The Warren Report

HUD Secretary Donovan Unveils Details Of Plan To Monetize Home Buyer Tax Credit

May 29, 2009 - In a speech before the National Association of Home Builders (NAHB) Board of Directors, HUD Secretary Shaun Donovan today unveiled new rules that will help spur the housing market by allowing consumers to use the $8,000 first-time home buyer tax credit to help cover the costs of closing on an FHA-insured home.

 

“We believe this is a real win for everyone,” said Donovan. “Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation’s housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away.”
 
“With the spring home buying season in full bloom, Secretary Donovan’s move to enable buyers to access the tax credit at the time of closing could not have come at a better time,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “This new rule will further encourage state housing finance agencies to develop programs to monetize the tax credit.”

(Details of how the $8,000 home buyer tax credit can be used have just been released in HUD's mortgagee letter. Letter follows.) 

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER

www.hud.gov espanol.hud.gov

May 29, 2009

MORTGAGEE LETTER 2009-15

TO:

ALL APPROVED MORTGAGEES

SUBJECT:

Using First-Time Homebuyer Tax Credits

The American Recovery and Reinvestment Act of 2009 (Recovery Act) provides for as much as an $8000 tax credit to qualified first-time homebuyers. FHA supports this important initiative to promote homeownership. This mortgagee letter provides:

• Basic information on the first-time homebuyer credit obtained from the Internal Revenue Service (IRS) website. Complete information on how the first time homebuyer tax creditworks, including the eligibility requirements for the tax credit, the amount of the tax credit that a first-time homebuyer may be eligible to receive, and how a homebuyer may claim the tax credit is available on the IRS website at http://www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet7 .

• Guidance on how FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local government agencies or instrumentalities may assisthomebuyers that are eligible for the tax credit.

I. About the First-Time Homebuyer Tax Credit

Please check the IRS website to ensure you have up-to-date information. A brief overview of the tax credit from the IRS website and a copy of IRS Form 5405 (including instructions) are attached for reference.

Pursuant to 31 U.S.C. 3727 and 26 U.S.C. 6402, a refund of the first-time homebuyer creditwill be made by the IRS only to the taxpayer, not to a third party. In other words, any refund issued in response to a claim for this credit cannot be assigned by a taxpayer to a third party.

II. FHA Tax Credit Guidance

Secondary Financing

Consistent with existing FHA policy, FHA will permit entities covered by Section 528 of the National Housing Act to use the current authority to offer tax credit advances with second liens in a manner consistent with the requirements in 12 U.S.C. 1709(b)(9). Eligible government agencies and instrumentalities of government are described in handbook HUD-4155.1 5.C3 and 5.C4.

Conditions

• The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower.

• The second lien may not exceed the total amount needed for the down payment, closing costs, and prepaid expenses.

• Secondary financing may be “soft” (silent) or require a monthly repayment.

• If payments are required, they must be included within the qualifying ratios and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.

• Payments must be deferred for at least 36 months to not be included in the qualifying ratios.

• If the tax credit advance loan has a short term for repayment, it must also provide that if the borrower fails to repay by the designated deadline, principal and interest payments begin automatically or the loan converts to a “soft” second.

• The secondary financing may not require a balloon payment before ten years.

Purchase of Tax Credit

FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local governmental agencies and instrumentalities thereof may purchase the tax credit anticipated by the homebuyer.

Conditions

:

• The proceeds of the sale of the tax credit may not exceed the anticipated tax credit due the homebuyer based on the computations of form IRS 5405;

• The borrower must submit a signed certification that the tax credit is not subject to offset due to other indebtedness.

• A copy of the borrower’s tax refund and/or the IRS 5405 must be collected and retained in the FHA case binder.

• Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer. In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive. (Example: $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)

• Pursuant to 12 U.S.C. 1709(b)(9), the homebuyer’s downpayment required for eligibility for FHA insurance may not consist of any funds (including funds derived from a sale of the homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction (or by any third party or entity that is reimbursed, directly or indirectly, by the financially benefiting person or entity). Accordingly, the proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefiting person or entity), may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs.

Due Diligence

FHA expects that entities purchasing tax credit assets will employ appropriate due diligence measures including, but not limited to:

• Require the homebuyer to draft and provide the IRS form 5405 “First-Time Homebuyer Credit.”

• Contact the borrower’s employer and review pay stubs to confirm there are no outstanding garnishments.

• Review the homebuyer’s credit report to ensure there are no unpaid student loans, or other obligations that could be offset against the credit.

• Validate that all of the eligibility requirements for the tax credit are fulfilled

• Review previous tax returns and IRS tax assessment letters, if any, to determine that the borrower does not have unsettled obligations to the IRS

III. Monitoring

In order to track the tax credit monetization activities, FHA will require FHA-approved mortgagees to input into FHA Connection the following data:

• Name and EIN of the party who purchased the tax credit,

• The amount of the anticipated credit, and

• The amount the homebuyer paid for the monetization services.

