Changing bankruptcy law to enable loan modification faces strong opposition from President Bush and may have a tough time in Congress.

“Amending the bankruptcy code in this manner would undermine existing contracts, leading to contraction in mortgage credit availability and affordability,” according to an administration policy statement. “These and other bankruptcy-related provisions in the bill would rewrite long-standing tenets of bankruptcy law in ways that would fundamentally alter the expectations of parties to hundreds of thousands of home purchases after the fact.”

The Mortgage Bankers Association said a bankruptcy proposal currently in the House of Representatives would give “judges free rein to rewrite these contracts without statutory or economic restraint.” The MBA also said the prospect of the bill’s enactment could prompt more foreclosures. “In the short term, lenders will likely move quickly to foreclosure to ensure that they are not covered by the onerous provisions of this bill,” according to MBA.

However, CRL’s Stein said bankruptcy changes could act as an incentive for servicers and investors to refinance more loans because they may feel they can get a better deal.

“It will induce some investors to go and accept a refinance program, and it will also get others to agree to modifications outside of bankruptcy,” Stein said.

Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies, said bankruptcy reform should be considered, noting that the infrastructure already exists.

“Particularly, if you look at alternatives like a large federal program,” Retsinas said. “For any new initiative, the government rulemaking will take months or longer.”

The Congressional Budget Office estimated that the House proposal could encourage some to file for Chapter 13 bankruptcy, resulting in a 4% to 5% increase in annual filings. But there would not be a run to file for bankruptcy, said NCRC’s Berenbaum.

“Most American homeowners understand the long-term impact of filing for bankruptcy. You have to wait before you can apply for a mortgage again. It impacts your credit,” Berenbaum said.

Speaking Thursday, Sen. Barack Obama, D-Ill., offered his support for the modification of loans to avoid foreclosure or bankruptcy.

“It’s also time to amend our bankruptcy laws,” Obama said, “so families aren’t forced to stick to the terms of a home loan that was predatory or unfair.

There is no shortage of proposals in Congress to address the housing crisis: the Depression-era Federal Housing Administration is up for a makeover, and there are other plans to ease the stress of pricey mortgages. Under veto threat is a proposal that consumer advocates see as key to helping more people stay in their homes: allowing bankruptcy courts to modify troubled mortgages on primary residences.

Under current Chapter 13 bankruptcy law, courts cannot modify the mortgage on a principal residence, though they may for vacation or second homes. Consumer advocates and others see bankruptcy, which is meant to adjust debt and make it easier for people to repay creditors over time, as an efficient and established method for troubled homeowners to make good.

“The marketplace is designed so that it will protect owners of vacation homes and second homes, but yet a consumer who is struggling to make their mortgage payments cannot include their home,” said David Berenbaum, executive vice president with the National Community Reinvestment Coalition.

A major strength of court-supervised modifications, consumer advocates say, would be their ability to help people who have “piggyback” loans, which are second mortgages taken on homes at the same time as a first mortgage. Struggling homeowners are often urged to seek a loan modification from their lenders, but many second-lien holders won’t allow loans to be modified without being paid out, said Mark Zandi, chief economist of Moody’s Economy.com.

“Second-lien holders are mucking up the process, they don’t want to be subordinated,” Zandi said. “The other limitation is that some mortgage investors are not allowing these modifications to go through because they don’t think it’s in their best interests.”

Generally, a first mortgage gets paid in full, followed by the second, so the holder of the second mortgage has no incentive to support a modification that could cause it to face a 100% loss, said Eric Stein, senior vice president with the Center for Responsible Lending.

“The holder of the second is better off waiting to see if a borrower can make a few payments before foreclosure,” Stein said. And, he said, dealing with two servicers is a “negotiating challenge that most borrowers cannot surmount.”

About 40% of home-purchase mortgages in the first nine months of 2006 involved piggyback loans, according to a report last year from Credit Suisse. That figure jumps to more than 60% in some markets such as Los Angeles, Las Vegas, and Sacramento, according to the report.

Battle over bankruptcy law

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The Mohave County Board of Supervisors will hold a special workshop Monday in its first step to craft the county’s 2008-09 budget usually adopted in August.

