It seemed ridiculous when we first read about them and apparently they were. I am referring to the undocumented loans that were being offered by banks and mortgage companies a few years ago. These were loans with no income verification. The mortgage industry named them “liar loans” since they required no proof of income or existing assets. Some of these people were not even employed when these loans were approved. Obviously, the people granting and approving these loans were motivated solely by their own greed.

Just as we believed the housing market was possibly starting to improve, many of the “liar loans” are defaulting in record numbers. Most of these mortgaged properties are located in states where home prices have decreased the most, such as California, Nevada, Arizona and Florida. The homeowners with these loans are unable to refinance because they paid record prices at purchase and the homes have since sharply devalued. This leaves only foreclosure as an option.

Many of the lenders who provided “liar loans” are now defunct and others may soon be following. Brokers who provided borrowers with this type of loan earned greatly inflated commissions, as the loans themselves carried substantially higher fees and interest rates. A broker who might earn between $2,000 and $4,000 on a normal mortgage loan was earning close to $15,000 on a “liar loan”. Unfortunately, we, the taxpayers, are picking up the cost and dealing with the problems generated by this unseemly business practice.

The housing market has been in trouble for some time. However, recently, the number of foreclosures has been increasing rapidly and may be causing confusion as to the current availability of homes for sale.

The combination of lower home values, decreased volume of sales, less credit availability, and a slowing economy is placing financially strapped homeowners in a very difficult bind. Some have no other choice then to let their homes go to foreclosure.

Since many foreclosed homes are in the hands of the banks at this time, frequently they are not recorded as “homes for sale” on real estate listings such as MLS (Multiple Listing Service). Foreclosed homes also often sell for less money and, therefore, they will lower the prices of homes in the area.

The possible result of this information is that the housing market may be in more trouble than originally believed. The hope has been for sometime that the market has bottomed-out, but this may not be completely true. If many foreclosure sales are not included in the current calculations, we may have even more trouble ahead before this market can return to normal.

Meanwhile, our government is introducing a program, Housing and Economic Recovery Act of 2008, which will allow homeowners who qualify to cancel their old home loans and refinance with 30-year fixed-rate loans for up to 90 percent of the home’s current value. This may help many struggling families but can only apply to foreclosed properties if the bank agrees to take a loss on an existing loan in exchange for avoiding the high expense of processing a foreclosure.

If you are purchasing your first home, the government is providing assistance. This help from our government also applies to anyone purchasing a home who has not owned a house during the past 3 years. If someone was renting or living with family during this three year period, this new tax credit will be available to them, too.

The new credit being made available extends only to purchasers who buy a home between April 9, 2008 and June 30, 2009. This is our government’s attempt to create activity in the housing market while helping numerous people become homeowners. Any home purchase will qualify whether the home is new, old, or in need of repair.

If you are able to close on the purchase of a home during this specific time period, you will be eligible for a credit of 10% of the purchase price, up to a maximum of $7,500 ($3,750 if you are a single person) against your federal tax liability for 2008 or 2009. This is what is referred to by the government as a “refundable” tax credit. “Refundable” refers to the fact that if you owe the government a specific amount in taxes and it is less than the “refund” you have qualified for, you will receive the difference in cash from the IRS. This would be a great source of funds for getting settled into your new home and providing a few of the new home purchases that everyone needs.

Unlike many others, this tax credit contains a clause stating that beneficiaries must repay the money to the government. Beginning in the second year of homeownership, taxpayers are expected to begin making regular payments to the government when filing their federal tax returns. The payback period may be extended up to 15 years as long as regularly scheduled payments are being made.

As with any law passed by our government, there are many exceptions, qualified clauses, etc. so be certain to consult a financial adviser or your accountant regarding your specific qualifications for this new tax credit.

The following are cost-saving tips that can save you money over the next year. Consider implementing some of them so that your family can stretch their budget.

Plan a visit to your attic to see what is up there. Many internet sites allow you to list these items for sale. If you are not using them, maybe someone else will.

Drink tap water instead of bottled water and you could save as much as $1,250 per year.

Adjust your thermostat so that your heat and/or cooling system is not working as hard and will use less energy. Consider a sweater if you are cool.

Adjust your toilet flow. Instead of purchasing a new toilet, consider filling a plastic drink bottle with water, cap it, and put it in a corner of the tank. This will decrease the water needed per flush.

Switch all light fixtures to fluorescent bulbs as they last longer and use less energy.

A new showerhead with a low-flow can save water over a period of time.

Pull the plugs on your electronics and the savings will be considerable. Disconnect the TV, DVD player, etc. each time you are finished using them. Substantial savings will be realized by this simple act.

Do not hand wash dishes; it actually uses more energy than the dishwasher.

Line dry your clothes.

Weather strip your doors.

Turn down lights using dimmers in several areas.

Plant leafy trees to protect from the summer’s heat.