The lender must also collect and maintain in the FHA case file the documentation that validates all of the tax credit monetization data submitted via FHA Connection.

FHA will monitor the purchase of tax credit transactions closely. Charging of excessive fees or costs in the purchase of the tax credit or increasing other fees or charges in the transaction without FHA approval may result in referral to the Mortgagee Review Board, and particularly with respect to entities that are not FHA-approved mortgagees, referral to the Federal Trade Commission, or referral to the appropriate State Attorney General office, as may be applicable.

If you have any questions regarding this mortgagee letter, please call FHA’s Resource Center at 1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

Sincerely,

Brian D. Montgomery

Assistant Secretary for Housing-

Federal Housing Commissioner

Strong Buyer Activity in Lower Price Ranges Allows Existing-Home Sales to Rise in April

RISMEDIA, May 29, 2009-Existing-home sales rose in April with strong buyer activity in lower price ranges, according to the National Association of Realtors®. Existing-home sales-including single-family, townhomes, condominiums and co-ops-increased 2.9% to a seasonally adjusted annual rate of 4.68 million units in April from a downwardly revised pace of 4.55 million units in March, but were 3.5% below the 4.85 million-unit level in April 2008. Lawrence Yun, NAR chief economist, said first-time buyers continue to influence the market but there also is a seasonal rise of repeat buyers. “Most of the sales are taking place in lower price ranges and activity is beginning to pick up in the midprice ranges, but high-end home sales remain sluggish,” he said. “The Federal Reserve needs to help restore liquidity for the jumbo mortgage market by buying these loans under the TALF program.”

“Because foreclosed properties will likely be released into the market over the rest of year, it is critical that distressed homes be quickly cleared from the market,” Yun said. “Fortunately, home buyers are being attracted to deeply discounted prices and are bidding up many foreclosed listings, particularly in California, Nevada, and Florida-this will set the stage for healthy market conditions going forward.”

An NAR practitioner survey in April showed first-time buyers declined to 40% of transactions, implying more repeat buyers are entering the traditional spring home-buying season. It also showed the number of buyers looking at homes has increased 14 percentage points from a year ago. “This is consistent with our forecast for home sales in the latter part of the year to be 10 to 20% higher than the second half of 2008,” Yun said.

The national median existing-home price for all housing types was $170,200 in April, which is 15.4% below 2008. Distressed properties, which accounted for 45% of all sales in April, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said conditions are optimal for buyers with good jobs and long-term plans. “We have record low mortgage interest rates, a wide selection of homes and affordable prices in most areas,” he said. “When you add the $8,000 first-time buyer tax credit, it’s hard to imagine a better time to make an investment in your future though homeownership.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.81% in April from 5.00% in March; the rate was 5.92% in April 2008; data collection began in 1971.

Total housing inventory at the end of April rose 8.8% to 3.97 million existing homes available for sale, which represents a 10.2.-month supply at the current sales pace, compared with a 9.6-month supply in March. “The gain in inventory is largely seasonal from sellers entering the spring market. Even with the rise, inventory over the past few months has remained consistently lower in comparison with a year earlier,” Yun noted.

Single-family home sales rose 2.5% to a seasonally adjusted annual rate of 4.18 million in April from a level of 4.08 million in March, but are 2.8% below the 4.30 million-unit pace in March 2008. The median existing single-family home price was $169,800 in April, which is 14.9% below a year ago.

Existing condominium and co-op sales increased 6.4% to a seasonally adjusted annual rate of 500,000 units in April from 470,000 in March, but are 9.4% lower than the 552,000-unit pace a year ago. The median existing condo price was $173,900 in April, down 18.5% from April 2008.

Northeast
Regionally, existing-home sales in the Northeast jumped 11.6% to an annual pace of 770,000 in April, but are 10.5% below April 2008. The median price in the Northeast was $237,400, which is 9.6% lower than a year ago.

Midwest
Existing-home sales in the Midwest slipped 2.0% in April to a level of 1.00 million and are 9.9% lower than a year ago. The median price in the Midwest was $138,800, down 11.7% from April 2008.

South
In the South, existing-home sales increased 1.8% to an annual pace of 1.74 million in April but are 8.9% lower than April 2008. The median price in the South was $148,000, which is 12.8% below a year ago.

West
Existing-home sales in the West rose 3.5% to an annual rate of 1.17 million in April and are 19.4% higher than a year ago. The median price in the West was $222,600, down 21.8% from April 2008.

For more information, visit http://www.realtor.org.

Housing Affordability Surges to Highest Level in 18 Years

Atlanta-Marietta-Sandy Springs is #64 on the List

of the Top 100 Most Affordable Housing Markets in the U.S.

Posted by NAHB

May 18, 2009

Nationwide housing affordability jumped 10 percentage points during the first quarter of 2009 to its highest level since the series began 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) released today.

