Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: nextrade! who wrote (10785)	5/23/2003 6:49:26 PM
From: nextrade!	Read Replies (1) \| Respond to of 306849

Buyers miss out on bonus, Housing Update/by Kenneth R. Harney Friday, May 23, 2003 bostonherald.com WASHINGTON - It was almost - but not quite enough - this week on Capitol Hill. Millions of moderate-income and first-time home buyers almost received a major new deduction from the giant federal tax-cut package under consideration by Congress. But in the end, a Senate-approved new tax rule allowing an estimated 10 million-plus home mortgage borrowers to take deductions on their monthly mortgage insurance premiums didn't make it into the final compromise package. Supporters, including civil rights, union, housing and mortgage industry groups, say they'll try to get the plan included in any follow-up federal tax legislation that Congress takes up later in the year. Here's what happened: The Senate's original tax-reduction bill included a major reversal of decades-long IRS policies on mortgage-related write-offs. It allowed home buyers and owners who pay Federal Housing Administration (FHA) mortgage premiums, private mortgage insurance premiums (PMI), or other forms of mortgage insurance to begin taking write-offs on those payments immediately. The savings under the Senate-approved plan would be substantial for moderate-income families across the country, especially minorities and young, first-time buyers. Say you're now paying $150 a month for private mortgage insurance. That comes to $1,800 a year. Unlike interest on your home loan, IRS policy prohibits you from taking deductions on your federal taxes for the mortgage insurance premiums you pay. Under the Senate-passed tax bill, by contrast, you'd probably be able to take the full write-off, saving hundreds of dollars a year depending upon your federal tax bracket. Mortgage insurance, whether private or government-backed, has long been a critical tool for first-time home buyers who don't have much cash for a down payment. Private mortgage insurance currently is paid by an estimated 5.5 million homeowners. It can range anywhere from $50 to $200 a month or higher as a mortgage payment add-on. Private mortgage insurance is required by most lenders on a conventional loan whenever the borrower has less than a 20 percent down payment or equity stake in the property. Though paid by the borrower, the insurance is designed to compensate the lender in the event of a delinquency or foreclosure. FHA insurance is the federal government's primary program to assist moderate and lower-income households purchase homes with minimal down payments, typically less than 5 percent. FHA serves borrowers whose credit profiles may not be perfect and whose debt-to-income ratios may be higher than those acceptable in the conventional marketplace. An estimated 7 million-plus homeowners now pay FHA premiums, and almost all of them would be eligible to take deductions under the Senate bill. The bill also would have extended deductibility to VA (veterans) guaranty fee payments and to certain federally-assisted rural housing mortgages. Minority group home buyers would be among the prime beneficiaries of the legislation, if approved in later action this year by Congress. The mortgage insurance industry estimates that 57 percent of all home purchase loans made to African-American and Hispanic applicants carry some form of mortgage insurance - public or private. Young and middle-income first time buyers of all ethnic groups would be major beneficiaries as well, since they often have little or no equity cash and ``thin'' credit files that lenders find difficult to evaluate. The Senate bill's mortgage insurance plan would emphasize deductions for households whose incomes do not exceed $100,000. Borrowers with incomes above that threshold would be subject to a phase-out formula, losing 10 percent of their writeoffs for each $1,000 that their household income exceeds $100,000. Married homeowners who file taxes separately would each have a $50,000 income limit to qualify for full deductions, and would lose 10 percent of their write-offs for each $500 their income exceeded $50,000. Untouched by the deduction reform, if it occurs: Borrowers who pay mortgage insurance premiums but who take the standard deduction. You've got to itemize to take advantage of this money-saver.