The Warren Report

Homebuyer Tax Credit Forms and Rules Now in Place

The Treasury Department has moved at record speed to implement one piece of the new American Recovery and Reinvestment Act of 2009 Act aka the stimulus act.

The Department and the Internal Revenue Service which will manage it announced on Wednesday that forms and regulations are already in place for homebuyers who wish to claim the first-time credit enabled under the act.

The credit is available to homebuyers who purchase a home before December 1 of this year.  In an effort to make the effects of the credit felt quickly in the economy, homebuyers can claim the credit either on their 2009 tax return or immediately on the 2008 return due in April.

The tax credit represents 10 percent of the purchase price of a home up to a maximum of $8,000 or $4,000 for married taxpayers filing separate returns.   The $7,500 credit that was authorized under earlier legislation last year was actually a 15 year loan; the new tax credit does not have to be repaid by the homeowner under ordinary circumstances.

The credit does have to be repaid if the homeowner sells the home in less than 36 months or if the home ceases to be his principal residence during that time.

For the purpose of this credit, a first time homeowner is defined as one who has not owned a home for the 36 months ending on the date of purchase.

The credit is available to taxpayers with adjusted gross incomes up to $75,000 or $150,000 for married taxpayers filing jointly.  Above those income levels the credit is phased out gradually.

Homeowners who purchased a house between April 8 and December 31, 2008 are not eligible for the new credit.  They are covered by the earlier legislation and can claim the $7,500 repayable credit.

Treasury Secretary Tim Geithner said in a press release from his department, "The expansion of the first-time home buyer tax break as part of the President's recovery agenda gives money to taxpayers when they need it most, while also targeting an important group of buyers.  We view our economic recovery plan, our financial stability plan, and now this homeowner affordability plan as three legs of the same stool - an integrated whole that represents our immediate response to the current crisis."

Forms and instructions for claiming the credit on 2008 tax returns are available at www.irs.gov. 

The form number is 5405. 

2/26/2009 Money

Isakson Outlines Keys to Getting Economy Back on Track

Pushes Homebuyer Tax Credit, Refinancing Help, Reinstatement of Uptick Rule, Revision of Mark to Market Rules

WASHINGTON (FEBRUARY 24, 2009) – U.S. Senator Johnny Isakson, R-Ga., today outlined four principles he believes are imperative to helping improve the U.S. economy during a speech on the Senate floor.

“Our people are in difficult times. We have difficult economic circumstances and it's imperative that we move forward together, members of the House and Senate with the executive branch, to find the solutions to the challenges before us,” Isakson said. “I believe it is time to address the fundamentals of our economy and the fundamental problems that we face.”

First, Isakson believes jump-starting the demand for housing is essential to boosting the economy. Isakson announced he will continue to push a housing tax credit for all purchasers of any home without income restrictions. Isakson’s $15,000 tax credit for all purchasers of any home was removed during conference negotiations between the House and Senate on the final version of the economic stimulus bill, despite its unanimous approval by the Senate. Instead, House and Senate negotiators made only small modifications to the first-time homebuyer tax credit that was enacted in 2008 as part of the Housing and Economic Recovery Act of 2008. 

Second, Isakson called for all homeowners to be eligible for the re-financing opportunities outlined by President Obama to help homeowners in trouble. Isakson does not believe responsible homeowners should be penalized or denied access to the proposed re-finance opportunities. 

Third, Isakson called for the SEC to reinstate the Uptick Rule in order to stabilize the markets and protect the American consumer from traders forcing down the price of a stock. In his remarks, Isakson argued that the market deterioration was impacted by short sellers rushing to the market, shorting financial stocks and accelerating the decline of those values. Isakson called for the Uptick Rule to be reinstated to ensure that traders are not coming into the market to take advantage of these difficult economic times.

Finally, Isakson stated that Mark to Market rules (FAS 114) are disproportionately penalizing the very people we serve. Given the declines our nation has seen in the mortgage-backed securities and in real-estate, mark to market has caused tremendous problems for our nation’s banks. 

“When the FDIC comes into your bank and says you are going to have to mark to market as real estate asset that might have been worth $20 million two years ago but is unfortunately worth $6 million today due to the economy, you are going to have to take a $14 million dollar loss in your bank asset ledger. Mark to market is making good loans look like problems therefore taking good banks and making them into troubled banks.” Isakson said. “This is devastating to our bankers as real estate is absorbed over time and not in one fell swoop. Mark to market should not be an arbitrary write-down to zero, it should be a recognition of the transition of values in a down market or in an up market. This issue hits at the heart of residential real estate construction lending thereby further crippling our economy from returning to a prosperous nation.” 

