RealEstate680

 The local Realtor Board, Contra Costa Board of Realtors fought hard to get this great homeownership tool as part of the the Housing and Economic Recovery Act  HR3221 that passed on July 30, 2008.

It’s a single credit worth up to $7500 that has to be taken in a single tax year.  The actual credit amount is a percentage of the home purchase with a maximum of $7500.  Income limits are $75,000 for individuals and $150,000 for households.  If an individual makes more that $75,000 but less than $95,000 there is still a credit but it’s reduced.  Talk to your tax preparer for the actual amount.

The new housing bill, scheduled to go into law next week, has a tax credit provision for first time homeowners:

BREAK FOR FIRST-TIME BUYERS If you are buying a home for the first time, and it is your primary residence, you are eligible for a federal tax credit of $7,500 or 10 percent of the purchase price, whichever is smaller. With a tax credit, you subtract the credit amount from the total you would otherwise pay to the Internal Revenue Service. So if you owe $1,500 and you qualify for the credit, you would end up getting a $6,000 refund.

There are two big catches, though. If you earn a modified adjusted gross income of more than $75,000, or $150,000 if you are married and filing your tax return jointly, the credit starts to phase out. For single people, it phases out completely at $95,000 of annual income, while for married people filing jointly, it phases out at $170,000.

But you have to pay back the credit over the next 15 years, in equal amounts each year when you pay your federal taxes. That makes this more like an interest-free loan than a true credit. According to the National Association of Realtors, there were about 2.5 million first-time home buyers in 2007. A large proportion of them would have qualified for this credit, but whether it is enough to push would-be buyers over the edge this year remains to be seen.

The tax credit is retroactive to home purchases on April 9, 2008, and expires on July 1, 2009. If you purchase a home from Jan. 1, 2009 to June 30, 2009, you can claim the tax credit on your 2008 tax return.

New York Times

The politicians in Washington are creating a “bail-out” for banks and homeowners that actually has more good features and bad.

Homeowners that are not paying their mortgages and banks facing big losses would get government help under a foreclosure rescue that has broad Washington, bipartisan support.

The lynch-pin of the plan would let the Federal Housing Administration (FHA) back up to $300 billion–NOT ENOUGH!!! in new loans to give struggling homeowners more affordable, fixed-rate mortgages. It allows lenders who agree to take a substantial loss on the mortgages to reclaim at least some money and avoid a costly foreclosure. 

The piece that’s missing is how hoes it help the homeowner that is 4 months down on their mortgage and is facing a Notice of Default, how do they qualify for the new loan.  Are banks and credit companies willing to show a Notice of Default or home foreclosures as a hick-cup on a credit report? 

Here’s are the “talking points to the Bill.”

• A refundable tax credit of up to $8,000 for first-time homebuyers.
• Establishes a new, temporary FHA program (HOPE for Homeowners) to help homeowners who are at risk of losing their homes to refinance their mortgages, if their lenders voluntarily agree to participate in the program.
• The program will be paid for using fees paid by Fannie Mae and Freddie Mac –- not taxpayer dollars.
• Only certain owner-occupants would be eligible to refinance –- no investors or investor properties will qualify.
• Creates a tough, new regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks to reduce the possibility of an expensive taxpayer bailout someday.
• Sets minimum standards for mortgage brokers and strengthens the “Truth in Lending Act” (to require better disclosure to borrowers before they sign a mortgage).
• Provides mortgage protections for service members and veterans, such as lengthening the time a lender must wait before staring foreclosure proceedings from three months to nine months after a soldier returns from service.
• A standard property tax deduction for taxpayers who don’t itemize on their returns.
• More than $10 billion in additional bond authority that states could use to provide loans to first-time homebuyers or to finance the construction of affordable rental housing.
• An additional $150 million for foreclosure prevention counseling.

 As a real estate professional in

Walnut Creek, California the positive piece of the bill in my opinion is that this will modernize FHA and create a new regulator and tighter controls on Fannie Mae and Freddie Mac, the government-sponsored mortgage giants.

“Madam Pelosi, please be sure to keep loan amounts high enough for California real estate.”  In advance, thanks for putting more regulations on an industry that is doing a fine job in correcting itself.  There was plenty of creed in the past several years, but I am skeptical that government regulations will solve these problems.