BofA Launches New Foreclosure Unit
Bank of America Corp. is splitting its mortgage business into two units in order to get a better handle on the flood of foreclosures.

Bank of America’s new unit, Legacy Asset Servicing, will be charged with resolving issues involving faulty paperwork that had led the bank to temporarily suspend foreclosures across the country for nearly two months in October. The new unit will also handle mortgage modifications and buyback claims on bad loans sold to investors.

Meanwhile, Bank of America’s Home Loans unit will continue to handle new loans and the servicing of current loans.

The company also said it plans to exit the reverse mortgage origination business.

Bank of America Home Loans lost $8.92 billion in 2010 and has been battered by a stream of lawsuits, mostly focused on bad loans it acquired when it purchased Countrywide in 2008.

Home Ownership Offers Plenty of Tax Benefits
While renting offers zero tax breaks, buying a home offers several tax benefits that can make homeownership more affordable. Real estate professionals need to be careful in providing detailed tax advice to clients to avoid lawsuits, but you can ensure clients have the information they need to understand the all of the tax benefits of home ownership.

The following is a few of the tax benefits to home ownership, according to Stephen Fishman, an author and lawyer who specializes in small business, tax and intellectual property law.

▪ Home mortgage interest deduction: Home owners can take an itemized deduction on interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home. This deduction could potentially reduce the cost of borrowing by one-third or more.
▪ Property tax deduction: Home owners can deduct from their federal income taxes the state and local property taxes that you pay on the home.
▪ Deductible home buying expenses: Several closing costs in a home purchase are also deductible, such as loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.
▪ $250,000/$500,000 home-sale exclusion: Home owners who have lived in their home for two of the prior five years prior to its sale do not have to pay income tax on the majority of their profit — $250,000 for single home owners and $500,000 for married homeowners who file jointly.
▪ 14 days of free rental income: Home owners can rent the home up to 14 days during the year and pay no tax at all on the rental income.

Fees for home mortgages increase
For the first time since 2009, Fannie Mae and Freddie Mac are raising risk fees charged to lenders on loans they buy for resale to investors.  Fannie and Freddie also are adding risk fees to more loans offered to borrowers with exemplary credit.  Although lenders could absorb the cost, most are expected to add the fees to loan costs.

MAKING SENSE OF THE STORY

• To avoid a fee or to receive a discount, most borrowers will need FICO scores of 740 or better and down payments of at least 25 percent.
• The fee increases likely will affect most loans with terms longer than 15 years that are sent to Freddie beginning March 1, and to Fannie beginning April 1.
• The most notable aspect of the fee increase is that the fees are being added to more loans to borrowers with higher credit scores.  With few exceptions, risk fees previously hadn’t applied to borrowers with FICO scores of 740 or higher.

Homeownership more affordable than renting in 72 percent of major U.S. cities
It is more affordable to buy than to rent a two-bedroom home in 72 percent of America’s 50 largest cities, according to Trulia.com’s latest Rent vs. Buy Index.  Meanwhile, a nation of renters has emerged as more Americans rent by choice or due to unforeseen financial difficulties.  In contrast to this nationwide trend, renting is only less expensive than buying in four of the cities included in this study – namely New York, Seattle, Kansas City, and San Francisco.  The remaining 10 cities are locations where buying still may be a financially sound long-term decision, despite the relative affordability of renting.

Cities overwhelmed by foreclosure filings and unemployment, including many cities in Florida, Arizona, Nevada and central California, typically correspond to more affordable markets for prospective buyers; however, there are exceptions. Oakland and Los Angeles, which are experiencing similar rates of unemployment or foreclosure filings as Phoenix, Miami, and Sacramento, still are more affordable to renters.  Moreover, close proximity to economic centers with promising job growth projections has propped up both the demand for homes and costs of homeownership in Oakland and Los Angeles.

Attorney Breaks Into Homes for Evicted Clients
Attorney Michael Pines fights foreclosures for his evicted clients in a very unconventional way. He advises his evicted clients to hire a locksmith and enter the vacant house illegally. The clients then squat in their homes while he defends their legal right to possession.

The lawyer admits to breaking into homes at least a half-dozen times on behalf of clients. And he’s gotten into plenty of trouble for his advice: Pines has been fined by a San Diego judge, arrested in Newport Beach, Calif., and threatened with contempt of court — and jail — in Ventura County, Calif.

But Pines says violating the law is necessary to force courts to examine how banks are doing business with distressed home owners.

Pines recently voiced his approach at entering the foreclosed home in open court at a hearing for his clients Jim and Danielle Earl, who had been evicted from their six-bedroom home.

“I’m going back there,” Pines declared in court. “And I hope I get arrested.”

George Lefcoe, a USC real estate law professor, says Pines violates professional ethics in advising clients to break the law. “What (his clients) are doing on his advice is not only going to prove costly to them and completely futile, it could lead to dangerous altercations with the true owners and law enforcement officers,” Lefcoe told the Chicago Tribune in an article about Pines.

Pines has been a lawyer for more than 30 years and has had his own foreclosure troubles. At least six of his properties are in foreclosure, and he owes banks more than $2 million. He filed for bankruptcy protection.

“I filed bankruptcy myself because I stopped paying,” Pines said. “I followed my own advice. I said I’m not going to let the banks steal from me.”

Source: “Foreclosure Hero or Villain? Attorney Who Was Baseball Star’s Lawyer Will Break Into Homes for Desperate Clients,” The Chicago Tribune (Jan. 31, 2011) [Online story not available.]