Investing in Distressed Communities Through Louisiana's Opportunity Zones

Established by Congress in the Tax Cuts and Jobs Act of 2017, Opportunity Zones are a community development program. This new federal capital gains tax incentive program is designed to drive long-term investments to low-income communities. The new law provides a federal tax incentive for investors to re-invest their capital gains into Opportunity Funds, which are specialized vehicles dedicated to investing in designated low-income areas.

Eligible taxpayers who invest capital gains into a Qualified Opportunity Fund (QOF) can defer paying federal capital gains tax until the QOF is sold or exchanged, or until December 31, 2026.

To qualify for deferral, capital gains must:

• Be invested in the QOF within 180 days from the sale of an asset

• Be an equity interest (not a debt interest)

• Elect deferral by filing the appropriate tax forms the year the gain would otherwise be included as income

Investors can receive up to three primary tax benefits for investing capital gains into a QOF:

• Temporary Deferral – The tax payment is deferred until the investment is sold or exchanged, or until December 31, 2026 (whichever comes first).

• Partial Exclusion – If the QOF investment is held for longer than five years, there is a 10 percent exclusion of the deferred gain. If held for more than seven years, the exclusion becomes 15 percent.

• Elimination – If the QOF investment is held for at least 10 years, the investor has the potential to eliminate any tax payment.

According to Louisiana Economic Development (LED) 150 census tracts in Louisiana that are qualified opportunity zones. These low-income tracts were nominated by Gov. John Bel Edwards and certified by the Secretary of the Treasury.

Louisiana’s 150 tract recommendations were determined based on a strategic review of feedback from local, state and federal elected officials; economic and community development organizations; private developers; private equity firms; non-profit organizations; churches; and individuals. LED’s extensive review and comprehensive analysis considered the following factors:

• the potential for development based on known certified sites, tracts of land, or buildings within the eligible census tract

• proximity to regional assets (ports, airports, industrial parks, tech parks, colleges and universities, etc.)

• opportunities to leverage other designations such as NMTC or Enterprise Zones

• that coverage included a mix of tracts - some with high potential for economic development and others with high potential for community development (e.g. affordable housing, redevelopment, mixed use real estate, and any other types of quality of place enhancements)

• the end goal to ensure a fair and balanced distribution of zones across each of the eight economic development regions of the state

• the end goal to ensure adequate coverage in both rural and urban areas.

  As with any real estate transaction, title and closing services will be essential to these properties. Homestead Title is ready to assist investors with their title and escrow needs. To find out more about our title insurance and closing services, call us at 504) 581-6427.
  

Yes, An Owner's Title Policy is the Best Way to Protect Your Home!

Though your first reflex may be to brush off buying an owner's title policy as you navigate your new home purchase, you should reconsider. Yes, you have your money and time tied up in so many other things that come with buying a house, but title insurance can protect all of the money you've put into the investment. 

"I don't want to spend extra on title insurance. What's the Big Deal?"

The big deal is that you may not know how title insurance works in the first place and may severely miss out on its benefits. Your mortgage lender's title insurance does not cover you. Also, title insurance isn't a recurring monthly payment but a one-time payment paid at the closing of your home buy. From then on, you're fully protected. 

The highest risk for buying a home without title insurance is the possibility of claims that may appear due to any issues with the deed. These claims range from the discovery that an owner didn't report the complete picture of the financials on one end and the surfacing of a forged deed on the other. Unknown heirs who hold previous claims can materialize to challenge ownership, not to mention any liens that may not have been appropriately reported. 

 "So What Do I Do?"

Take Title Insurance into serious consideration. Peace of mind aside, you will have your legal fees covered in the unfortunate event of legal challenges, and if the claim succeeds, then it provides a net to hold back any loss on your investment. Homestead Title is known for its guidance unique to each client and facilitating the particulars of purchasing title insurance and every other step of closing on a property along the way. We understand that buying a home is an anxious, confusing journey, and we're here to offer our expertise. If you'd like to discuss title insurance for your upcoming home or property purchase, reach out to schedule an appointment or call (504) 581-6427 to discuss your options. 

