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

Possible State Funding for 1st Time Home Buyers

States Contemplate Loans for Home Buyers
The $8,000 first-time home buyer mortgage tax credit, which is part of the Recovery and Reinvestment Act of 2009, is a great boon. But, it doesn’t help people who don’t have money for a down payment and closing costs.

Now some states are contemplating offering an $8,000 loan to home buyers before they close on the condition that they repay the loans as soon as they get their federal tax credits.

The idea has been adopted in Missouri, which advances the money to those who take out first mortgages offered through the state’s housing finance authority. The New York State Builders Association is lobbying the State of New York Mortgage Agency to adopt a similar strategy.

“A lot of states are trying to get through the technical aspects of this," says Gregory Brown, an assistant vice president for government affairs at the National Association of Home Builders. "I feel very confident they’ll find a way to make it work.”

Meanwhile, some home builders are taking matters into their own hands, offering programs that purchase the tax credit from borrowers prior to closing.

“This is a legitimate monetizing program that actually works,” says David Abrahamson, vice president of S.E. operations for American Home Key Mortgage Company, which makes the loans for many participating builders in the southeast.

Source: The New York Times, Bob Tedeschi and HousingWire.com, Paul Jackson (04/10/2009)