Feds Shift Focus as Buyer Tax Credits End

Realtors® mightily advocated for passage of the tax credits that helped first-time home buyers and wouldn’t mind if they were rolled out yet again, but somewhat improved market conditions make it unlikely that Congress or the Obama Administration will support another round of credits, preferring instead to shift focus to aiding underwater and unemployed existing home owners.

California was the primary beneficiary of the federal tax that offered first-time buyers an $8,000 tax credit. An estimated 261,302 California buyers took advantage of the credits, which totaled $1.95 billion.
That program has ended as has California’s $10,000 tax credit for first-time buyers. The $100 million California allocated for first-time buyers was used up quickly, forcing the state to stop taking new applications long before its official expiration.

An additional $100 million had been set aside for purchasers of new homes, but that program is on the verge of being cut off also due to heavy demand. For more information go to http://www.ftb.ca.gov/individuals/new_home_credit.shtml

Here’s a quick roundup of some of the programs and regulations implemented recently that help first-time buyers, limit a buyer’s exposure to scams and fraudulent lending activity, while also throwing a life preserver to owners who are struggling to keep their home.

• The Federal Housing Administration on Tuesday launched the Short Refinance program that is designed to allow underwater homeowners who are current on a non-FHA loan to refinance into an FHA-backed loan when their lender agrees to write off at least 10 percent of their principal. Originally announced in March, the program is meant to help homeowners in markets that have seen large declines in home values refinance into a safer, more secure mortgage. For details go to http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-23ml.pdf

• Governor Arnold Schwarzenegger on July 21 announced the launch of the Community Stabilization Home Loan Program, a special program designed to help first-time homebuyers purchase homes in communities hardest hit by the foreclosure crisis. Run by the California Housing Finance Agency, first-time homebuyers will be eligible for below-market interest rate loans to purchase foreclosed homes in ZIP codes with some of the state’s highest foreclosure rates. For a list of foreclosed properties eligible for this program, visit http://www.calhfa.ca.gov/. Information on sales price limits and income eligibility requirements is also available at that website.

• California received $427 million from the Obama Administration’s “Hardest Hit Fund,” which is aimed at helping families in states that saw a 20 percent or more decline in prices due to the economic and housing market downturn. The assistance is meant to help homeowners who are struggling to make their mortgage payments due to unemployment. Details of the program are being developed.

• Additionally, the U.S. Dept. of Housing and Urban Development has launched a complementary $1 billion Emergency Homeowners Loan Program. That program will provide assistance — up to 24 months — to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment or a medical condition.

• The Federal Housing Finance Agency recently took steps to restrict government-sponsored enterprises — Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks — from investing in mortgages with private transfer fee covenants. A private transfer fee, often a 1 percent fee attached as a lien to a property by a developer, is due to the developer each time the property is resold. The term of some covenants can extend for 99 years. The National Association of Realtors is a leader of a coalition that strongly opposes such fees.

• The Federal Reserve on Aug. 16 approved a rule banning lenders from paying bonuses to mortgage brokers and loan officers who get borrowers to agree to a higher interest rate than they need to pay. The move is part of many actions taken to rein in high-risk lending that fueled the housing boom and its eventual collapse. Another rule finalized on Aug. 16 would require lenders to notify borrowers when a mortgage has been sold or transferred.

• Facing new penalties if they lowball estimates of upfront mortgage costs, lenders and brokers now have an incentive to accurately report actual closing costs in the so-called good-faith estimates that mortgage providers must give prospective home buyers. Prior to the new rules issued by HUD, lenders had more of an incentive to give lowball quotes.

• As of this writing, Gov. Arnold Schwarzenegger was weighing whether to sign Senate Bill 1178, which extends anti-deficiency protections to homeowners who refinanced what are called “purchase money” loans and now are facing foreclosure. The California Association of Realtors sponsored this critical piece of legislation designed to protect homeowners in foreclosure from attempts by lenders to sue owners often years later for the difference between the value of the foreclosed property and the outstanding balance on the mortgage loan. Under existing law, if a homeowner defaults on a mortgage used to purchase a home – commonly referred to as a “purchase money mortgage” – the homeowner’s liability on the mortgage is limited to the property itself. However, homeowners who refinanced the original purchase debt, even if only to obtain a lower interest rate, were not extended the same protections.

The Southland Regional Association of Realtors® is a local trade association with more than 10,000 members serving the San Fernando and Santa Clarita Valleys. SRAR is one of the largest local associations in the nation.

Article Courtesy of Southland Regional Association of Realtors