The HOI showed that 72.5 percent of all new and existing homes sold in the first quarter of 2009 were affordable to families earning the national median income of $64,000, up from 62.4 percent during the previous quarter and up from 53.8 percent during the first quarter of 2008.

“Underlying the increase in affordability are lower home prices and record low interest rates.  Combined with the $8,000 federal tax credit for first-time home buyers, consumers are beginning to return to the marketplace,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla.

Indianapolis was the most affordable major housing market in the country during the first quarter. Almost 95 percent of all homes sold were affordable to households earning the area’s median family income of $68,100. Indianapolis has now topped the affordability list 15 consecutive quarters.

Also near the top of the list of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Akron, Ohio; Grand Rapids-Wyoming, Mich.; and  Syracuse, N.Y.

Several smaller housing markets posted even higher affordability scores than Indianapolis, with Sandusky, Ohio outscoring all others. There, almost 98 percent of homes sold during the first quarter of 2009 were affordable to median-income earners. Other small housing markets ahead of Indianapolis on the affordability scale included Monroe in Michigan and Mansfield, Springfield and Canton-Massillon in Ohio.

New York-White Plains-Wayne, N.Y.-N.J., where just over 21 percent of all homes sold during the period were affordable to those earning the median income of $64,800, was once again the nation’s least affordable major housing market in the first quarter. Though affordability jumped 7 percentage points for the quarter, this was the New York metro area’s fourth consecutive appearance at the bottom of the list. Other major metros near the bottom of the chart included San Francisco; Los Angeles-Long Beach-Glendale, Calif.; Nassau-Suffolk, N.Y.; and Honolulu.

Among smaller metro areas, Ocean City, N.J. was the least affordable market, along with San Luis Obispo-Paso Robles, Calif.; Flagstaff, Ariz.; Hanford-Corcoran, Calif.; and Santa Cruz-Watsonville, Calif., respectively.

Please visit www.nahb.org/hoi for tables, historic data and details.

RE/MAX Supports Government Efforts to Streamline Short Sales

RISMEDIA, May 21, 2009-Treasury Department proposals to streamline the short sale process are a welcomed development by the real estate industry and are supported by industry leader Dave Liniger, Chairman and Co-Founder of RE/MAX International, Inc. and the entire RE/MAX brand. Cash incentives will now be offered to lenders and homeowners who successfully complete a short sale. The foreclosure alternative, which could have a beneficial impact on record high housing inventories, has been a frustration to home sellers, buyers and real estate agents.

“We are very excited and applaud the administration for creating the ‘Foreclosure Alternatives Program’ which promotes the short sale process,” said Liniger. “We have been talking with key lenders and government officials for months about the short sale issue and couldn’t be more pleased that our hard work has finally paid off.”

Short sales can occur when a homeowner is unable to pay their mortgage and their home is valued for less than they owe. All parties can benefit from a short sale transaction, as homeowners avoid the trauma of foreclosure and the resulting impact on their credit. Lenders can save as much as 30% in losses by accepting a short sale offer before taking a property to foreclosure, and neighborhoods benefit with fewer vacant homes and the resulting lower home values.

With all its benefits, a combination of challenges has prevented all, but one in 10 short sale offers being rejected by lenders, who have been taking an average of nine weeks to make a decision. As a result, 70% of homeowners facing foreclosure never even attempt to sell their home. This situation has added more foreclosures to the record high inventory of homes on the market and has lowered home values even further.

Liniger stated that “Short sales provide a tremendous advantage for everyone concerned, but have been nearly impossible to complete. That’s why we’ve trained nearly 5,000 of our agents in the last 60 days to deal with short sales and other distressed property transactions.”

Under provisions of the newly created “Foreclosure Alternatives Program,” eligible homeowners can be accepted through December 31, 2012, and the short sale process will be streamlined with standardized documentation, cash incentives to lenders and a moving allowance payment to the homeowner.Analysts say the housing market can’t return to normal as long as prices keep falling, due to high inventories. Short sales can play an important role in reducing the current high inventory levels. RE/MAX International is committed to creating an awareness of this viable alternative to foreclosure and to training real estate agents who offer a professional short sale service to the consumer.

For more information, visit www.remax.com.

Pressure Grows on Obama Administration to Stimulate Home Sales

RISMEDIA, May 20, 2009-(MCT)-President Barack Obama has rolled out several initiatives since mid-February to stem the rising tide of foreclosures by slowing the supply of homes coming onto a down market. Now there’s a growing clamor for him to do more to spark moribund home sales.

Real estate agents, mortgage brokers and lenders all want a government refinance program expanded so that more homeowners whose properties have lost value, especially in hard-hit states such as Florida and California, can take advantage of today’s low mortgage rates.

