Ah, There is Justice in the World….
There are moments where faith is restored in small increments. This is one.
read comments (0)In a sort of reversal of its former reversal, HUD announced that it would allow FHA approved lenders to monetize the tax credit to allow first time buyers to “apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate.”
This is a modification of the original announcement that stated the credit could be used to meet the 3.5% FHA down payment requirement. In its new form, it may help some people. A buyer could certainly take advantage of that to write an offer that didn‘t ask the seller for help with closing costs. Since this type of concession is common practice in our market where most buyers are strapped for cash, not asking the seller to put out extra money might set the buyer apart from the crowd. Or the funds could be used in addition to any seller credit to buy the interest rate down further making monthly payments more affordable.
However, remember that it takes everybody a little while to figure out how to implement these new rules, and in this case, figuring out the details could be a little complicated.
Fed Says “No” to $8k Tax Credit For Down Payment
Well, it was a good idea while it lasted. Concerns about similarities between this proposal and seller-funded down payment assistance programs has scuttled the idea before it ever left port.
May. 19, 2009 12:00 AM
The Arizona Republic / J. Craig AndersonFederal officials on Monday reversed an earlier decision to allow first-time home buyers to use an $8,000 tax credit to borrow the down payment on a home.
A week earlier, U.S. Department of Housing and Urban Development Secretary Shaun Donovan had told the National Association of Home Builders that HUD would let banks and local governments offer short-term “bridge loans” to cover the down payment for first-time buyers eligible for the tax credit. The loans would have been available to applicants for federally insured mortgages such as Federal Housing Administration loans.Lenders, home builders and real- estate agents had reacted favorably to the bridge-loan proposal, saying it would open up the housing market to more first-time buyers.
However, not everyone was in favor of using the tax credit as collateral on a down-payment loan.
I haven’t heard the official announcement, and banks often take awhile to adopt these changes formally, but this would be great news indeed.
…from Realtor.org
“Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, on Tuesday said that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment.
Previously, most buyers wouldn’t receive the funds until after they filed their tax return, and that deterred some people from using the credit. The NATIONAL ASSOCIATION OF REALTORS® has been calling for the change.
“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan says. His remarks came in an address to several thousand REALTORS® gathered Tuesday morning at “The Real Estate Summit: Advancing the U.S. Economy,” at the 2009 REALTORS® Midyear Legislative Meetings & Trade Expo in Washington, D.C..
He says FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.”
Home Affordable Refinance & Fannie Mae’s “Refi Plus”
Fannie Mae has clarified its implementation of the Obama Administration Making Home Affordable Plan announced on March 4, 2009. The refinance pice of the Obama plan–Home Affordable Refinance–is for borrowers with an acceptable payment history who have been unable to refinance to lower rates or a more stable loan due to declines in property values.
It will be called “Refi Plus” by Fannie Mae. Here is a Q&A for consumers about “Refi Plus“, and here is the link to look up your current loan to see if you qualify.
Do You Owe Taxes on Cancellation of Debt?
For those who have lost a home or defaulted on other debt, the salt in the wound might be the income liability associated with cancellation of debt. As you may know, when you are relieved of debt, the IRS considers the amount to be taxable income. And this is the time of year when those 1099C notices show up.
But if you were insolvent at the time, you may have an easy way out. Here’s a good article for those facing an income tax liability due to cancellation of debt.
Mortgage Rates Slide, But Pressure is Building
To read the news, you would think mortgage rates had suddenly fallen through the floor. While the slide has been steady in recent weeks, owing to the Fed’s fat wallet and their promise to shill at the Treasury auctions, the decline is clearly not as dramatic as portrayed by the headline-hungry media.
Here’s what I mean. These are the weekly national averages for 30 year fixed rates taken from Freddie Mac’s weekly Primary Mortgage Market Survey published each Thursday.
- March 26: 4.85%
- March 19: 4.98%
- March 12: 5.03%
- March 05: 5.15%
- February 26: 5.07%
- February 19: 5.04%
- February 12: 5.16%
- February 05: 5.25%
- January 29: 5.10%
- January 22: 5.12%
- January 15: 4.96%
- January 08: 5.01%
Hmmm….not so much. Year to date, rates have fallen just 16 basis points, less than two tenths of one percent! Not exactly the plunge describe in our own Sacramento Bee last week.
The details are common casualties of the hype, but remember, that’s where the devil lives. For example, banks are not pricing the old “zero points” loans favorably these days. Home owners accustomed to eliminating points with a small increase in interest rate find that today the rate offered is 5.5% or higher.
If you are pulling cash out or your credit scores have fallen below 740, you’ll pay a higher rate as well. Those buying duplexes and condos also pay higher rates. And if you’re are an investor, rates and fees look nothing at all like the advertised rates. These risk-base price adjustments have been implemented by Fannie Mae and Freddie Mac this year in reponse to the high mortgage default rates, and the effectively mean that only a narrow cross section of today’s borrowers have access to those really low rates.
And don’t pay attention to the rumors that the government is going to somehow push rates down to 4% or lower–I hear that one a lot lately–because it just isn’t going to happen. The only reason rates aren’t rising already is that a) the economy is deflating rather than inflating, and b) the Fed is standing by to buy MBS and Treasury securities to keep rates in check.