bailout — Refinance .net

We’ll Go Second IRS Tells Struggling Lenders

Nothing is ever as simple as you think it is. What’s the likelihood that a homeowner falling towards forclosure on his mortgage might also be behind on his income taxes? Actually its pretty common, and unfortunately, it can put a family in a world of hurt.

Here’s the circumstance: if you fall far enough behind on paying your federal income taxes, either personally, or as a small businessperson, the IRS can file a Tax Lien against all of your personal property. That includes your house. And that tax lien takes precedence over your mortgage. That means the IRS can seize your home and sell it to cover your tax debt. If there isn’t enough money to pay back the lender, they are just out of luck. Unfortunately, that means no lender will want to carry a mortgage on your home. Which means you can’t possibly refinance your way out of an exploding mortgage and into a nice new safe mortgage.

Today the IRS announced that they are willing to “subordinate” their lien to your mortgage. If the house gets sold, the lender is protected and gets to go first. The IRS has over 1 million current tax liens against US residents, so a lot of families got a load of relief today.

Read more about the story here at the Journal or here in the IRS Newsroom

Low Rates and Plunging Values – Home Loan Mortgage Lending Picks Up

In the midst of all of the economic bad news, and the mad dash to intervene throughout the capital markets, there is at least some hint of good news. The beauty and flexiblity of a market economy rather than a command economy, is that markets tend to adjust themselves. When things get too expensive, people stop buying and the price comes down. Price drops far enough, and people start buying again. Although regulation is certainly necessary to soften short term pain or to cover certain kinds of bad behaviours within a market, in general terms, markets will always tend to move to correct themselves.

As 2008 comes to an end, we are starting to see corrections in the Home Loan Mortgage Lending market. Over the last weeks of November Fed actions to bring interest rates down as low as 5.5% on 30 year home loans combined with a 15 to 20 percent drop in the average cost of housing have worked to bring affordablity of housing way up. Read more about it here at FoxNews.