Among other things, they would like to see the new $8,000 tax credit for first-time homebuyers expanded to include all home purchases. “Not only expand it to all buyers, but actually increasing the amount,” said Steve O’Connor, the senior vice president of government affairs for the Mortgage Bankers Association. The lenders’ group applauded Department of Housing and Urban Development plans to create bridge loans that would allow first-time homebuyers to use the tax credit at the time of closing. The credit was designed to benefit homebuyers after filing their annual tax returns. It applies only to Federal Housing Administration loans underwritten by FHA-approved lenders. “We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit,” HUD Secretary Shaun Donovan told real estate agents.

Beyond FHA loans, some housing experts would like to allow the mortgage-finance giants Fannie Mae and Freddie Mac to use the $8,000 credit to reach more homebuyers. The government seized Fannie and Freddie last September, and some experts say that they can be used to stimulate demand for housing.

“We see no reason that Fannie and Freddie can’t take the approach that HUD Secretary Donovan announced … to allow the borrower to use it as a down payment toward closing costs,” O’Connor said. “We would encourage Fannie and Freddie to look at that.”

An Obama administration official, speaking on the condition of anonymity because he wasn’t authorized to discuss details, said the FHA program needed to demonstrate that it could work before it could be expanded. “Because we back the mortgage, we can set the underwriting criteria,” said the official, noting that would be harder to do with Fannie and Freddie since they don’t back loans but purchase them in a secondary market.

Many taxpayers bristle at the idea of having their tax dollars supporting someone else’s home purchase, and since first-time homebuyers also tend to be weaker borrowers, some experts fear that the tax credit could encourage a repeat of today’s woes.

“It’s almost tantamount to 100 percent financing. The industry has already had its issues with 100 percent financing,” said Matt Zaborksy, who owns the mortgage brokerage firm Norbeck Olney Rockville Mortgage Co. in Maryland. “Are we opening up a can of worms? People buying houses with no skin in the game were a major factor in what has happened nationwide.”

When Congress passed it, the credit was set at 10% of a home’s value, up to $8,000. The credit is available in full to individual tax filers with adjusted gross incomes below $75,000, and joint filers with incomes below $150,000. It’s phased out completely at $95,000 for single filers and $170,000 for joint filers.

The National Association of Realtors doesn’t like these limits. Association chief economist Lawrence Yun said that policymakers should expand the credit to all home purchases, and focus more on making refinancing available to borrowers whose homes had lost significant value but who remained current on their payments.

“They should expand that more, because if the homeowner is current on their payments at a 7 percent interest rate, surely they will be current on mortgage rates under 5 percent,” Yun said.

The Obama administration recently updated the Making Home Affordable program it rolled out February 18. One key component involves allowing Fannie Mae and Freddie Mac to refinance mortgages that have loan-to-value ratios as high as 105%.

That means a homeowner can owe up to 5% more than his or her home is worth - a condition called being “underwater” on a mortgage - and still qualify for refinancing. Fannie and Freddie used to allow refinancing only up to 80% of a home’s value. This component of Making Home Affordable seeks to reach as many as 5 million at-risk borrowers.

Three months into the program, however, only 51,000 of the 233,000 applicants declared eligible met the definition of at-risk, owing more than 80% of their homes’ present values. The rest, more than three-quarters of the applicants, owed less than 80% and thus weren’t at-risk homeowners, although refinancing them into lower mortgage rates still would help the economy.

To reach more at-risk borrowers, many experts think the program must allow people who are as much as 15 or 20% “underwater” on their mortgages to refinance.

“I think there should be more focus on trying to lessen the burden on homeowners who may question why they are stuck with high interest rates,” Yun said.

Many “underwater” mortgages are jumbo or nonconforming loans. They’re above the $417,000 cap that historically has limited which loans could be sold to Fannie and Freddie. That cap now stands temporarily at a maximum of $729,750, but the recession has put many homes above that value on the market too. It’s why real estate agents want Congress to lift Fannie and Freddie’s loan-purchase cap altogether.

“Just get rid of the loan limit until the housing market stabilizes, then worry about Fannie and Freddie in the future,” Yun said, referring to the debate over how and when Fannie and Freddie should emerge from government control. “Job losses have been across the board, and it’s only fair that trying to stimulate the housing market should be for all buyers.”

(c) 2009, McClatchy-Tribune Information Services.

Pressure Grows on Obama Administration to Stimulate Home Sales

RISMEDIA, May 20, 2009-(MCT)-President Barack Obama has rolled out several initiatives since mid-February to stem the rising tide of foreclosures by slowing the supply of homes coming onto a down market. Now there’s a growing clamor for him to do more to spark moribund home sales.

Real estate agents, mortgage brokers and lenders all want a government refinance program expanded so that more homeowners whose properties have lost value, especially in hard-hit states such as Florida and California, can take advantage of today’s low mortgage rates.

