Frequently Asked Questions
About the First-Time Home Buyer Tax Credit
The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.
The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.
The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
Who is eligible to claim the $8,000 tax credit?
First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and on or before April 30, 2010. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. A limited exception exists for certain contract for deed purchases and installment sale purchases. See the IRS website for more detail.
However, the law also allows home sales occurring by June 30, 2010 to qualify, provided they are due to a binding sales contract in force on or before April 30, 2010.
Persons who are claimed as dependents by other taxpayers or who are under age 18 are not qualified for the tax credit program.
What is the definition of a first-time home buyer?
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, IRS Notice 2009-12 allows unmarried joint purchasers to allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
Are there any income limits for claiming the tax credit?
Yes. For sales occuring after November 6, 2009, the income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
The income limits for claiming the tax credit were raised when the tax credit was extended. Are the higher limits retroactive?
No. The new income limits are only applicable to purchases occurring after November 6, 2009.
The income limits for sales occuring on or after January 1, 2009 and on or before November 6, 2009 are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
How is this home buyer tax credit different from the tax credit that Congress enacted in early 2009?
The tax credit’s income limits were increased, the documentation requirements were tightened, and the program's deadlines were extended.
How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.
What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.
I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April, 30, 2010).
In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
No. You can claim only one.
I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.
A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
I bought a home in 2008. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.
Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.
HUD is now allowing "monetization" of the tax credit. What does that mean?
It means that HUD allows buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.
Under HUD’s guidelines, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans of up to $8,000. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.
Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement. In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.
More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.
If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.
For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.
source: National Association of Home Builders website federalhousingtaxcredit.com
Saturday, November 21, 2009
Highlights of Up to $8000 Tax Credit & $6500 Credit for Military Personnel, etc
Excerpt: ...for qualified service members who are ordered on a period of official extended duty, these dates are extended for one year. For these home buyers, the tax credit applies to sales with a binding sales contract in place on or before April 30, 2011 and closed by June 30, 2011. ~ This means that military buyers still must be under contract on a home by April 30, 2011. ~Editor
Special Rules for Members of the Military, the Foreign Service
and the Intelligence Community
Congress has acknowledged the unique circumstances affecting members of the military, the foreign service and the intelligence community by making the following exceptions that apply to both the $8,000 tax credit for first-time home buyers and the $6,500 tax credit for repeat home buyers.
Exemption From Tax Credit Recapture Rules
Typically, homes that are sold or that cease to be used as a principal residence within three years of the initial purchase are subject to recapture of the tax credit.
However, qualified service members who sell or move from a tax credit home within three years of the initial purchase due to official extended duty are exempt from the recapture rule.
Extension of Tax Credit Deadlines
The home buyer tax credit is available for qualified purchases with a binding sales contract in place on or before April 30, 2010 and closed by June 30, 2010.
However, for qualified service members who are ordered on a period of official extended duty, these dates are extended for one year. For these home buyers, the tax credit applies to sales with a binding sales contract in place on or before April 30, 2011 and closed by June 30, 2011.
Definitions
“Qualified service member” means a member of the uniformed services of the U.S military, a member of the Foreign Service of the U.S., or an employee of the intelligence community.
“Official extended duty” means any period of extended duty while serving at least 50 miles away from home for a period in excess of 90 days.
Special Rules for Members of the Military, the Foreign Service
and the Intelligence Community
Congress has acknowledged the unique circumstances affecting members of the military, the foreign service and the intelligence community by making the following exceptions that apply to both the $8,000 tax credit for first-time home buyers and the $6,500 tax credit for repeat home buyers.
Exemption From Tax Credit Recapture Rules
Typically, homes that are sold or that cease to be used as a principal residence within three years of the initial purchase are subject to recapture of the tax credit.
However, qualified service members who sell or move from a tax credit home within three years of the initial purchase due to official extended duty are exempt from the recapture rule.
Extension of Tax Credit Deadlines
The home buyer tax credit is available for qualified purchases with a binding sales contract in place on or before April 30, 2010 and closed by June 30, 2010.