Isakson said mark to market rules should be replaced with a mechanism of amortization or “smoothing” to absorb the assets over time. This will allow the absorption of those assets over time to be more reflective of reality and less reflective of the dire straits that our nation is currently in today.

Obama Unveils Plan to Stem Foreclosures

By Kevin G. Hall

RISMEDIA, February 19, 2009-(MCT/RISMedia)-President Barack Obama rolled out a bold $75 billion, three-part plan Wednesday to halt the soaring rate of mortgage foreclosures nationwide, one that seeks to encourage refinancing of homes now worth less than their mortgages and provides incentives for lenders to lower the debt load on struggling homeowners.

The Homeowner Stability Initiative, which Obama unveiled in Phoenix, seeks to address one of the triggers of the global financial crisis: the 2.3 million U.S. foreclosures last year that are protracting the housing crisis and helping to drive down home prices across the nation.

“When the housing market collapsed, so did the availability of credit on which our economy depends. As that credit dried up, it has been harder for families to find affordable loans,” Obama said. “In the end, all of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to deepen _ a crisis which is unraveling homeownership, the middle class, and the American Dream itself.”

Specifically, the Obama plan seeks to provide low-cost refinancing for as many as 5 million Americans. It seeks to help delinquent or at-risk borrowers get their mortgages modified so that no more than 31 percent of their income is tied up in their mortgages. And it provides financial incentives to lenders and even a new insurance program to promote more mortgage modifications.

Like the failed efforts under the Bush administration, however, the Obama plan doesn’t compel banks and other lenders to modify troubled mortgages. Instead, it provides a menu of incentives that may or may not prove sufficient.

“This is not just the treasury secretary going into the room and asking people to do the right thing,” said a senior Treasury official, speaking on the condition of anonymity to speak more freely. “This is the first time there has really been a systemic incentive strategy for them (lenders).”

Banks joined two prior voluntary efforts during the Bush administration _ Hope for Homeowners and the Federal Housing Administration’s FHA Secure _ but these efforts have resulted in relatively few mortgage modifications.
Now they’ll have a stick waved at them if they don’t comply with the subsidy plan. It will come in the form of Obama’s support for legislation pending in Congress that would allow bankruptcy court judges to modify the terms of a mortgage.

That’s forbidden right now, and banks and other lending institutions fiercely oppose what they call “cram down” legislation, warning that it’ll bring uncertainty for lenders, who will respond by restricting mortgage lending.
Banks may soon have to choose between the lesser of two evils. They could either modify loans - with a subsidy - to provide lower lending rates, and lose what they might have made from the higher lending rate over the life of the loan. Or they can do nothing and run the risk that a homeowner could file for bankruptcy and then have a judge order new loan terms that allow the borrower to stay in the home - and pay the lender less money.

The president’s plan also offers payments to mortgage servicers, who collect mortgage payments on behalf of investors who own the mortgages originally issued by banks but were sold into a secondary market. Servicers apparently would be offered a payment for modification on par with what they would collect in the case of foreclosure.

$15,000 homebuyer credit cut in compromise

Inman News

By Matt Carter

A proposal to provide a $15,000 tax credit to homebuyers was stripped from a $789 billion economic stimulus package that appears headed for a vote Friday, but a restoration of higher loan limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs appears to have made the cut.

The $15,000 homebuyer tax credit -- included in an $838 billion economic stimulus bill passed by the Senate Tuesday (see story [1]) -- was scaled back to $8,000 and limited to first-time homebuyers as part of a compromise between Democrats and Republicans.

The Congressional Budget Office estimated the larger tax credit would have cost $35.5 billion, a price tag that proved too tough to swallow in conference committee negotiations where differences between House and Senate versions of H.R. 1, The American Recovery and Reinvestment Act of 2009 [2] were ironed out.

Instead, the compromise bill falls back on language approved by the House Jan. 28 (see story [3]), which would have eliminated the repayment requirement on an existing $7,500 tax credit that is currently available only to first-time homebuyers through July 1.

According to a summary of the compromise bill [4] released by lawmakers Thursday, the tax credit will still be available only to first-time homebuyers -- those who haven't owned a principal residence in the last three years. But they won't have to pay it back, as is currently the case, and the credit will be increased to $8,000 and be available through the end of November. The smaller tax break will cost taxpayers closer to $6.6 billion over 10 years, a savings of nearly $30 billion.

