Comments on: $8,000 First Time Home Buyer Tax Credit Can Now Be Used at Closing – But Not For Minimum Down Payment

By: Jim

Jim — Mon, 03 Aug 2009 14:15:16 +0000

Autos 1, Housing 0
There is a pent up demand by consumers to spend in America. This is evidenced by the overwhelming success of the “cash for clunkers” program, it’s been so successful that Congress is allocating more. On the other hand, the $8000 First-Time Homebuyers Tax Credit has been a yawner, due to the fact that HUD has added additional regulations that were not the intent of the Stimulus Bill.
The “clunker” program has accomplished exactly what Congress intended, reduce inventories, help the manufacturers, stimulate the local economies and inject cash into the local and state revenue shortfalls. It is refreshing to see this success without any additional Federal regulations or roadblocks.
The $8000 Tax Credit as it stands, benefits only the wealthy, those home buyers who have a wealthy family member who will lend the $8000 so they can buy a home, be eligible for the credit and repay the loan. What about average Americans who are approved for a FHA mortgage, but don’t have wealthy families to lend the $8000, where do they get the 3.5% required downpayment from? So far the Tax Credit has not reduced inventories, has not helped the local economies and has not added to the local and state revenue shortfalls to any extent, as the Stimulus Bill intended. HUD allows only State Housing Finance Agencies (HFA’s) (there are only 11 states offering this) to lend the 3.5% FHA required down payment against the Tax Credit. The problem is that only 11 states offer any help and all of these states have limited funds for their programs. Where are the Realtors (NAR) and the Builders (NAHB) in this issue, are their members satisfied with the lack of monetization of the Tax Credit for the majority of potential home buyers, the missed opportunities, I would think not? The President also is missing opportunities by the under utilization of the Tax Program.
Congress has put forward numerous Bills with regard to the $8000 Tax Credit, Sen. Isakson (R-GA) proposes raising the Credit to $15,000 and Rep. Johnson (D-TX) has a Bill extending the Tax Credit, to name just two. Wouldn’t the average American First-Time Homebuyer be better served if Congress enacts legislation that will specifically authorize and require HUD to recognize that a Tax Credit is an asset? Furthermore that this asset is either eligible to secure a loan under FHA’s existing collateralized loan guidelines or be eligible for purchase by nonprofit agencies in order to monetize the Tax Credit and allow these funds to be used for the required 3.5% down payment. It should be noted that these nonprofits are not parties to the real estate transaction and do not benefit from the transaction.

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By: Joshua Bucio

Joshua Bucio — Wed, 17 Jun 2009 17:07:18 +0000

The lenders in the wholesale market never allowed the credit to be used at closing. We hope that will change some day, but most likely it will not. Local banks will be the best option for the first time home buyers.