Pros and cons of paying mortgage during short sale

Q: We just got multiple offers on my “vacation” house listed as a short sale. And so far, we have begged and borrowed to keep our mortgage current so our credit scores will be less bruised. But now that our house is in contract, do I continue to pay the mortgage? Our debt exceeds our income due to job and benefit loss.

Here’s my bigger concern: Since we are current, I don’t want the bank to reject the offers just because we have been current, although our financial papers will prove that our debt exceeds our income. –Cindy

A: There are a number of schools of thought and approaches to deciding whether to continue making your mortgage payments while you’re selling your home on a short sale, and your ultimate decision will require you to weigh a number of factors and see where your personal calculus of your own values and interests comes out:

Legal: Legally speaking, you have an obligation to pay your mortgage and property taxes as long as you own your home. While you might very well make the decision not to for a number of reasons (see below), it’s important to keep the legal contract you made to pay especially your mortgage in mind, as some lenders make efforts to reserve the right to come after you later for the deficiency (i.e., the difference between the sale price of your home and your mortgage balance). For this reason, it’s not a bad idea to have a local real estate attorney involved in your short-sale transaction, to help you negotiate a complete release of liability for the mortgage.

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Huge new development planed for San Diego’s Upper East Village

After carefully vetting a number of qualified applicants, Jerry Navarra, chairman of Jerome’s Furniture, chose Lankford & Associates, Portman Holdings and Phelps Development — together forming a new entity dubbed LPP — to be the master developer for a nearly three million-square-foot renovation in San Diego’s Upper East Village.

The grand vision involves turning three blocks of a bleak warehouse district into a pedestrian-friendly, mixed-use space with new residences, shops, hotels, office buildings and a four-acre open space park.

One of the primary design concepts for the renovation is an Innovation, Design, Education and Arts (IDEA) zone — an artistic vision championed by developers David Malmuth and Pete Garcia that will encompass the area between Market Street and City College and 11th Avenue and the I-5 freeway.

California may not participate in Ag Settlement making refinancing in California a continued difficulty.

While the attorneys general working toward a settlement with the nation’s largest servicers may be able to strike a settlement without California, it may cost them.

A deal that seemed likely imminent as of the end of October would have required $25 billion from the banks – $5 billion in cash penalties and $20 billion in refinancings and modifications, including principal reductions.

The $25 billion settlement could be reduced to $18.5 billion, according to unnamed sources referenced in a Wall Street Journal article.

Many thought a settlement without California would be impossible. In fact, the LA Times stated earlier this week, “Without California’s participation, of course, the banks would never assent to a deal.”

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Take advantage of expiring tax deductions

There are several tax credits and deductions set to expire at the end of the year, and given the federal deficit problem, there’s a good chance they won’t be extended. If you want to take advantage of them, you need to act before Jan. 1, 2012.

Mortgage insurance premium deduction

If you itemize deductions, you may deduct the premiums you pay for mortgage insurance, just like you do mortgage interest. However, this deduction is phased out if your income exceeds certain levels. To qualify for the full deduction, a couple or a single taxpayer must have an adjusted gross income of $100,000 or less. The deduction is phased out completely if AGI exceeds $109,000.

This deduction, which was first enacted for 2007, is scheduled to expire at the end of 2011. Thus, your payments are deductible only if you pay them during 2011; a payment after 2011 is not deductible.

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Green taxis lift off at San Diego airport

Three dozen hybrid vehicles are joining the fleet of taxis serving the San Diego International Airport.

A combination of government incentives and private financing were harnessed to encourage local taxi companies to invest in their first “green” cabs — mostly Prius v models, a roomier new version of the popular hybrid.

The 300 taxis serving Lindbergh Field still are predominantly aging Ford Crown Victoria sedans whose fuel efficiency hovers around 10 to 13 miles per gallon.

Taxi owners, accustomed to shopping at California Highway Patrol sales and other used-car  auctions, called the transition to new, low-emission vehicles a leap of faith.

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Past Due Mortgages = 6,298,000

There were 6,298,000 mortgages going unpaid in the United States as of the end of October, according to Lender Processing Services (LPS).

It’s a daunting number, but the data show that it’s actually been on a fairly steady decline for nearly two years now.

At the start of 2011, the total number of non-current mortgages in the U.S. stood at 6,870,000. In January 2010, it was 8,118,000.

LPS’ more recent reports show the industry is slowly but surely chipping away at the number each and every month – the result of both loss mitigation workouts and removing loans that cannot be resolved from the inventory through foreclosure.

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House approves higher FHA conforming loan limits

The House of Representatives voted 292-121 to restore the elevated conforming limits for jumbo mortgages for the Federal Housing Administration Thursday.

The Senate is expected to give a final vote in the coming days.

Members of a joint committee compromised earlier this week to include language in a minibus spending bill that would raise the limits on mortgages insured by the FHA but not those guaranteed by Fannie Mae and Freddie Mac.

Congress raised the limits in 2008 to allow the government to back more loans when credit markets froze. On Oct. 1, the limits expired, reverting back to $625,500 from $729,750 in the most expensive neighborhoods.

According to the bill the House passed Thursday, the elevated limits for FHA loans will be extended through 2013.

The effect of the drop has already been felt in some markets. San Francisco home sales above $500,000 fell 20% in October from last year, according to analytics firm DataQuick.
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