The compromise version of H.R. 1 would nevertheless increase the statutory limit on the public debt by $789 billion, raising it from $11.3 trillion to $12.1 trillion.

While not everything that the industry was hoping for, the National Association of Realtors nevertheless welcomed the more limited expansion of the tax credit.

Eliminating the repayment provision on the first-time homebuyer tax credit could drive more than 200,000 additional home sales, NAR President Charles McMillan said in a statement, which will help stabilize home values. The National Association of Home Builders had estimated a $15,000 tax break for all homebuyers would have generated nearly 500,000 home sales.

McMillan said the compromise bill will also reinstate the $729,750 loan limit in high-cost areas for Fannie Mae, Freddie Mac and FHA loan guarantee programs that was in place throughout much of 2008, which he said would help reduce inventory and improve liquidity in the overall mortgage market.

In a separate development, investors were cheered Thursday by a report that the Obama administration is planning to launch a program to subsidize mortgage payments for troubled borrowers who can pass a standardized re-appraisal and affordability test. A Reuters report [5] on the Obama administration's foreclosure prevention plan helped stocks recover much of their losses for the day before Thursday's closing bell.

The foreclosure prevention plan is presumably part of a comprehensive housing program that Treasury Secretary Timothy Geithner promised Tuesday the administration would roll out in coming weeks as part of a "TARP 2" financial stability plan for banks.

In announcing the plan [1], Geithner suggested an expansion of a $600 billion Federal Reserve program to drive down mortgage rates could also be in the works. That program has already driven down mortgage rates to around 5 percent through purchases of mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae.

Reuters reported that the Obama administration has shelved a plan for the government to stand behind low-cost mortgages with rates between 4 percent and 4.5 percent.

Federal Home Loan Bank of Atlanta to Award More Than $12.4 Million for Housing in Georgia

/PRNewswire/ -- Federal Home Loan Bank of Atlanta (FHLBank Atlanta) announced today that it will award more than $12.4 million to help finance 1,359 affordable housing units in Georgia. The funding is part of more than $43 million FHLBank Atlanta will award in ten states to create or preserve 4,514 units of affordable housing.

FHLBank Atlanta will award the funds as part of its 2008 Affordable Housing Program (AHP) offering. Local community developers, in partnership with FHLBank Atlanta member institutions, will use the awards to fund 18 affordable housing developments in Bleckley, Butts, Cobb, Crawford, DeKalb, Dodge, Fulton, Henry, Houston, Jones, Lamar, Laurens, Monroe, Montgomery, Peach, Pike, Pulaski, Spalding, Telfair, Treutlen, Twiggs, Upson, Wheeler, and Wilcox counties, as well as Atlanta, Bowdon, Cordele, Decatur, Donalsonville, Dublin, and Rabun Gap.

"AHP program funding has positive far-reaching effects for the communities it serves by providing a source of affordable housing and new jobs, which stimulates the local economy," said Arthur Fleming, first vice president and director of Community Investment Services, FHLBank Atlanta.

AHP is a competitive funding program that helps develop owner-occupied and rental housing for very low-, low-, and moderate-income families. FHLBank Atlanta awards the funds annually to member financial institutions and their community housing partners. AHP is a component of FHLBank Atlanta's affordable housing, economic development, and down-payment assistance initiatives. For the complete list of AHP winners, visit www.fhlbatl.com/ahp.

Tax Credit for Homebuyers Passes

February 4, 2009, 7:19 pm

Tax Credit for Homebuyers Passes

By Kate Phillips

Within just a few moments of beginning votes on several amendments to the stimulus package, the Senate easily passed by voice vote two measures that were popular on both sides of the aisle.

The swift passage of a tax deduction for homebuyers and a small business provision was yet another sign — like the car-buying incentive passed last night — that the types of items attracting strong Republican support are those that put money in consumers’ pockets or provide tax breaks to persuade them to spend. (Related article by David Herszenhorn.)

Since the Senate began debating the stimulus in earnest on Tuesday, Republican senators have been balking at the size of the stimulus package and the way that it is weighted (in their view) toward spending versus tax cuts. This morning, in opening remarks on the floor, Senate Minority Leader Mitch McConnell began by ticking off amendments that passed on Tuesday night, proposals that added at least $17 billion to the bill. “Unfortunately, Democrats just keep throwing more money on top of an incredibly bloated bill,” Mr. McConnell said earlier today.

(Although $11 billion of the money he mentioned is the estimated cost of the car-purchasing tax deduction — one that received broad G.O.P. support. And $6.5 more billion went toward additional money for the National Institutes of Health, which Republican Senator Arlen Specter backed.)