Your Questions Answered About Refinancing

If you consider refinancing your home, you undoubtedly have some questions, such as How does refinancing work? What are the average costs to refinance? What are the title company's responsibilities?

The refinancing process may be a confusing experience if you've never been through it before. Here are answers to some of your questions:

HOW DOES REFINANCING WORK?

When you purchase a home, even though you have the full intention of making the mortgage payments, sometimes issues arise that keep you from making your financial obligations. Refinancing your home is a way to reduce your monthly mortgage payment. 

In the case of a divorce, you may need to refinance your home to remove your ex's name from the mortgage

Or on a positive note, you may choose to refinance because improvements in your credit score will now help you obtain a lower interest rate.

WHAT DOES "REFINANCING" MEAN?

A refinance loan is a second loan used to pay off the first one. When you refinance your home, it's typically necessary to pay off the original loan first. 

WHAT ARE THE AVERAGE CLOSING COSTS TO REFINANCE?

The closing costs of a refinance are between 2 and 5 percent of the loan. That means a 15-year-fixed mortgage at 2.35 percent will cost approximately $660 for each $100K borrowed. That said, many different factors can impact the price, from the type of loan you are seeking to your credit score. It's important to remember that each case is unique. 

DOES REFINANCING MEAN I GET A NEW TITLE? 

When you decide to refinance your home, the first thing your title company must do is search the public records to confirm ownership. In most cases, you will not be issued a new title at the end of the process. 

An owner's title policy is purchased at the original closing. For each separate loan transaction, you can purchase a loan policy. Once you are confirmed as the current property owner, you will be able to submit your owner's title policy to your title company to acquire a reissue credit.

A new title is only provided at closing if the "current vesting" (the property owners' name) changes. For example, if your new mortgage doesn't include your ex-spouse's name, you will need a new title.

WHY DO I NEED TITLE INSURANCE ON A REFINANCE?

First, it is essential to understand that title insurance is significantly less costly than many other types of insurance policies you might buy. That's because instead of paying a monthly premium, you pay a one-time fee at the time of the closing. In return, you get proof that you are the legal owner of your property. This ensures that past events (even ones you are unaware of) can not result in the loss of your ownership. Additionally, it is customary for both lenders and owners to purchase title insurance at the closing, so each party to the loan is protected. 

Mortgages are backed by securities. That's why investors must be confident that the title is "free and clear" of all encumbrances. Title insurance provides your lending institution with this confidence. Without title insurance, it would be too challenging to back mortgages with the necessary assets, and investors would be too wary of the risk. 

WHAT DOES THE TITLE COMPANY DO? 

The first responsibility of a title company is to conduct a title search to establish the legal property owner. This process may also reveal information that the lender might find relevant. For example, the title search may indicate that the property owner has had a judgment filed against them. If this is the case, the lender could require the owner to pay the judgment before starting the refinancing process.

Title companies are typically involved in the closing. When a lender has reached an agreement with a property owner and is ready to provide them with a loan, a title company will prepare a settlement statement. This document explains how the loan funds will be disbursed to the borrower. It also will show how the funds will be used. For instance, if a loan is being issued for the payment of several bills, the settlement statement will list them accordingly.

Sometimes the title company is involved in the disbursement of funds as well. There are instances when a lender will provide the agreed-upon loan to the title company instead of directly to the borrower, which often happens when the settlement statement includes other parties besides the borrower, who are also entitled to payment.

In general, the title company may also serve as a liaison between the various parties involved in refinancing. These can include not only borrowers and lenders but attorneys, surveyors, government employees, and more. Because refinancing can involve many steps, with many issues to resolve before closing can occur, it helps to have an intermediary who works with everyone to move the process along smoothly.