County Manager Ron Walker and Finance Director John Timko will discuss the county’s upcoming budget projections and business strategies, as well as the needs from 22 county department heads.

Walker said the recently passed Truth-in-Taxation law, Proposition 101, that limits property tax increases to 2 percent, will have a negative impact on the county residents. The same legislators who seek credit for being tax cutters also add more unfunded mandated county services, he said.

“The realty is that our job is to provide the ever increasing mandated services to a growing population with shrinking revenues,” Walker said. “We are caught in the middle.”

The legal system that includes the sheriff’s office, jail, court system, county attorney’s office and public and legal defender’s office will take 143 percent of the current primary property tax revenue, Walker said.

Timko said Proposition 101 has eliminated $14.9 million in potential public services, with $9.6 million of that for the 2008-09 fiscal year. The county also initiated a hiring freeze last year.

The county will also see an increase in costs from the state mandated Arizona Health Care Cost Containment System, indigent health care and employee health insurance. The county will need to cut $4.8 million to $5.2 million from the past fiscal budget, Timko said.

The property tax rate is also expected to be lowered again for the 2008-09 fiscal year to $1.33 per $100 assessed value on a home. Last year, the rate was $1.53 per $100 assessed value. The property tax rate was lowered to $1.67 per $100 assessed value two years ago, from the $1.75 per $100 assessed value that had been in effect for more than a dozen years before that.

The workshop will also include performances and accomplishments from department heads from 22 county departments. The supervisors will also discuss their goals for the next four years.

District 1 Sup. Pete Byers of Kingman is stepping down after eight years on the board.

Dist. 2 Sup.Tom Sockwell, who is running against former Bullhead City Mayor Diane Vick, said the biggest challenge is to maintain a balanced budget despite Proposition 101.

“It’s like a cancer eating away at the county government,” Sockwell said.

His goals for his district are building a new law and justice center, as well as building a new facility for the sheriff’s office and animal control in Mohave Valley.

The county will also look to sell off county property to help pay for some capital projects.

Capital projects already started include the county jail and an expansion of the Bullhead City library. Future projects include the law and justice center, a county morgue, a new building for the planning and zoning and probation departments, an animal control facility and a new sheriff’s substation for Mohave Valley and Lake Havasu City.

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To explore this Budget bonanza which the real estate sector is about to witness, Times Property takes a look at the new tax breaks on spending and investment avenues of the potential home buyers.

A city based young couple, which together fetches an annual income of Rs 10 lakh per annum sound really enthusiastic about the entire tax break provision.

Shikha, who works in a bank herself is happy about the fact that her additional spending power would not only make her feel liberated to shop but also help them save better for the prospective property that she and her husband will soon be buying in the Hazratganj area.

She expands, “Rishi, my husband and I had zeroed down on a house last year itself, but since we didn’t have the paying capacity then, we decided not to indulge in the house buying, while now since its an absolute wow situation as we have more disposable income, we surely can fulfil this dream of ours.”

On the same note, Niranjan Hiranandani, Director, Hiranandani Constructions, believes that those thinking of buying a 1 BHK can now plan for a 2BHK flat through this increased affordability. This will specially help those in the income bracket of Rs 2.5 to 2.9 lakh, he says.

While, Assem Vivek, Branch Head HDFC Home Loans, adds, “Certainly the budget which directly didn’t affect the realty market is going to move it in totality. Since the tax bracket has changed for both men and women, at an average a person with 30 percent bracket would save Rs 40,000 more.”

He further expands, “Real estate has always witnessed growth and this rate sensitive industry which now to a common man assures no further hiking of interest rate is surely a treat to the potential buyers and of course the investors.” Gaurav Agarwal, Fortuna Builders (P) Ltd opines, “In my opinion the budget has not done any particular wonders to the realty sector yet the tax break sounds like a boon to the middle income group. It certainly provides them a possibility of better housing facilities.”

Rahul Agarwal, Tirath Builders adding his views to the same avers, “The budget on the large has not been pro-realty , as no special mentions were made in its regard. Though like all would agree, the tax break would benefit, though only the upper middle class segment.”

He also adds that it’s not just going to be the budget which will affect real estate in the coming months but largely the very buoyant stock market. For sure all this upheaval will inject a sudden competitiveness amongst the builders especially the so called branded builders and the local Lucknow builders and to meet the same competition, some new selling concepts would have to be floated.