However, for qualified service members who are ordered on a period of official extended duty, these dates are extended for one year. For these home buyers, the tax credit applies to sales with a binding sales contract in place on or before April 30, 2011 and closed by June 30, 2011.
Definitions
“Qualified service member” means a member of the uniformed services of the U.S military, a member of the Foreign Service of the U.S., or an employee of the intelligence community.
“Official extended duty” means any period of extended duty while serving at least 50 miles away from home for a period in excess of 90 days.
President Obama Signs Homebuyer Tax Credit
There is an extension on the amount of time for military buyers the media is not reporting on. It's the next post on my blog. ~Editor
Obama Signs Homebuyer Tax Credit Extension
RISMEDIA, November 9, 2009—President Barack Obama has approved the first-time homebuyer tax credit extension which will extend the tax credit until April 30, 2010.
The extension is part of a $24 billion economic stimulus bill that will extend the $8,000 tax credit for homebuyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to homeowners who have lived in their current home for at least five years and are seeking to relocate.
The following details apply to the homebuyer tax credit expansion:
Who is Eligible
-First-time homebuyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.
-Existing homeowners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit.
-All U.S. citizens who file taxes are eligible to participate in the program.
Income Limits
Homebuyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
-For married couples filing a joint return, the combined income limit is $225,000.
-Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
-The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.
Effective Dates
-The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.
Types of Homes that Qualify
-All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.
Tax Credit is Refundable
-A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.
-For example:
-A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time homebuyer tax credit).
-A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit).
-All qualified homebuyers can take the tax credit on their 2009 or 2010 income tax return.
Payback Provisions
The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.
The www.federalhousingtaxcredit.com site is being updated. Check the site next week for more detailed information on the new tax credit.
For more information, visit www.nahb.org.
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.
Read more: http://rismedia.com/2009-11-08/obama-signs-homebuyer-tax-credit-extension/#ixzz0XXFb8lT3
Obama Signs Homebuyer Tax Credit Extension
RISMEDIA, November 9, 2009—President Barack Obama has approved the first-time homebuyer tax credit extension which will extend the tax credit until April 30, 2010.
The extension is part of a $24 billion economic stimulus bill that will extend the $8,000 tax credit for homebuyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to homeowners who have lived in their current home for at least five years and are seeking to relocate.
The following details apply to the homebuyer tax credit expansion:
Who is Eligible
-First-time homebuyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.
-Existing homeowners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit.
-All U.S. citizens who file taxes are eligible to participate in the program.
Income Limits
Homebuyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
-For married couples filing a joint return, the combined income limit is $225,000.
-Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
-The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.
Effective Dates
-The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.
Types of Homes that Qualify
-All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.
Tax Credit is Refundable
-A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.
-For example:
-A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time homebuyer tax credit).
-A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit).
-All qualified homebuyers can take the tax credit on their 2009 or 2010 income tax return.
Payback Provisions
The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.
The www.federalhousingtaxcredit.com site is being updated. Check the site next week for more detailed information on the new tax credit.
For more information, visit www.nahb.org.
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.
Read more: http://rismedia.com/2009-11-08/obama-signs-homebuyer-tax-credit-extension/#ixzz0XXFb8lT3
Tuesday, November 17, 2009
Correction on AR Home Sales Figures for September '09
CORRECTION: Arkansas Home Sales Up 9.9% In September, State Realtors Say
Homes sales in Arkansas increased in September by 9.85 percent compared with the same month a year ago, according to the Arkansas Realtors Association. The value of houses sold also rose, though the average sales price slipped 5.07 percent.
The Realtors Association initial report contained a few errors. To see the corrected PDF of the report, click here. To see a graphic showing the homes sales trend, click here.
Throughout Arkansas, there were 2,298 homes sold in September compared with 2,092 sales in the same month a year ago, the association said. September marked only the second month out of the past 44 where sales have been ahead in month-to-month comparison. The last time sales rose was in July.