That's one of the primary reasons for working with a title company during refinancing is beneficial to all parties involved. By assisting in key steps and coordinating with various organizations and individuals, title companies ensure refinancing is more efficient.

At Homestead Title, we understand that refinancing a home can seem like a lengthy and overwhelming process. Every step of the way, we work with all relevant parties to help make it easier. To discover more about what we can do for you, contact us today.

Homestead Exemptions In Orleans Parish - What You Need to Know

As of January 1, 2012, if you reside in Orleans Parish, the Homestead Exemption you receive on your property will be permanent for as long as you own your property and declare it as your domicile. Once you have successfully applied for a Homestead Exemption, you will no longer need to reapply annually.

For every home, there can only be one homestead exemption. As of August 2016, it is a punishable crime according to state law to claim more than one homestead exemption.

Every homeowner in Orleans Parish can claim an exemption from property taxes for the first $75,000 of the value of their "domicile" or the home they occupy as their primary residence, guaranteed by the State

Constitution. As of 2017, for those declared 100 percent disabled by the U.S. Department of Veterans Affairs or the surviving spouse of a veteran, policeman, fireman, or state trooper killed in the line of duty, the exemption is for the first $150,000 of a home's value. 

AGE, DISABILITY, VETERANS

Homeowners 65 years of age or older, may qualify for a Special Assessment Level (SAL) if they meet certain conditions. You must be on permanent disability, be the documented surviving spouse of a member of the Armed Forces or Louisiana National Guard who was killed in action, is missing in action, or is a prisoner of war. The SAL places a "freeze" on the property's assessed value, even though the appraised value may fluctuate with the market.

HOW TO FILE FOR A HOMESTEAD EXEMPTION:

To claim a Homestead Exemption, all owners who occupy the property must appear in person at the Assessor's Office and present the following documentation:  

1. Proof of ownership (either an Act of Sale or Warranty Deed);

2. A valid Louisiana Driver's License or Louisiana State I.D. (address must match the property's address on your application);

3. A current unpaid Entergy bill for the property, (service location and mailing address must match) showing a standard residential usage; OR

4. A landline telephone bill or cable bill (Direct, Dish, or Cox).

Note that your Sewerage and Water Board bill will not count towards proof of residency.

100 PERCENT DISABLED VETERANS EXEMPTIONS

To claim a Homestead Exemption for a 100 percent Disabled Veteran,

you must show the following: 

1. Proof of ownership (either an Act of Sale or Warranty Deed); 

2. Proof that the owner qualified for the current year's Homestead Exemption; 

3. 3. A valid Louisiana Driver's License or Louisiana State I.D. (address must match the property's address on your application);

4. 4. A current unpaid Entergy bill for the property, with service location and mailing address being the same, showing standard residential usage; OR 

5. 5. A letter from the Veterans Administration (V.A.) which states the veteran owner is 100 percent disabled. 

WHAT IS AN AGE FREEZE AND HOW TO QUALIFY 

An Age-related abatement or "age freeze." 

To qualify for an age-freeze, the homeowner must be at least 65 by August 1 in the year preceding your tax year. You must also meet certain income restrictions. Note that the maximum qualifying income for an age freeze changes annually—Call 504.658-1300 to verify the current maximum. Once successfully gained, the age freeze will be permanent, and you will not have to reapply for it on an annual basis.

Age-related abatements or "freezes" must be documented by:

1. A valid Louisiana Driver's License or Louisiana State I.D. (address must match the property's address on the application);

2. Proof of annual income: 1040 adjusted gross income of the prior year's income tax return or Social Security award letter for individuals with no income or job.

 At Homestead Title, we handle the coordination of all parties of interest so that your refinancing runs efficiently. We also take the time to ensure that all documents are in order, so that you will experience a “smooth road” to refinancing. Call us today at (504) 581-6427 if you have any questions or would like further information on how we can help you.