Don't Reneg on your Purchase Contracts

The appellate court recently came down hard on a buyer who reneged on his purchase contract.  In 1472 Milwaukee, Ltd. v. Feinerman, 2013 IL App (1st) 121191, the court affirmed the trial court's judgment that the buyer should be responsible for losses the seller incurred when the buyer defaulted on his contract to purchase real estate.

Back in 2006, the defendant contracted to purchase a commercial building located on Milwaukee Avenue in Chicago from plaintiff for $1.2 million.  However, defendant never showed up for closing in mid-November as scheduled.  The closing was rescheduled, and again, the defendant was a no-show.  The plaintiff re-listed the property, and eventually sold it for $911,500 in July of 2007.

Subsequently, plaintiff filed suit for the difference between the original and eventual purchase price, as well as plaintiff's carrying costs for the eight months in the interim between when the property was supposed to close, and when it eventually closed.  The judge awarded the plaintiff this amount (which included the difference in price, real estate taxes, and interest paid by the plaintiff), and on appeal, the court agreed.

Alternative Energy Tax Credits Calculated Net of Energy Sold

If you read my blog, you may already know that alternative energy tax credits are available through 2016.  However, here's what you may not know:  If you are selling, or will be selling, the excess electricity generated through your new solar equipment back to the utility company, you won't qualify for the whole tax credit.

To refresh your memory, you can claim a tax credit of up to 30% of the cost of certain alternative-energy improvements, so long as those improvements are completed prior to the end of 2016.  But, if you are making more energy than you need to power your own home and selling it back to the utility company (called "net metering"), then you can only claim a tax credit of up to 30% of the cost of the equipment actually used to power your OWN home.

So if you spend $15,000 on solar panels, technically you should be able to deduct $5,000.  But if a portion of your energy is being sold back to the utility company, then you will need to figure out how much of your equipment is being used to power your own home, and take the deduction based on that, which means you won't get the whole $5,000.

Just something to keep in mind!

New Servicing Guidelines for Delinquent Borrowers

This Friday, new rules go into effect for mortgage servicers.  Here's what you should know:

1)  If a borrower defaults, the servicer must contact them within 36 days.  The servicer must contact the borrower after every missed payment thereafter. At least once every six months, the servicer must contact the borrower in writing. 

2)  By the 45th day after borrower defaults, the servicer must give the borrower a written list of possible loss mitigation options.  By the time the servicer sends this notice, a specific person must be assigned to the borrower's file.

3) In the event a borrower submits a loss mitigation application 45 days or more before the foreclosure date, the bank has only five days in which to respond and notify the borrower if there are any missing documents, or if the application is complete.  If there are missing documents, the bank must allow at least 7 days for the borrower to submit them.  If a completed application is in place at least 37 days before the foreclosure sale date, the servicer must evaluate the file within 30 days and provide a decision.  If the borrower is denied, an explanation must be provided.

4)  As long as the completed loss mitigation application was submitted at least 90 days before the foreclosure sale date, the borrower may appeal the servicer's decision.

Generally, small servicers are exempt from these new rules.  Additionally, if the borrower is in bankruptcy, the servicer is exempted from these new requirements as well.

HUD Decreases FHA Loan Maximum Limits

If you are looking to get and FHA-insured loan for a higher-priced purchase in 2014, you may be out of luck.  HUD has announced new maximum limits for the 2014 calendar year.  The maximum FHA-insured mortgage loan in 2014 will be $625,500.  That's nearly a 15% decrease from the amount currently allowed, $729,750.  650 counties throughout the country will be affected.  Standard streamline refinances that meet all of the other requirements will not be affected by this decrease. 

New Online Tool to Help Find Housing Counseling Services

Last month, the Consumer Financial Protection Bureau announced a new tool to assist homeowners in anticipation of the new mortgage rules taking effect in January 2014.  The purpose of the tool, which can be accessed here, is to connect homeowners with local housing counseling agencies.  Effective January 10, 2014, mortgage lenders will be required to give mortgage applicants a list of housing counseling agencies.  In case they do not have their own lists available by that time, they can use the tool provided by CFPB.

The new online tool will help homeowners and home buyers find the closest HUD-approved counseling agencies.  It will also list the languages spoken at each agency, as well as list the specific services available there. 

FHA Requires Lenders to Self-Report

Lenders who are FHA-approved and lend on single-family property now face a new set of reporting requirements.  Effective last month, lenders must report "material findings" of suspected fraud or material misrepresentation, discovered through the lender's quality control process, directly to the Federal Housing Administration.  The lender must also disclose what the lender is doing to resolve the issue.  Any issues that have already been resolved need not be reported.

So, what's a "material finding"?  A material finding is any finding that would have caused the lender to disapprove the loan or not request an FHA endorsement had the lender discovered the material finding before the loan was approved.  For example, if the borrower would not have qualified under FHA guidelines but was approved anyway because of the lender's failure to verify his eligibility, income, employment, credit, or the appraisal of the house, that would constitute a "material finding".  If the home the borrower purchased was not repaired to FHA standards even though the appraisal noted significant deficiencies, that would be a "material finding" as well.

If lenders fail to report such material findings to the FHA, they are subject to administrative action.

Alternative Energy Tax Credits Available Through 2016

If you are making, or thinking about making, certain large-scale alternative-energy improvements to your home, there's good news for you.  You can get a tax credit for 30% of the cost of these improvements.  And you have plenty of time to make the improvements too -- all the way through 2016.  There is no limit on the tax credit for these improvements, except that they cannot exceed 30% of the cost of labor and installation.

To qualify, you must install certain types of equipment, such as solar panels, solar water heaters, wind-energy systems, fuel cells or geothermal heat pumps.  More information is available on the IRS' web site.

If you're not making such large changes to improve your home's energy efficiency, you may still qualify for certain tax credits for 2013.  Click here for more information.