Among other things, they would like to see the new $8,000 tax credit for first-time homebuyers expanded to include all home purchases. “Not only expand it to all buyers, but actually increasing the amount,” said Steve O’Connor, the senior vice president of government affairs for the Mortgage Bankers Association. The lenders’ group applauded Department of Housing and Urban Development plans to create bridge loans that would allow first-time homebuyers to use the tax credit at the time of closing. The credit was designed to benefit homebuyers after filing their annual tax returns. It applies only to Federal Housing Administration loans underwritten by FHA-approved lenders. “We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit,” HUD Secretary Shaun Donovan told real estate agents.

Beyond FHA loans, some housing experts would like to allow the mortgage-finance giants Fannie Mae and Freddie Mac to use the $8,000 credit to reach more homebuyers. The government seized Fannie and Freddie last September, and some experts say that they can be used to stimulate demand for housing.

“We see no reason that Fannie and Freddie can’t take the approach that HUD Secretary Donovan announced … to allow the borrower to use it as a down payment toward closing costs,” O’Connor said. “We would encourage Fannie and Freddie to look at that.”

An Obama administration official, speaking on the condition of anonymity because he wasn’t authorized to discuss details, said the FHA program needed to demonstrate that it could work before it could be expanded. “Because we back the mortgage, we can set the underwriting criteria,” said the official, noting that would be harder to do with Fannie and Freddie since they don’t back loans but purchase them in a secondary market.

Many taxpayers bristle at the idea of having their tax dollars supporting someone else’s home purchase, and since first-time homebuyers also tend to be weaker borrowers, some experts fear that the tax credit could encourage a repeat of today’s woes.

“It’s almost tantamount to 100 percent financing. The industry has already had its issues with 100 percent financing,” said Matt Zaborksy, who owns the mortgage brokerage firm Norbeck Olney Rockville Mortgage Co. in Maryland. “Are we opening up a can of worms? People buying houses with no skin in the game were a major factor in what has happened nationwide.”

When Congress passed it, the credit was set at 10% of a home’s value, up to $8,000. The credit is available in full to individual tax filers with adjusted gross incomes below $75,000, and joint filers with incomes below $150,000. It’s phased out completely at $95,000 for single filers and $170,000 for joint filers.

The National Association of Realtors doesn’t like these limits. Association chief economist Lawrence Yun said that policymakers should expand the credit to all home purchases, and focus more on making refinancing available to borrowers whose homes had lost significant value but who remained current on their payments.

“They should expand that more, because if the homeowner is current on their payments at a 7 percent interest rate, surely they will be current on mortgage rates under 5 percent,” Yun said.

The Obama administration recently updated the Making Home Affordable program it rolled out February 18. One key component involves allowing Fannie Mae and Freddie Mac to refinance mortgages that have loan-to-value ratios as high as 105%.

That means a homeowner can owe up to 5% more than his or her home is worth - a condition called being “underwater” on a mortgage - and still qualify for refinancing. Fannie and Freddie used to allow refinancing only up to 80% of a home’s value. This component of Making Home Affordable seeks to reach as many as 5 million at-risk borrowers.

Three months into the program, however, only 51,000 of the 233,000 applicants declared eligible met the definition of at-risk, owing more than 80% of their homes’ present values. The rest, more than three-quarters of the applicants, owed less than 80% and thus weren’t at-risk homeowners, although refinancing them into lower mortgage rates still would help the economy.

To reach more at-risk borrowers, many experts think the program must allow people who are as much as 15 or 20% “underwater” on their mortgages to refinance.

“I think there should be more focus on trying to lessen the burden on homeowners who may question why they are stuck with high interest rates,” Yun said.

Many “underwater” mortgages are jumbo or nonconforming loans. They’re above the $417,000 cap that historically has limited which loans could be sold to Fannie and Freddie. That cap now stands temporarily at a maximum of $729,750, but the recession has put many homes above that value on the market too. It’s why real estate agents want Congress to lift Fannie and Freddie’s loan-purchase cap altogether.

“Just get rid of the loan limit until the housing market stabilizes, then worry about Fannie and Freddie in the future,” Yun said, referring to the debate over how and when Fannie and Freddie should emerge from government control. “Job losses have been across the board, and it’s only fair that trying to stimulate the housing market should be for all buyers.”

(c) 2009, McClatchy-Tribune Information Services.

Pressure Grows on Obama Administration to Stimulate Home Sales

By Kevin G. Hall Print Article

RISMEDIA, May 20, 2009-(MCT)-President Barack Obama has rolled out several initiatives since mid-February to stem the rising tide of foreclosures by slowing the supply of homes coming onto a down market. Now there’s a growing clamor for him to do more to spark moribund home sales.

Real estate agents, mortgage brokers and lenders all want a government refinance program expanded so that more homeowners whose properties have lost value, especially in hard-hit states such as Florida and California, can take advantage of today’s low mortgage rates.