The total value of new and existing homes sold by members of the association in September was $324.46 million, up 4.28 percent from $311.16 million in the same month last year. The average sales price fell 5.07 percent to $141,193.
The gains and the drop in average sales prices can be attributed to the first-time homebuyer tax credit, the association said. People were rushing to buy homes throughout September so they could close on them by Nov. 30, the deadline under the first-time homebuyer tax credit before it was extended.
Because first-time homebuyers in Arkansas tend to purchase houses that cost around $150,000 or less, the average sales price dropped in September, the association said. Members of the association reported homes at that price point were moving out of inventory quickly.
Members of the association have reported healthy sales in October, though those are only anecdotal accounts.
source: arkansasbusiness.com
Homes sales in Arkansas increased in September by 9.85 percent compared with the same month a year ago, according to the Arkansas Realtors Association. The value of houses sold also rose, though the average sales price slipped 5.07 percent.
The Realtors Association initial report contained a few errors. To see the corrected PDF of the report, click here. To see a graphic showing the homes sales trend, click here.
Throughout Arkansas, there were 2,298 homes sold in September compared with 2,092 sales in the same month a year ago, the association said. September marked only the second month out of the past 44 where sales have been ahead in month-to-month comparison. The last time sales rose was in July.
The total value of new and existing homes sold by members of the association in September was $324.46 million, up 4.28 percent from $311.16 million in the same month last year. The average sales price fell 5.07 percent to $141,193.
The gains and the drop in average sales prices can be attributed to the first-time homebuyer tax credit, the association said. People were rushing to buy homes throughout September so they could close on them by Nov. 30, the deadline under the first-time homebuyer tax credit before it was extended.
Because first-time homebuyers in Arkansas tend to purchase houses that cost around $150,000 or less, the average sales price dropped in September, the association said. Members of the association reported homes at that price point were moving out of inventory quickly.
Members of the association have reported healthy sales in October, though those are only anecdotal accounts.
source: arkansasbusiness.com
Saturday, November 14, 2009
FHA Head: FHA Not the New Subprime
FHA boss: FHA is not the new subprime
SAN DIEGO (AP) - Federal Housing Administration Commissioner David Stevens said Saturday that concerns the agency is headed for the same financial trouble that snared Fannie Mae, Freddie Mac and the subprime sector are unwarranted.
Stevens made the remarks during a speech at the National Association of Realtors' annual conference and expo in San Diego.
His comments come days after the agency revealed its financial reserves have fallen to a dangerously low level due to more homeowners defaulting on their loans. The FHA does not make loans, but rather offers insurance against default.
That's led to mounting concerns that it will eventually need an infusion of cash like government-controlled mortgage finance companies Freddie Mac and Fannie Mae.
But Stevens sought to dampen those concerns, noting that despite the most severe housing recession in decades, the agency has $31 billion in capital - $3.5 billion more than it had a year ago.
FHA is "the only participant in home financing services in the U.S. economy that hasn't needed a bailout, hasn't needed (funds from the government's Troubled Asset Relief Program), hasn't needed special assistance and is still completely self-sustaining," Stevens said.
"Without FHA there would be no (housing) market, and this economy's recovery would be significantly slower," he said.
The FHA has insured nearly a quarter of all new loans made this year, and about 80 percent of that business is from first-time homebuyers.
The agency's dominant role in first-time home purchases has raised questions about whether it taking on too much risk. Some have drawn comparisons between FHA and the subprime market, which collapsed due to homebuyer defaults on risky loans.
Stevens rejected such comparisons, stressing that the agency has far more stringent guidelines for the loans it insures.
"Nothing could be further from the truth," he said.
FHA's losses have increased with the unemployment rate as more homeowners default on their loans. About 17 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 13 percent for all loans, according to the Mortgage Bankers Association.
An independent audit shows FHA's reserves have fallen to $3.6 billion, compared with $685 billion in outstanding insured loans for the fiscal year ended Sept. 30. That's a ratio of 0.53 percent and far below the 2 percent threshold required by Congress.