One proposal promoted by Senator Johnny Isakson of Georgia had bipartisan support even before the vote. It would offer new homebuyers a tax credit of up to $15,000 or 10 percent of the purchase price of a house that could be spread over two years. The proposal, which would double the $7,500 tax credit under current law, is estimated to cost $20 billion. “Ít is the beginning of what is going to be a long climb back,” the senator said earlier.

To promote the credit, Senator Isakson used his own experience selling homes during the housing crash in the mid-1970s to explain how such incentives spur sales. At the time, a bipartisan effort by President Ford and the Democratic-controlled House and Senate approved such a break, which Mr. Isakson said helped stabilize the housing market. At a news conference earlier today, he called this type of initiative a catalyst that would fuel housing sales. That’s the way he said the cost of the additional tax credit would be offset — through reviving the real estate market.

Unlike the previous credit for buying a new home, this one would not have to be repaid.

The second item that passed by a simple voice vote was one offered by Senator Ben Cardin, Democrat of Maryland. It would help small businesses qualify for public works projects.

Mr. Isakson indicated tonight that he still hadn’t decided whether he would vote for the overall stimulus package. But earlier today, he appeared with Senators Lamar Alexander, Republican of Tennessee, and John Ensign, Republican of Nevada, at the news conference where they all pushed for scrapping the existing stimulus bill (unlikely given the Democratic majority) and for substituting far more housing/mortgage relief and tax-cut proposals.

Senator Ensign is proposing an amendment that would provide for a fixed rate mortgage of somewhere between 4 and 4.5 percent over 30 years for mortgage refinancing or buying a new home. His proposal will be debated tomorrow. But Democrats, including President Obama, have said they would prefer a broader housing/mortgage package to be considered separate from the stimulus package.

Also upcoming: Senator John McCain’s alternative bill will be debated tomorrow, along with a lot of other issues as the Senate Democrats try to finish the legislation up this week. (Senate Majority Leader Harry Reid and Mr. McConnell have agreed to try to do a conference bill, perhaps as early as next week, when a lot of haggling would go on between Senate priorities and the House version that passed last week with nary a Republican vote. )

Senate Adds $15,000 Home-Buying Tax Credit to Stimulus Bill

February 05, 2009 11:26 AM ET | Luke Mullins

 

The Senate on Wednesday approved an amendment to the economic stimulus package that would provide a tax credit of as much as $15,000 to anyone buying a primary residence during a one-year period. The measure, introduced by Sen. Johnny Isakson, a Republican from Georgia, would reportedly add $19 billion to the already-massive stimulus package.

Here's the release from Isakson's office:

The U.S. Senate today unanimously approved an amendment by U.S. Senator Johnny Isakson, R-Ga., to stimulate the nation's declining housing market by offering a $15,000 tax credit to individuals who purchase a home in the next year.

"It is time to fix America's problem, not throw money at the symptoms. It is time to fix housing first. It is rare that we have a road map to success in times of difficulty, but this country has once before realized a housing crisis every bit as bad as the one we have today and economic troubles every bit as dangerous," Isakson said. "We have a pervasive housing problem, and we have a historical precedent that works. I am proud this Senate has joined together, learned from history and repeated a method that worked by adopting this amendment."

Specifically, Isakson's amendment to the pending economic stimulus bill would provide a direct tax credit to any homebuyer who purchases any home. The amount of the tax credit would be $15,000 or 10 percent of the purchase price, whichever is less. Purchases must be made within one year of the legislation's enactment, and the tax credit would not have to be repaid.

The amendment would allow taxpayers to claim the credit on their 2008 income tax return. It also seeks to prevent misuse by only allowing purchases of a principal residence and by recapturing the credit if the home is sold within two years of purchase. The amendment would sunset the current $7,500 housing tax credit on the date of enactment.

Isakson has pushed hard for a non-repayable tax credit for homebuyers because he knows that it will work. In the mid-1970s, America faced a similar housing crisis when a period of easy credit and loose underwriting flooded the market with new construction. Interest rates rose, the economy slowed and America was left with a three-year supply of vacant homes. Congress responded by passing a $2,000 tax credit for anyone purchasing a new home for their principal residence. Isakson believes the results were clear and swift as home values stabilized, housing inventory dropped and the market recovered.

