-The illegal use conforms to the subject neighborhood and to the market.
-The property must be appraised based on its current use.
-The borrower must qualify for the mortgage without considering any rental income from the illegal unit.
-The appraiser must report that the improvements represent an illegal use.
-The appraisal must demonstrate that the improvements are typical for the market through an analysis of at least three comparable properties that have the same illegal use.
-The loan file must contain evidence that the existence of the illegal additional unit will not jeopardize any future hazard insurance claim that might need to be filed for the property.”
Personal Credit: Try This Simple New Year’s Resolution
Many people set lofty goals for New Year Resolutions and forget to plan out how they will achieve their goal. This is a recipe for disappointment. Here is an easy resolution you can make with a clear and concise four-step process which will lead to greater peace of mind about your credit.
Resolve to check one of your three major credit reports every four months. This is free of cost and takes only a few minutes to do.
Step One: using your email calendar or other system you prefer, set a reminder for January 20, May 20 and September 20.
Step Two: on each of these dates, pick one of the three major credit bureau reports to check (Trans Union, Experian or Equifax)
Step Three: Go to annualcreditreport.com to access your credit report.
Step Four: Carefully review all the line items in your credit report for accuracy. Pay attention to whether an account is marked as open and active or closed. Are there any inaccurate late payments showing? Are there public records displayed that are not correct or do not belong to you? Hopefully, you don’t see anything out of the ordinary.
As always, if you ever need help reading your credit report, never hesitate to contact me for help.
Economy & Financial Insights: Variety Of Year End Updates
Rates: Although a bit higher than earlier in 2010, historically low rates still prevail. No one has a crystal ball to predict when interest rates will take off on a rising trend but one thing is for sure – when they do it will be too late to lock into a great low rate. What will make rates rise? Loss of confidence internationally in the U.S. dollar, inflation, positive trending in U.S. economic growth are all potential catalysts. Also, keep in mind that the Federal Reserve is helping keep interest rates artificially low buy purchasing tremendous amounts of U.S. Treasury debt. That program could end at any time as well.
VA Loans: The brave men and women that serve to protect our country have great news regarding their home purchasing power. The 2011 VA Zero Down Loan Limits were recently announced – in other words, how much can be borrowed with zero down payment. VA Jumbo Loans are also available up to $1,500,000 for higher priced neighborhoods. Did you know that a vet can purchase a $1.6 million home in Marin County, California with only $150,000 down (less than 10%) with zero private mortgage insurance (PMI) and a rate that is basically the same as someone getting a conventional $400k loan with 20% down? For good advice on VA loans, you can always reach out to our friends at Military Home Programs.
Tax Relief: Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude certain debt forgiven on their principal residence up to $2 million ($1 million for a married person filing a separate return). The debt must have been used to buy, build or substantially improve the taxpayer’s principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing. Review IRS Form 982 Instructions for more details.
Question of the Month: How Do I Use A Power Of Attorney To Close A Mortgage?
Each lender has its own rules so there isn’t a single answer to this question. It is important to disclose your need for a POA early in the loan process so that the proper arrangements and documentation requirements can be met without delaying the closing. For example, here is information from one lender that recently announced some Power of Attorney Updates:
“Effective immediately for all loan programs: Power of Attorney (POA) policy has been updated to allow for general and military POA in addition to limited or specific POA.” Lenders will have their own policies related to eligible agents, using a POA, durability of the POA and notary acknowledgements. For example, one lender has this policy: “In order to be accepted, a non-durable transaction specific POA must clearly reference the subject property (property address and/or legal description).”
Giving Back: Tips On Making Charitable Donations Before January 1, 2011
This is a popular time of year when people clean out closets to make room for those new sweaters and other items received during the holidays. Items in good or better condition can be donated. The Internal Revenue Service has many guidelines for determining the value of your donation. Some publications which may be helpful are IRS Publication 561 (Determining the Fair Value of Property), IRS Publication 526 (Charitable Contributions), and IRS Form 8283 (Noncash Charitable Contributions).
If you itemize deductions on your federal tax return (using the long form), you are entitled to claim a charitable deduction for your donation to a qualified charitable organization such as the Salvation Army. You will be required to determine the value of these items. One valuation method acceptable to the IRS is to use Thrift Store Value. For example, here is list of thrift store values from Goodwill Industries in Florida.
Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.
The New Year will first require a trip to Las Vegas for Affiliate Summit (shucks) and then we will look forward to the next Michelle’s Angels Hope Concert at the famous Bluebird Café in Nashville on February 10. Best wishes to all of you for a healthy and prosperous 2011.
Randy
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Mortgage by Randy newsletter, Copyright 2010 Randy Mitchelson. All Rights Reserved.
Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
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You have permission to publish this article electronically or in print as long as the following is included:
Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with over 15 years experience in financial services. Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.
As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval. He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy as well as the Daily Dollar newsletter. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.
He is owner of Estero, Florida based National Web Leads, LLC, an internet lead generation service matching consumers with lenders for auto, cash advance and other financial products. Through its network of partners, National Web Leads delivers innovative Web 2.0 performance marketing solutions to advertisers and affiliate marketers.
Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle’s Angels Foundation Inc. He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.
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