Stevens credited the requirement with keeping FHA on good financial footing.
"That is why we're still standing while many of others did not survive this tumultuous time," he said.
www.FHA.com/
Obama's Loan Modification - Do You Qualify? Find Instantly. 9 Million Homeowners Can Benefit.
www.HBCNews.com
source: AP
SAN DIEGO (AP) - Federal Housing Administration Commissioner David Stevens said Saturday that concerns the agency is headed for the same financial trouble that snared Fannie Mae, Freddie Mac and the subprime sector are unwarranted.
Stevens made the remarks during a speech at the National Association of Realtors' annual conference and expo in San Diego.
His comments come days after the agency revealed its financial reserves have fallen to a dangerously low level due to more homeowners defaulting on their loans. The FHA does not make loans, but rather offers insurance against default.
That's led to mounting concerns that it will eventually need an infusion of cash like government-controlled mortgage finance companies Freddie Mac and Fannie Mae.
But Stevens sought to dampen those concerns, noting that despite the most severe housing recession in decades, the agency has $31 billion in capital - $3.5 billion more than it had a year ago.
FHA is "the only participant in home financing services in the U.S. economy that hasn't needed a bailout, hasn't needed (funds from the government's Troubled Asset Relief Program), hasn't needed special assistance and is still completely self-sustaining," Stevens said.
"Without FHA there would be no (housing) market, and this economy's recovery would be significantly slower," he said.
The FHA has insured nearly a quarter of all new loans made this year, and about 80 percent of that business is from first-time homebuyers.
The agency's dominant role in first-time home purchases has raised questions about whether it taking on too much risk. Some have drawn comparisons between FHA and the subprime market, which collapsed due to homebuyer defaults on risky loans.
Stevens rejected such comparisons, stressing that the agency has far more stringent guidelines for the loans it insures.
"Nothing could be further from the truth," he said.
FHA's losses have increased with the unemployment rate as more homeowners default on their loans. About 17 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 13 percent for all loans, according to the Mortgage Bankers Association.
An independent audit shows FHA's reserves have fallen to $3.6 billion, compared with $685 billion in outstanding insured loans for the fiscal year ended Sept. 30. That's a ratio of 0.53 percent and far below the 2 percent threshold required by Congress.
Stevens credited the requirement with keeping FHA on good financial footing.
"That is why we're still standing while many of others did not survive this tumultuous time," he said.
www.FHA.com/
Obama's Loan Modification - Do You Qualify? Find Instantly. 9 Million Homeowners Can Benefit.
www.HBCNews.com
source: AP
Thursday, November 12, 2009
Foreclosures Dipped 3% in October, Filings Up 19% From Last Year
Arkansas is not among these states, a good sign. ~ Editor
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Foreclosures dip 3 pct. in October from September
NEW YORK (AP) - The number of homeowners on the brink of losing their homes dipped in October, the third straight monthly decline, as foreclosure prevention programs helped more borrowers.
But foreclosure filings are still up 19 percent from a year ago, RealtyTrac Inc. said Thursday, and rising job losses continue to threaten the stabilizing trend.
More than 332,000 households, or one in every 385 homes, received a foreclosure-related notice in October, such as a notice of default or trustee's sale. That's down 3 percent from September.
Banks repossessed more than 77,000 homes last month, down from nearly 88,000 homes in September.
New state programs, like one launched in Nevada in July, that require mediation before banks can seize a property have helped stem foreclosure activity, said Rick Sharga, senior vice president at RealtyTrac.
Also, anecdotally, lenders are delaying foreclosure as they evaluate which borrowers might qualify for the federal loan modification program, he said.
"That's the reason there's been a buildup of homes that are seriously delinquent but not foreclosed," he said.
Despite Nevada's legislative efforts to slow foreclosures, the state still clocked in the nation's highest foreclosure rate for the 34th month in a row, followed by California, Florida, Arizona and Idaho. Rounding out the top 10 were Illinois, Michigan, Georgia, Maryland and Utah.
