Changes Affecting Home Buyers and Sellers:
Various legislative changes and industry modifications are made throughout the year that can affect both homebuyers and sellers. Here are two of the more significant changes in 2012.
FHA Fees Change: Effective April 1, 2012 there will be an increase to the annual FHA mortgage insurance premium for borrowers using FHA loans. Borrowers will see a .10 percent increase; and, an additional .25 percent increase for jumbo loans takes effect June 1, 2012. The upfront mortgage insurance premium (commonly referred to as the MIP on settlement sheets) is also being raised to 1.75 percent from its current 1 percent. However, to encourage refinancing options for existing mortgages, the Obama administration is reducing the MIP on FHA refinance loans and lowering the annual premium.
Debt Cancellation Set to Expire: Back in 2007, at the start of distressed sales in our real estate market, the federal government provided tax relief for homeowners conducting a short sale or foreclosure. This tax relief was in the form of mortgage debt forgiveness on a primary residence. The amount that is a shortfall from what was owed to a lender vs. the amount they accepted would normally be seen as taxable under "imputed income". Since short sales are still prominent in our local market, another extension of this debt cancellation relief is important to the overall health of our real estate industry. This legislation is also important for homeowners who are working to modify/restructure their loans principal.
National Flood Insurance Policy Also Set to Expire: At the end of 2011, President Obama signed a bill that temporarily extended the NFIP through May 31, 2012. The status of the NFIP reauthorization is an important piece of legislation to our local coastal area.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