Among other things, they would like to see the new $8,000 tax credit for first-time homebuyers expanded to include all home purchases. “Not only expand it to all buyers, but actually increasing the amount,” said Steve O’Connor, the senior vice president of government affairs for the Mortgage Bankers Association. The lenders’ group applauded Department of Housing and Urban Development plans to create bridge loans that would allow first-time homebuyers to use the tax credit at the time of closing. The credit was designed to benefit homebuyers after filing their annual tax returns. It applies only to Federal Housing Administration loans underwritten by FHA-approved lenders. “We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit,” HUD Secretary Shaun Donovan told real estate agents.

Beyond FHA loans, some housing experts would like to allow the mortgage-finance giants Fannie Mae and Freddie Mac to use the $8,000 credit to reach more homebuyers. The government seized Fannie and Freddie last September, and some experts say that they can be used to stimulate demand for housing.

“We see no reason that Fannie and Freddie can’t take the approach that HUD Secretary Donovan announced … to allow the borrower to use it as a down payment toward closing costs,” O’Connor said. “We would encourage Fannie and Freddie to look at that.”

An Obama administration official, speaking on the condition of anonymity because he wasn’t authorized to discuss details, said the FHA program needed to demonstrate that it could work before it could be expanded. “Because we back the mortgage, we can set the underwriting criteria,” said the official, noting that would be harder to do with Fannie and Freddie since they don’t back loans but purchase them in a secondary market.

Many taxpayers bristle at the idea of having their tax dollars supporting someone else’s home purchase, and since first-time homebuyers also tend to be weaker borrowers, some experts fear that the tax credit could encourage a repeat of today’s woes.

“It’s almost tantamount to 100 percent financing. The industry has already had its issues with 100 percent financing,” said Matt Zaborksy, who owns the mortgage brokerage firm Norbeck Olney Rockville Mortgage Co. in Maryland. “Are we opening up a can of worms? People buying houses with no skin in the game were a major factor in what has happened nationwide.”

When Congress passed it, the credit was set at 10% of a home’s value, up to $8,000. The credit is available in full to individual tax filers with adjusted gross incomes below $75,000, and joint filers with incomes below $150,000. It’s phased out completely at $95,000 for single filers and $170,000 for joint filers.

The National Association of Realtors doesn’t like these limits. Association chief economist Lawrence Yun said that policymakers should expand the credit to all home purchases, and focus more on making refinancing available to borrowers whose homes had lost significant value but who remained current on their payments.

“They should expand that more, because if the homeowner is current on their payments at a 7 percent interest rate, surely they will be current on mortgage rates under 5 percent,” Yun said.

The Obama administration recently updated the Making Home Affordable program it rolled out February 18. One key component involves allowing Fannie Mae and Freddie Mac to refinance mortgages that have loan-to-value ratios as high as 105%.

That means a homeowner can owe up to 5% more than his or her home is worth - a condition called being “underwater” on a mortgage - and still qualify for refinancing. Fannie and Freddie used to allow refinancing only up to 80% of a home’s value. This component of Making Home Affordable seeks to reach as many as 5 million at-risk borrowers.

Three months into the program, however, only 51,000 of the 233,000 applicants declared eligible met the definition of at-risk, owing more than 80% of their homes’ present values. The rest, more than three-quarters of the applicants, owed less than 80% and thus weren’t at-risk homeowners, although refinancing them into lower mortgage rates still would help the economy.

To reach more at-risk borrowers, many experts think the program must allow people who are as much as 15 or 20% “underwater” on their mortgages to refinance.

“I think there should be more focus on trying to lessen the burden on homeowners who may question why they are stuck with high interest rates,” Yun said.

Many “underwater” mortgages are jumbo or nonconforming loans. They’re above the $417,000 cap that historically has limited which loans could be sold to Fannie and Freddie. That cap now stands temporarily at a maximum of $729,750, but the recession has put many homes above that value on the market too. It’s why real estate agents want Congress to lift Fannie and Freddie’s loan-purchase cap altogether.

“Just get rid of the loan limit until the housing market stabilizes, then worry about Fannie and Freddie in the future,” Yun said, referring to the debate over how and when Fannie and Freddie should emerge from government control. “Job losses have been across the board, and it’s only fair that trying to stimulate the housing market should be for all buyers.”

(c) 2009, McClatchy-Tribune Information Services.
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HUD says bridge-loan program hasn't been killed

by J. Craig Anderson - May. 20, 2009 12:00 AM
The Arizona Republic

A U.S. Department of Housing and Urban Development official said Tuesday that HUD would move forward with a plan to let first-time homebuyers use the currently available tax credit of up to $8,000 as collateral for "bridge loans" to cover the down payment on Federal Housing Administration-insured mortgages.

HUD spokesman Brian Sullivan said Phoenix-area lenders misinterpreted the department's withdrawal of an official communication, known as a "Mortgagee Letter," announcing the program last week.

"There was a premature posting of a Mortgagee Letter," Sullivan said to explain the withdrawal, adding that the program's details had not been finalized.

Sullivan would not say when the bridge-loan program would be initiated, or whether it would be substantially different from what originally was announced.