Among cities, Las Vegas had the highest rate, the report showed. One in 68 homes there received a foreclosure filing in October, more than five times the national average. Seven of the top ten metros were in California, led by Vallejo and Modesto at No. 2 and 3.
After three years of declines, home prices reversed course in June and have been rapidly climbing month-over-month. This will rebuild home equity and reduce the number of borrowers that owe more than their homes are worth.
Still, foreclosures remain near record highs and the mortgage industry is still struggling to manage the onslaught. The government has had to push many lenders to participate in the Obama administration's loan modification plan.
The Treasury Department said Tuesday that more than 650,000 borrowers, or 20 percent of those eligible, had signed up for temporary trial plans lasting up to five months. But since the beginning of September, only about 1,700 modifications had been made permanent. The Treasury Department expects to release updated data later this month.
Congress last week also extended and expanded a key federal tax credit for homebuyers that has been credited for boosting home sales recently.
Buyers who have owned their current homes for at least five years are eligible for tax credits of up to $6,500, while first-time homebuyers - or anyone who hasn't owned a home in the last three years - would still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30, 2010, and close by June 30.
"Anything that stimulates buying activity," Sharga said, "will go a long way to mediate the foreclosure problem."
--------
Foreclosures dip 3 pct. in October from September
NEW YORK (AP) - The number of homeowners on the brink of losing their homes dipped in October, the third straight monthly decline, as foreclosure prevention programs helped more borrowers.
But foreclosure filings are still up 19 percent from a year ago, RealtyTrac Inc. said Thursday, and rising job losses continue to threaten the stabilizing trend.
More than 332,000 households, or one in every 385 homes, received a foreclosure-related notice in October, such as a notice of default or trustee's sale. That's down 3 percent from September.
Banks repossessed more than 77,000 homes last month, down from nearly 88,000 homes in September.
New state programs, like one launched in Nevada in July, that require mediation before banks can seize a property have helped stem foreclosure activity, said Rick Sharga, senior vice president at RealtyTrac.
Also, anecdotally, lenders are delaying foreclosure as they evaluate which borrowers might qualify for the federal loan modification program, he said.
"That's the reason there's been a buildup of homes that are seriously delinquent but not foreclosed," he said.
Despite Nevada's legislative efforts to slow foreclosures, the state still clocked in the nation's highest foreclosure rate for the 34th month in a row, followed by California, Florida, Arizona and Idaho. Rounding out the top 10 were Illinois, Michigan, Georgia, Maryland and Utah.
Among cities, Las Vegas had the highest rate, the report showed. One in 68 homes there received a foreclosure filing in October, more than five times the national average. Seven of the top ten metros were in California, led by Vallejo and Modesto at No. 2 and 3.
After three years of declines, home prices reversed course in June and have been rapidly climbing month-over-month. This will rebuild home equity and reduce the number of borrowers that owe more than their homes are worth.
Still, foreclosures remain near record highs and the mortgage industry is still struggling to manage the onslaught. The government has had to push many lenders to participate in the Obama administration's loan modification plan.
The Treasury Department said Tuesday that more than 650,000 borrowers, or 20 percent of those eligible, had signed up for temporary trial plans lasting up to five months. But since the beginning of September, only about 1,700 modifications had been made permanent. The Treasury Department expects to release updated data later this month.
Congress last week also extended and expanded a key federal tax credit for homebuyers that has been credited for boosting home sales recently.
Buyers who have owned their current homes for at least five years are eligible for tax credits of up to $6,500, while first-time homebuyers - or anyone who hasn't owned a home in the last three years - would still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30, 2010, and close by June 30.
"Anything that stimulates buying activity," Sharga said, "will go a long way to mediate the foreclosure problem."
Tuesday, November 10, 2009
Housing Plan Helps 20% in California, Nevada & Arizona
Housing plan helps 20 pct in Calif, Nev., Ariz.
