Tag Archives: congress

$8,000 Homebuyer Tax Credit

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Looks like the $8,000 Home Buyer Tax Credit is now signed, sealed and delivered.

Update: Everything you wanted to know about the 2009 home purchase $8,000 credit. (There is a similar link below for the 2008 $7,500 loan/credit)

Zillow reports it is a FULL $8,000 credit, even if the buyers total tax liability is less than that amount. “Buyers may not have owned a home for the past three years to qualify.”

CNN Reports That you can get your $8,000 faster by claiming it on your 2008 Return (or amended return if you have already filed), even though to qualify for this $8,000 non-refundable credit, you have to buy a house between 1/1/2009 and 11/30/2009

There is an income limit of $75,000 for single people and $150,000 for couples, though there are reports that people making over the limit might be able to get a partial credit.

If anyone has any details on the partial credit for people earning over the limits, please do let us know. Update: This answer is in the link at the top of this post.

For people who bought between 4/9/08 and 12/31/08

I don’t see any news so far that there are any changes for people who bought in 2008.

The Baby or the Bathwater

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Are we throwing out a program that works, the FHA Down Payment Assistance Program, in this case the baby, while trying to fix the sub prime mess, the bathwater? I guess it all boils down to how valuable home ownership is and how well it helps drive a healthy economy.

A lot of realtors, including myself, have used an FHA non profit down payment assistance program (NDPA) with borrowers that want to own a home but can’t save a down payment fast enough to keep up with rising home prices. FHA programs, like Nehemiah or AmeriDream,  allow more options for buyers, including the gifted down payment portion, and now that zero down payments are hard to find, this program is needed even more. 

The non profit down payment assistance programs are going to be stopped in February unless Congress votes to extend the program.  In the HUD Appropriations bill, congressional members are being influenced by a study done by HUD that shows that the default rate from the non profit down payment programs is 1% higher than other down payment assisted loan programs. 

However, there is a further study by George Mason University that contradicts the HUD study and calls into question the validity of that statistics.  For instance, the HUD sampling was limited to four  US cities that had a higher than normal use of the programs and decreasing home values. Because of this study, the bill extending the programs may not pass.

The George Mason University study as well as the HUD bill is available by emailing me.  It is long and takes time to get through, but here are the key findings, extremely edited!
1.  627,000 NDPA loans in 5 years.
2.  National economic benefits as a result of these loans in the same time period is 4 times the estimated costs.
3.  Those using this program had total wealth growth of 9.6 billion of this period.
4.  NDPA homeowners contributed 228 million in property taxes in that time period.
5.  NDPA homeowners generated 7293 jobs just in using more utilities due to their home ownership
6.  Spending on household items created 60794 jobs, 1.8 billion in personal income, and 5.8 billion in total economic output.
Senator Patty Murray has voted against this bill possibly because of the influence of the HUD study.  I hope she changes her mind. Since over 95% of all homebuyers using this program have not defaulted, we would be punishing those hopeful buyers and throwing out a wonderful and productive program.
 

Children, Can You Say "Suitability"

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If Congressman Barney Frank has his way, all mortgage originators will have to utter those words in the back of their minds when considering loan options for their clients.   Frank is not just any member of Congress, he happens to be the new chairman of the House of Financial Services Committee and his top priority is to create national laws to protect consumers from predatory mortgage practices.

Recently, on The Perennial Borrower post, I was asked by RCG readers how do I determine what loans are right for clients with all the options that are available in today’s mortgage marketplace.  It takes a great deal of determining what the available financing options are, what their financial plans are and then what mortgage makes the most sense, or is the most “suitable”.   This doesn’t happen automatically for every borrower with every loan originator.   Which is why states like Washington are now licensing Mortgage Brokers and Congress is looking into the same on a nationwide basis.  Currently, when we have subprime lenders calling on our office, they promote “how low they can go” in the borrower pool.   55% debt to income ratios are common–heck, you hardly have to be re-established out of your bankruptcy if you don’t mind the interest rate.  Can’t document your income, assets…don’t have a job but your credit is good–fantastic, we have a loan for you!  It’s true, there are a lot of mortgages that seem crazy and while they may not make sense for some, they do for other clients.  Suitability.

According to Kenneth R. Harvey’s article last Saturday, “…a new national standard might require loan officers to determine an applicant’s suitability for a particular loan program based on:

• Employment status, income level, assets and likelihood that income or employment could change;

• Other recurring expenses and the effect they could have on the borrower’s capacity to repay;

• The potential for higher future monthly payments based on the structure of the loan.

A suitability standard might also ban brokers and others from steering less-sophisticated borrowers to higher-cost mortgages than they qualify for, such as pushing them into complicated higher-rate subprime loans when they could qualify for prime rates and simpler programs.”

This sounds great…however; there is always another side to the story.  NAMB is concerned this could “lead to accusations of discrimination.”  I agree, I mean, are loan originators to provide IQ test to borrowers before determining if they truly understand a more sophisticated loan?  Who are we to judge?   Many times, this surprises me, I may not physically meet my client.  The entire transaction may take place over the phone or internet.  You do get a “feel” for whether or not a person understands the mortgage product by the questions they ask, but how do you really know?   If you’re a borrower who wants an option ARM and a lender (deciding you are less-sophisticated) insists on giving you a 30 year fixed, have you been discriminated against?

2007 should be a very interesting year in the mortgage industry.