Rahul Agarwal further adds, “Since there are a large number of branded players in Lucknow already, the local builders will have to come up with some unique propositions. We personally feel, that to attract more buyers towards our projects, we will have to provide better facilities at lower cost, without plainly focusing at the high end living concepts.”

Atul Saxena, Eldeco, asserting his take on the same concept of competitiveness avers, “We welcome competitiveness and happy with the take that the other groups are also happy with the budget. The motto for now in for all builders would be catering to all segments of the society, especially with the tax bracket decreasing; we surely shall see a large number of buyings in the property sector.”

In lieu to pointing the finer benefits of the budget, Saxena informs, “To tackle the competition, we plan to also focus at the medium buying strata and therefore are soon planning to launch our projects on the Sitapur Road.”

So isn’t that indeed a god news for the middle class buys who for a long time now have been unable to decide where and when to buy a house of their own. Another important provision in the budget has been about how reverse mortgages should be treated by the tax men.

The budget has clarified that reverse mortgages should not be treated either as income or capital gain and hence not be taxed. This would go a great deal towards creating more confidence among senior citizens planning to take advantage of this product, says R Verma, Executive Director, National Housing Bank.

Analysts also believe that this move will go a long way towards popularising the product, which, though launched a over a year ago, has not found enthusiastic takers. They believe that these schemes, where senior citizens can mortgage their property and either get a lump sum amount worth a certain percentage of the value of their home or choose to get a monthly installment over 15 or 20 years, would now be promoted in a big way by players like banks and housing finance companies.

Brick Bytes

? Developers say that those buying a 1BHK can now plan for a 2BHK flat, thanks to increased affordability.

? All this upheaval will inject a sudden competitiveness amongst the builders, especially the so called branded builders, and the local Lucknow builders and to meet the same competition, some new selling concepts would have to be floated.

? Another important provision in the Budget has been about how reverse mortgages should be treated by the tax men.

? The Budget has clarified that reverse mortgages should not be treated either as income or capital gain and hence not be taxed.

? Analysts believe that this move will go a long way towards popularising the product, which, though launched a over a year ago,has not found enthusiastic takers.

? Real estate has always witnessed growth and this rate sensitive industry, which now to a common man assures no further hike in interest rate, is surely a treat to the potential buyers and of course the investors.

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Statements for investments like 401(k) plans or mutual funds will soon arrive, showing investors how much they shared in the bloodletting Wall Street saw during the first three months of the year.

With evidence of the quarter’s toll in hand, more investors might be tempted to call brokers or financial advisers, asking what to do now. For many with a long-term investment strategy, the answer might simply be stay put or at least consider only a few modest moves to snap up bargains.

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he city of Saskatoon released it’s initial budget for 2008 which indicates that Saskatoon real estate owners could be facing an 8.6 per cent property tax increase. This increase would be the largest property tax increase Saskatoon home owners have faced in 26 years. The property tax increase is directly related to the increase of demand in the Saskatoon real estate market. The city is indicating that the property tax increase will help assist in the cost of providing utilities to the new Saskatoon neighborhoods development currently underway. The city has developed several new neighborhoods including Willowgrove and Stonebridge but other neighorhoods are planned such as Rosewood and Blarimore. As the city of Saskatoon continues to grow and expand homeowners will need to float the bill for the development. Be sure to visit my Saskatoon real estate website for up to date information on the current Saskatoon market.

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Sotheby’s International Realty (incorporated name: K.K. Urban International Properties), a premier global luxury real estate brokerage firm, as part of its exclusive franchise agreement with Sotheby’s International Realty Affiliates LLC signed on July 19, 2007. It has opened its first office in Tokyo’s Chiyoda-ku, Kojimachi, paving the way for clients to have access to an unprecedented and unrivaled global real estate network.Japan Sotheby’s International Realty will operate as the independently owned franchise of the Sotheby’s International Realty(R) brand, which currently consists of 484 offices in 33 countries. By working with the brand’s more than 9,000 brokerage professionals worldwide, Japan Sotheby’s International Realty is able to offer more than 20,000 luxury property listings around the world to Japan’s real estate market. Meanwhile, the launch also provides domestic and foreign clientele with access to the finest domestic property listings, such as luxury residences in metropolitan Tokyo and Osaka, as well as premium resorts and vacation homes in Karuizawa, Okinawa, and throughout Japan.