WASHINGTON (AP) - The Obama administration's plan to combat the foreclosure crisis has reached about 20 percent of troubled homeowners in the states most affected by the housing meltdown, according to data being released Tuesday.
In California, about 130,000 homeowners have been enrolled in the "Making Home Affordable" loan modification plan, which President Barack Obama unveiled in February. That works out to about 19 percent of homeowners who were either two payments behind or in foreclosure at the end of last month, according to Treasury Department data.
"We are reaching all the places that really got decimated," said Michael Barr, an assistant Treasury secretary. "The other basic story is we're reaching borrowers at a scale that has not been done by any other modification program."
Two other hard-hit states, Arizona and Nevada had similar rates of assistance as California, at 22 percent and 18 percent respectively. Florida, however, was much lower, at 12 percent, possibly because of high numbers of investor-owned properties that don't qualify for the program.
The $50 billion plan got off to a slow start, but government officials say they are pressing the industry hard to improve their performance. Still, many housing advocates have been disappointed with the plan's progress and say that getting a loan modification is still a battle.
And economists doubt the Obama administration will reach its broad goal of helping 3 to 4 million borrowers within three years.
Most of the borrowers enrolled so far have been signed up for preliminary trial modifications for up to five months. To make the change permanent, though, they must complete a big stack of paperwork. The government expects to release details in the coming weeks on permanent modifications.
"We're seeing some early indications that the servicers haven't done enough to get all the documents in," Barr said.
Traditionally mortgage servicers were low-cost operations, with workers in collections departments trying to wring payments from tardy borrowers. Those workers, and thousands of new ones, are now engaged in a far different job - figuring out whether thousands of borrowers qualify for help or not.
Banks, for their part, have been slow to adapt to an unfamiliar climate of sinking home prices and soaring unemployment.
"Even as foreclosures and delinquencies were soaring, everybody underestimated how ugly the housing picture was," said Thomas Lawler, an independent housing economist in Virginia.
source: http://apnews.myway.com//article/20091110/D9BSKUQ02.html
WASHINGTON (AP) - The Obama administration's plan to combat the foreclosure crisis has reached about 20 percent of troubled homeowners in the states most affected by the housing meltdown, according to data being released Tuesday.
In California, about 130,000 homeowners have been enrolled in the "Making Home Affordable" loan modification plan, which President Barack Obama unveiled in February. That works out to about 19 percent of homeowners who were either two payments behind or in foreclosure at the end of last month, according to Treasury Department data.
"We are reaching all the places that really got decimated," said Michael Barr, an assistant Treasury secretary. "The other basic story is we're reaching borrowers at a scale that has not been done by any other modification program."
Two other hard-hit states, Arizona and Nevada had similar rates of assistance as California, at 22 percent and 18 percent respectively. Florida, however, was much lower, at 12 percent, possibly because of high numbers of investor-owned properties that don't qualify for the program.
The $50 billion plan got off to a slow start, but government officials say they are pressing the industry hard to improve their performance. Still, many housing advocates have been disappointed with the plan's progress and say that getting a loan modification is still a battle.
And economists doubt the Obama administration will reach its broad goal of helping 3 to 4 million borrowers within three years.
Most of the borrowers enrolled so far have been signed up for preliminary trial modifications for up to five months. To make the change permanent, though, they must complete a big stack of paperwork. The government expects to release details in the coming weeks on permanent modifications.
"We're seeing some early indications that the servicers haven't done enough to get all the documents in," Barr said.
Traditionally mortgage servicers were low-cost operations, with workers in collections departments trying to wring payments from tardy borrowers. Those workers, and thousands of new ones, are now engaged in a far different job - figuring out whether thousands of borrowers qualify for help or not.
Banks, for their part, have been slow to adapt to an unfamiliar climate of sinking home prices and soaring unemployment.
"Even as foreclosures and delinquencies were soaring, everybody underestimated how ugly the housing picture was," said Thomas Lawler, an independent housing economist in Virginia.
source: http://apnews.myway.com//article/20091110/D9BSKUQ02.html
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