A week earlier, real-estate agents and home builders had issued statements supporting a HUD proposal to let banks, non-profit organizations and local governments offer short-term bridge loans to cover the down payment for first-time buyers eligible for the tax credit.

Jill Hoogendyk, president of HomePoint Mortgage Co.in Phoenix, said Mortgagee Letters are the primary means of communication between HUD and mortgage lenders.

"We get told over and over that nothing is official or should be counted on until we are given a Mortgagee Letter - no matter how much we've heard that HUD is going to do something," Hoogendyk said.

Reach the reporter at 602-444-8681 or craig.anderson@arizonarepublic.com.

Tax credit ineligible for down payment

Feds reverse rule to assist first-time home buyers

by J. Craig Anderson - May. 19, 2009 12:00 AM
The Arizona Republic

Federal 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.

"That tax credit should be savings, not debt," said Patricia Garcia-Duarte, executive director of Neighborhood Housing Services in Phoenix.

Garcia-Duarte said the proposal too closely resembled a now-illegal practice known as seller-funded down-payment assistance, which allowed a home's seller to "gift" the down payment to a specific buyer through a non-profit organization.

Phoenix loan originator Dean Wegner was among the housing-industry professionals who had expressed enthusiasm about the bridge-loan plan.

Wegner said the program would have boosted local home sales, but he added that the bridge loans likely would have come with a high interest rate.

The loans also could have created income-tax issues, according to the IRS officials who shot down HUD's plan.

Still, Wegner remains optimistic that the government will seek other means to circumvent the FHA's required 3.5 percent down payment.

"They will probably come out with a zero-down FHA loan starting January 1, once the $8,000 goes away," he said.

Reach the reporter at 602-444-8681 or craig.anderson@arizonarepublic.com.

Tax Credit Can Be Used as Down Payment

Tax Credit Can Be Used for Down Payment

 
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.

Other Solutions for Today's Market

During his address at the summit, Donovan went on to say that the Obama administration plans to further stabilize the housing market. “I do think we have some early signs that the market overall is stabilizing,” Donovan says. “Since January we’ve seen both home sales moving up and down around a relatively stable number and we are seeing the first signs that the rapid decline in home prices is starting to abate.”

The morning session included a panel discussion that was moderated by CNBC’s Ron Insana. Panelists examined cutting-edge solutions necessary to promote and preserve homeownership and real estate development, stimulate the economy, and protect the nation’s taxpayers. They also shared their ideas on what the role and responsibility of the federal government is in the revitalization effort.

“Right now the Federal Reserve is the market,” said panelist Jay Brinkman, chief economist for the Mortgage Bankers Association. “What will be the effect when the Fed stops buying?” Brinkman explained that an exit strategy must be planned for the long-term; the federal government cannot continue to support the mortgage markets indefinitely.

“We are thrilled that so many high-caliber individuals were able to join us today at this important meeting to promote stability in the housing market and the U.S. economy,” said NAR President Charles McMillan. “We look forward to an ongoing dialogue and action toward this goal, during our midyear meetings this week and beyond.”

The real estate summit is part of the 2009 REALTORS® Midyear Legislative Meetings & Trade Expo. During the week ending May 16, more than 8,500 REALTORS® will attend meetings, visit lawmakers and inspire action on Capitol Hill.

Source: NAR

Governor Perdue Signs Housing Tax Credit Bill

Governor Perdue Signs Housing Tax Credit Bill

Monday, May 11, 2009

ATLANTA –   Governor Sonny Perdue today signed House Bill 261, which provides a $1,800 tax credit for home purchases. The credit, which would be taken over three years, takes effect immediately and is meant to spur activity in the housing market.

“The housing tax credit is a strategic investment that strikes at the root of this economic downturn. Much of the financial turmoil we have seen stems from a severe downturn in housing,” Governor Perdue said. “Families interested in buying a home will now have an additional incentive to act.”

The bill provides an income tax credit for the purchase of a single family residence during the next six months. The amount of the credit will be the lesser of $1,800 or 1.2 percent of the purchase price. A taxpayer may claim one-third of the credit available in each taxable year, and may carry forward unclaimed amounts.

For first time homebuyers, the state credit would be in addition to the federal tax credit authorized by the American Recovery and Reinvestment Act.  The federal credit gives first-time homebuyers a credit equal to 10 percent of the purchase price, up to $8,000.  The state credit is available to all buyers for six months.

   “I’m proud of Governor Perdue for signing this legislation, and I’m proud to have brought it before the state legislature.  This bill will put people to work, reduce the inventory of unsold homes, and kick start Georgia’s economy,” said Rep Ron Stephens.

“Jumpstarting the housing industry will mean more money flowing through our economy and more customers for Georgia’s real estate professionals, appraisers, closing attorneys, and others who depend so heavily on regular market activity. This bill is a signal that we are doing all we can to spur Georgia’s economy and lead the nation in financial recovery,” said Rep. Larry O’Neal.