The Sotheby’s International Realty brand has brokered some of the world’s top luxury real estate, concentrating on property listings over US$1.5 million. In 2007, the brand recorded more than 10,000 property transactions. With the rapid growth of the affluent class worldwide and the global expansion of the Sotheby’s International Realty network in strategic regions, the number of transactions is expected to rise in the near future.

Alongside its official business launch, Japan Sotheby’s International Realty has formed partnerships with domestic and international financial institutions that have proven track records for working successfully with domestic affluent clientele, and has promoted business partnerships with a major tax accountant network and key groups such as domestic real estate firms. By joining forces with these potent partners, Japan Sotheby’s International Realty will develop a unique and effective business strategy that is unrivaled and unprecedented in Japan.

For affluent clientele of financial institutions, Japan Sotheby’s International Realty will strictly comply with applicable laws in establishing in the future, a framework for providing information related to domestic and foreign luxury real estate to the clients.

Japan Sotheby’s International Realty has begun partnership negotiations with groups such as a major tax accountant network firm, which has a strong well-established affluent clientele base with more than 50 locations domestically. It is anticipated that a partnership agreement centered on clientele introduction is to be reached in the near future.

In the future, Japan Sotheby’s International Realty is scheduled to begin partnering with firms that possess strategic regional presence (ex. Tokyo’s Jyonan area, Kanagawa’s Shonan area, Kansai’s Ashiya/Kobe Yamate area, and other affluent residential regions) as well as those that posess strengths in specific real estate categories. Japan Sotheby’s International Realty has already signed a business tie-up agreement with Tokyu Resort Corporation, the nation’s leader in resort property sales, and has begun partnership negotiations with numerous well-established independent firms that possess unique real estate specialties.

These partnerships mutually benefit both parties by providing business partners with access to the extensive global luxury property listings of the Sotheby’s International Realty brand, while giving Japan Sotheby’s International Realty access to these partners’ top tier domestic listings.

With the recent growth in the number and the individual net-worth of domestic and foreign affluent population, the evolution of real estate has been characterized by the multitude of lifestyles, values, and their needs. These values and needs include the area scenery, quality of the buildings, and the environment, which has led many new clients to look beyond domestic properties or simply investment ambitions. Japan Sotheby’s International Realty anticipates the growth of these needs at the global level and will develop its brokerage business tailored towards this new specialized real estate market.

Finally, as part of its partnership with the world renowned Aman Resorts announced last July, Urban Corporation is expected to develop luxury condominium villas with Aman. Urban is also considering the development of domestic luxury properties to meet the needs of new clients. A strong synergy can be expected as Japan Sotheby’s International Realty will play a key role in the brokerage of such luxury villas jointly developed with Aman Resorts and other luxury developments by the Urban Corporation.

Japan Sotheby’s International Realty has dealings with Standard Chartered Bank (based in London, UK), a financial institution with a strong presence centered in Asia, Africa, and the Middle East region, and Suruga Bank, which has developed unique strategies that include personal financing and credit card businesses.

For more information, please visit http://www.urban.co.jp/english/ir/

About Sotheby’s International Realty Affiliates LLC

Founded in 1976 to provide independent brokerages with a powerful marketing and referral program for luxury listings, the Sotheby’s International Realty network was designed to connect the finest independent real estate companies to the most prestigious clientele in the world. In February 2004, Realogy Corporation, the world’s largest real estate franchisor, entered into a long-term strategic alliance with Sotheby’s Holdings, Inc. (NYSE:BID). The agreement provided for the licensing of the Sotheby’s International Realty name and the development of a full franchise system by Sotheby’s International Realty Affiliates LLC, a subsidiary of Realogy. Affiliations in the Sotheby’s International Realty system are granted only to brokerages and individuals meeting strict qualifications. Sotheby’s International Realty Affiliates LLC supports its affiliates with a host of operational, marketing, recruiting, educational and business development resources. Franchise affiliates also benefit from an association with the venerable Sotheby’s auction house, established in 1744. For more information, please visit http://www.sothebysrealty.com

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The Senate could pass a housing stimulus bill next week, and home builders may benefit the most from the legislation, according to one research group.