Last year, Isakson introduced legislation to specifically target those homes that were causing the unprecedented increase in housing inventory by offering tax credits to individuals purchasing a foreclosed home or a home where foreclosure is pending. In April 2008, the Senate passed legislation to stimulate the nation's declining housing market that included Isakson's proposal. However, the final version of the legislation that was signed into law included only a $7,500 tax credit for first-time homebuyers that must be repaid over a 15-year period. Isakson's amendment that passed today would sunset that $7,500 tax credit.

Isakson spent more than three decades in the real estate business, beginning his business career in 1967 when he opened the first Cobb County, Ga., office of a small, family-owned real estate business, Northside Realty. Isakson later served as president of Northside for 20 years, presiding over the company's growth into the largest independent residential real estate brokerage company in the Southeast and one of the largest in America.

Isakson has not made a decision regarding his vote on the overall economic stimulus legislation.

Isakson wants tax credit for home buyers

Senator says housing market must be fixed to lead way out of economic crisis

 

By JIM THARPE in Atlanta, BOB KEEFE in Washington

The Atlanta Journal-Constitution

Monday, February 02, 2009

 

The U.S. economy will not recover until the housing market revives, U.S. Sen. Johnny Isakson said Monday as he renewed his call for a $15,000 homebuyer tax credit to be included in the economic stimulus package now being considered by the Senate.

 

A first-term Georgia Republican senator from Cobb County, Isakson also reiterated his call for a “forensic investigation” of what went wrong with the economy.

 

“It may not make that bill perfect,” Isakson told the Atlanta Rotary Club of his proposed housing credit. “But it is the single best thing we can do to begin the comeback.”

 

Isakson wants a tax break for any family who buys and holds a home for at least three years 3 years. Housing prices across the nation have fallen about 25 percent in the last two years and are cited by many economists as the foundation of many of the current financial woes.

 

“It will work, and I’m convinced it will be the beginning of putting a bottom under the housing market,” he said.

 

The senator’s idea has gotten some buzz from both Republicans and Democrats in the Senate, which this week began considering its own version of a multi-billion-dollar package to jump-start the economy. The senator said he was sitting in church Sunday when he got an email that a prominent Senate Democrat was touting his idea on television.

 

The tax credit “is something that we look favorably upon,” Sen. Charles Schumer, (D-N.Y.), said over the weekend.

 

U.S. Sen. Saxby Chambliss (R-Ga.) has gone on the record backing Isakson’s idea. Chambliss wants the Senate version of the stimulus bill to contain less direct spending and more tax credits for small business.

 

Senate Minority Leader Mich McConnell, (R-Ky.), meanwhile, announced he wants to introduce a provision that would make government-backed 4 percent fixed-rate mortgages to any credit-worthy borrower. The average American family would see its mortgage payment drop by about $466 a month, according to McConnell.

 

The U.S. House of Representatives last week passed a $819 billion stimulus package, but the Senate has balked at that proposal. Isakson and other upper chamber Republicans, who are in the minority, hope to hone a compromise in the next few weeks that includes more tax credits than the House bill.

 

“I think there will be some great theater this week,” Isakson said of the stimulus debate. “I think we have a chance to do something meaningful.”

 

The former head of Northside Realty, Isakson compared the current housing crisis to that of 1974. That year, he said, there was a three-year supply of housing on the market. There is now an 11-month supply, he said.

 

Three decades back, then-President Gerald Ford pushed through Congress a tax credit for anyone who bought a home in 1975, Isakson said. That move, he said, reduced the housing supply to 10 months — housing rebounded and the economy recovered.

 

The first-term senator described the economy as having “deep problems” and cautioned that “no single dose of medicine will cure it.”

 

However, if people begin buying houses again, the recovery can begin to begin, he said.

“Housing led us into this problem, and it will lead us out,” Isakson said. “If we don’t fix it, the bottom will continue to lower.”

 

Kurt Cannon, president of the Home Builders Association of Georgia, said he has been meeting with Isakson for months about ways to help the housing industry.

 

“We don’t want a bailout; we don’t want any money to buy a jet or go on vacation,” said Cannon, whose organization also is pushing for a state tax credit for home buyers. “This would go directly to the consumer to incentivize them to go out and do something good and invest in their future.”

 

A recent study by Cannon’s group found that the housing slump cost Georgia 196,000 construction-related jobs, $11 billion in wages and $2.8 billion in taxes and fees between the end of 2006 and October 2008 alone.

 

Some housing industry officials have made it clear they would welcome any help from the federal government.

 

“Real estate has always led this nation out of economic downturns,” National Association of Realtors President Charles McMillan said in a statement. “A renewed, revitalized and robust housing market is essential to generating commerce and helping families build wealth and stability.”