U-Haul Names Atlanta as Top 2008 Destination

Source: U-Haul International, Inc.

U-Haul Names Atlanta as Top 2008 Destination

PHOENIX, March 31, 2009 (GLOBE NEWSWIRE) -- U-Haul International, Inc., America's number one choice for do-it-yourself movers, today released the results of the annual 2008 U-Haul National Migration Trend Report, titled "The 2008 Top 50 U.S. Destination Cities." According to moving data reflective of nationwide statistics for calendar year 2008, Atlanta takes the No. 1 spot for the second year in a row, while Houston takes second place, moving up from the No. 8 rank last year. Los Angeles climbed to No. 3 from No. 13 last year, while Las Vegas maintained at No. 4 for the second year in a row, and Denver, Colo. moved up to fifth place from the No. 9 rank last year. Portland, Ore.; Chicago, San Antonio, Austin, Texas and Orlando, Fla. rounded out the top 10. "Since 1945, U-Haul has built a long and proud history of relocating Americans," said U-Haul President of Phoenix Operations John "J.T." Taylor. "Our consumers rely on us to provide affordable services at convenient locations, which makes for a shorter distance to travel when moving. This not only makes their move easier but also has the positive effect of reducing the amount of carbon emissions released into the atmosphere." The ranking reflects destinations for movers traveling more than 50 miles, and considers every city in the country, regardless of size. However, the data is not stated as a percentage of population and is not reflective of overall growth. The 2008 Top 50 U.S. Destination Cities Report was compiled from more than 1 million U-Haul truck transactions occurring between Jan.1 and Dec. 31, 2008. Since 1945, U-Haul has been the undisputed choice for the "do-it-yourself" mover, with a network of more than 15,650 locations in all 50 United States and 10 Canadian provinces. U-Haul customers' patronage has enabled the Company to maintain a fleet size of 96,000 trucks, 75,000 trailers and 35,000 towing devices. U-Haul offers more than 395,000 rooms and more than 34 million square feet of storage space at more than 1,075 owned and managed facilities throughout North America. U-Haul is the consumer's number one choice as the largest installer of permanent trailer hitches in the automotive aftermarket industry. U-Haul supplies alternative-fuel for vehicles and backyard barbecues as one of the nation's largest retailers of propane. The U-Haul International, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5134 Note to editors: The annual mileage of North American U-Haul trucks, trailers and tow dollies would move a family to the moon and back more than 20.5 times per day, every day of the year. The annual mileage of North American U-Haul trucks, trailers and tow dollies would travel around the Earth 194 times per day, every day of the year. U-Haul Top 50 U.S. Destination Cities* January - December 2008 1. ATLANTA, Ga. 26. PITTSBURGH, Pa. 2. HOUSTON, Texas 27. PHOENIX, Ariz. 3. LOS ANGELES, Calif. 28. NEW YORK CITY, N.Y. 4. LAS VEGAS, Nev. 29. INDIANAPOLIS, Ind. 5. DENVER, Colo. 30. FULLERTON, Calif. 6. PORTLAND, Ore. 31. COSTA MESA, Calif. 7. CHICAGO, Ill. 32. CHARLOTTE, N.C. 8. SAN ANTONIO, Texas 33. SAN JOSE, Calif. 9. AUSTIN, Texas 34. MINNEAPOLIS, Minn. 10. ORLANDO, Fla. 35. ST. LOUIS, Mo. 11. SAN DIEGO, Calif. 36. QUEENS, N.Y. 12. KANSAS CITY, Mo. 37. WEST PALM BEACH, Fla. 13. PHILADELPHIA, Pa. 38. OKLAHOMA CITY, Okla. 14. MIAMI, Fla. 39. TUCSON, Ariz. 15. SACRAMENTO, Calif. 40. TULSA, Okla. 16. BROOKLYN, N.Y. 41. SALT LAKE CITY, Utah 17. DALLAS, Texas 42. ALBUQUERQUE, N.M. 18. SAN FRANCISCO, Calif. 43. SPOKANE, Wash. 19. WASHINGTON, D.C. 44. BRONX, N.Y. 20. TAMPA, Fla. 45. LONG BEACH, Calif. 21. JACKSONVILLE, Fla. 46. FRESNO, Calif. 22. VAN NUYS, Calif. 47. BIRMINGHAM, Ala. 23. FORT WORTH, Texas 48. BALTIMORE, Md. 24. COLUMBUS, Ohio 49. SEATTLE, Wash. 25. CHRISMAN, Ill. 50. SANTA MONICA, Calif. *Data compiled from more than 1 million U-Haul one-way truck transactions from January - December 2008. CONTACT: U-Haul International, Inc. Joanne Fried, Director, Media and Public Relations Ashleigh Wagner, Senior Media and Public Relations Specialist (602) 263-6194 publicrelations@uhaul.com