Companies will be able to apply net operating losses from 2008 and 2009 against profits from the prior four years, Stanford Group Co. said in a policy research note on Thursday.

“This is very helpful to home builders as well as some broker-dealers who have suffered or are likely to incur losses that exceed their prior two years’ worth of profits,” the group said. “The other provisions offer modest assistance to the housing market, but none are a panacea.” Read the report.

One provision of the bill gives a $7,000 tax break — spread over two years — to people who buy a foreclosed home. The bill would also provide $4 billion in grants for states to purchase foreclosed homes and mitigate blight.

FHA reform provisions in the bill would raise the FHA loan limit, and also raise the down-payment requirement for these loans to 3.5%. And a $10 billion increase in tax-free, state-issued bonds would be used to help troubled homeowners refinance, according to the report.

Read more about the Senate bill as well as the case for bankruptcy reform to help homeowners stay in their homes on this week’s Real Estate page. Also, read a Realty Q&A that answers one family’s question of whether to rent out their mother’s home, now that she has moved to a retirement community.

After the Senate approves the housing bill, it moves to the House, which will likely add amendments. Still, enactment of the bill could be quick: Stanford Group believes there’s at least a 75% chance that the housing bill will get enacted, and it could come by the Memorial Day recess.

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A Garden City realty company has filed suit against Nassau Assessor Harvey Levinson, alleging that he illegally revoked tax breaks granted the firm by the Hempstead Industrial Development Authority.

The suit filed by the firm that owns and renovated the former Endo manufacturing plant in Garden City contends that Levinson’s actions were “illegal, improper and contrary to law.”

It also notes that Levinson, who chairs the Nassau Board of Assessors, acted without required board approval when he decided to override tax breaks granted by the town Industrial Development Authority and impose full special district levies.

Lawyer Jon Santemma, representing A.G. Metropolitan Endo, said the suit filed in State Supreme Court in Mineola last week asks the tax imposed by Levinson “be declared illegal, the bills be canceled and the payments refunded, plus interest and costs.” No sum is specified.

The suit apparently is the first filed by any of the 144 businesses to formally challenge the $8 million in tax bills received this year because of Levinson’s action.

To promote economic development, state law exempts IDA projects from real estate taxes. The agencies usually negotiate “payments in lieu of taxes,” or PILOTs, in which the companies agree to pay local taxing jurisdictions less than their full property tax burden for a period of years - generally a decade - in return for creating or retaining jobs locally.

With IDA incentives, AG Metropolitan spent $33 million to buy and renovate the vacant Endo building, which now has tenants such as Lifetime Brands and more than 400 employees.

Levinson, however, contends the PILOTs do not exempt “special ad valorem” levies, which he interprets as requiring that the companies pay their full amount of taxes for special districts such as county police, fire, library or sewage disposal.

Based on this interpretation, Levinson directed that tax bills be sent to the 144 firms this year over and above their existing PILOT agreements. AG Metropolitan was billed $125,307 in January for its first half tax instead of the PILOT agreement amount of $99,458.

Levinson spokesman Randolph Yunker said, “Mr. Levinson and his counsel believe that they have interpreted the law correctly and are strictly enforcing the terms of the IDA PILOTs that were agreed to by the businesses now suing the

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board of assessors.”

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Senate leaders have reached a deal to advance legislation to ease the nation’s home foreclosure crisis. The bill has not been written yet, but Sen. Mitch McConnell of Kentucky, the Republican leader, and Senate Democratic Leader Harry Reid of Nevada defused a GOP filibuster threat that had stymied a Democratic plan a month ago.

The legislation would provide billions of dollars to buy up foreclosed homes. It also would ensure that people who take out high-cost mortgages in the future aren’t surprised by big payment increases.

The 15-minute tip: Keeping up with tax changes

Where can you get a summary of what’s new on the tax front? By the time IRS forms arrive, usually not long after New Year’s Day, it’s too late to do any planning. Ditto for all those phone-book-size tax publications you find in the bookstores.

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