By now most of us are aware of the term “fiscal cliff.” The term refers to the economic mayhem that is expected if tax increases, spending cuts and the budget deficit rules go into effect in January 2013. But while a fiscal cliff threatens the economy as a whole, real estate has its own fiscal cliff that's quickly approaching. And unless certain rules, laws and programs are extended, we could see a huge falloff in the recovery of the housing market. Potential borrowers might want to get their transactions completed in front of those changes, since they might push rates and fees higher in their respective wakes. Here are five items with approaching expirations that could seriously threaten the strides we've made so far:
- Expiration of the mortgage interest deduction
- Expiration of the Mortgage Debt Forgiveness Act
- Tax-deductible mortgage insurance
- Expiration of Operation Twist
- Foreclosure reviews
The IRS allows homeowners who pay mortgage insurance in connection with a home acquisition to deduct the premiums from their taxes along with their mortgage interest payments. In order to be tax-deductible, the mortgage insurance contract must have been issued after 2006.For complete details about taxes and mortgage insurance, check IRS Publication 936. No. 4: Operation Twist. The Federal Reserve's Operation Twist is scheduled to come to a close at the end of the year. Operation Twist is a money-recycling program in which the Fed has bought longer-term Treasury bonds while selling shorter-term bonds in order to hold down rates. While it sounds technical, the program is essentially an effort is to lower long-term interest rates, including mortgage rates. No. 5: Independent foreclosure reviews. Originally slated to end on July 31, consumers now have until the end of this year to submit a request for a foreclosure review at http://www.independentforeclosurereview.com. To request a foreclosure review, you must log on and first check your eligibility. You must be a customer of one of the participating servicers. If you are, your next steps are to fill out and submit a “Request for Review Complaint Form.” Forms must be sent online or postmarked before Dec. 31. For general questions or for help completing the form, call 1-877-465-0428. The five items above aren't the only issues threatening the real estate market as we come to the turn of the year. A nearly insolvent FHA and a still-undetermined definition of what a “Qualified Residential Mortgage” should be are bound to also have a profound influence on the mortgage market moving forward.