HOMEBUYER TAX CREDIT USED FOR DOWN PAYMENT

DONOVAN ANNOUNCES RECOVERY ACT'S HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME FHA plan will stimulate new home sales and help stabilize housing market WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.�The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to 'monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA's new mortgagee letter, visit�HUD's website."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. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today's announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today's action permits the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit.According to estimates by the National Association of Home Builders, the Administration's homebuyer tax credit will stimulate 160,000 home sales across the nation - 101,000 of which will be first-time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home. Given FHA's current market share, it's estimated that thousands of families will be able to purchase a home by allowing the anticipated tax credit to be applied toward their purchase together with an FHA-insured mortgage.Homebuyers should beware of mortgage scams and carefully compare benefits and costs when seeking out tax credit monetization services. Programs will vary from organization to organization and borrowers should consider whether the services make sense for them, as well as what company offers the most suitable and affordable option.�For every FHA borrower who is assisted through the tax credit program, FHA will collect the name and employer identification number of the organization providing the service as well as associated fees and charges. FHA will use this information to track the business closely and will refer any questionable practices to the appropriate regulatory agencies, as necessary.

Georgia Homebuyer Tax Credit Awaits Governor's Signature

HB 261 passed both the House and Senate overwhelmingly on Friday placing the fate of a statewide homebuyer tax credit solely in the hands of the Governor. Understanding the delicate nature of passing a tax credit bill in our current budgetary climate, House sponsor Ron Stephens and House Ways and Means Chairman Larry O'Neal met with Governor Perdue and decided to reduce the overall maximum benefit of the tax credit to $1,800 or 1.2 % of the purchase price spread over three years. The final version of the bill contains the GAR amendment to clarify condominiums and residences occupied at the time of sale are eligible for the credit, otherwise the definitions for eligible single family residences did not change.

Join Our Real Estate Investors Meetup

If you would like to network with commercial real estate professionals join our monthely meetup group. Check us out at http://www.meetup.com/South-Metro-Real-Estate-Meetup-Group/?gj=wg2_ej1b . We will be discussing Syndicated Group Investments, individual real estate investment and how to walk through the mine fields of the current market.

Economic Stimulus Measure Includes Multifamily Housing Provisions

Responding to the President's call for "swift and bold" action, Congressional Democrats have put the massive $800-$900 billion stimulus package on a fast track for enactment. The House passed its version of the measure, the American Recovery and Reinvestment Act Bill of 2009 (H.R. 1) last Wednesday on a straight party line vote. As Washington Update went to press, the full Senate was debating its version and was expected to make changes to the package. Assuming Senate passage, lawmakers will still have to resolve the significant differences between the two versions.
While the package is mainly focused on non-real estate issues, there are several provisions of interest to apartment firms, including several tax provisions related to net operating loss, bonus depreciation, cancellation of indebtedness and enhancements to the Low-Income Housing Tax Credit. It also authorizes energy-efficiency tax incentives and increased funding for the Section 8 program and lead-based paint abatement. A summary of the apartment-related elements of the two bills is available at www.nmhc.org/goto/5038 and will be updated to reflect final action on the Senate floor this week. President Obama has asked Congress to complete action on the package by February 16.
NMHC seeks multifamily mortgage assistance
NMHC has launched a high-profile effort to help restore the apartment sector's access to capital. In addition to issuing the NMHC-commissioned policy paper by Harvard's Joint Center for Housing Studies last month (see the January 16 Washington Update), NMHC has issued a three-point program statement calling on the Federal Reserve and Treasury Department to take action to bring badly needed liquidity to the apartment sector until the credit crisis is resolved. In addition to our ongoing outreach to lawmakers, we are meeting with senior Federal Reserve officials this week and with the Federal Housing Finance Agency (FHFA), the GSE,s' regulator, to make our case.
Citing the looming risk of systemic failure and a wave of defaults and bankruptcies on otherwise performing properties because of a lack of capital to refinance maturing debt, the NMHC initiative calls on the federal agencies to use the authority they have under the Troubled Assets Relief Program (TARP) to:
1. Purchase multifamily mortgage-backed securities (MBS) guaranteed by Fannie Mae and Freddie Mac. Federal Reserve/Treasury purchases are important to invigorate the multifamily MBS investor market which has begun to show limited signs of activity.
2. Purchase longer-term (e.g. 10-year) debt issuances by Fannie Mae and Freddie Mac so that the GSEs can support their lenders’ funding needs without having to rely on mismatched short-term debt. This is essential to align the GSEs’ capital needs with longer-term multifamily loan products.
3. Exempt multifamily loans from GSE mortgage portfolio limits through December 31, 2010 or until a new secondary market structure for multifamily loans is operational, whichever comes first. Based on Fannie Mae’s and Freddie Mac’s strong multifamily loan portfolio performance, exempting these loans will have virtually no impact on the overall portfolio risk of the two enterprises.
Additional details on the three-point program are posted at www.nmhc.org/goto/CapitalCrisis. In related news, on January 27, FHFA issued interim final rules requiring substantial portfolio reductions at Fannie Mae and Freddie Mac as required by the Housing and Economic Recovery Act of 2008. The rule would codify the terms of the September agreement that placed Fannie Mae and Freddie Mac under federal conservatorship. The interim rule states that each firm's retained mortgage and MBS portfolio must not exceed $850 billion as of December 31, 2009 and must decline by 10 percent per year until it reaches $250 billion. The interim rule also requests public comment on portfolio criteria that should apply when the GSEs are no longer subject to the terms of the conservatorship. NMHC will submit comments seeking to protect the GSEs' role as a liquidity backstop to the apartment sector, arguing for separate treatment for multifamily assets in portfolio calculations.
Seller-financed "charity" down payment assistance
NMHC has once again mounted a campaign to oppose reinstating seller-financed "charity" down payment programs. These circular funding schemes, which NMHC has long opposed, were banned as of October 1 because loans secured with assisted down payments are three times as likely to default. We successfully opposed efforts by homeownership advocates to overturn the ban via amendments to last year's financial bailout bill and the continuing resolution funding the government through March. On January 16, Representative Al Green (D-TX) reintroduced a measure reinstating and allegedly reforming the programs. NMHC continues to educate lawmakers that these programs threaten the financial viability of the Federal Housing Administration (FHA), perpetuate the now discredited zero-down mortgage lending and threaten to re-inflate the housing bubble.
Hendersen-Webb receives 2008 NMHC Good Neighbor Award
On January 23, NMHC awarded its annual "Good Neighbor Award for Outstanding Community Service" to Hendersen-Webb. The award, which carries a $10,000 donation to the charity of the winner’s choice, highlights the many positive contributions apartment firms make to their communities and showcases good ideas that others can replicate. Hendersen-Webb was selected by an independent panel of judges for its Creative Kids program, which operates community centers for residents of the firm's apartments, offering a variety of services including English classes, tutoring, homework assistance and job-seeking help for adults. More information on the award is available at www.nmhc.org/goto/GoodNeighbor.
Smoke-free housing
Santa Monica joined several other cities, many in California, last month by approving a ban on smoking in common areas of multi-unit residential buildings. The law makes it a criminal infraction to smoke in outdoor common areas, including patios, garden and pool areas and parking lots. Victims of secondhand smoke can file a civil action in court to get an injunction or collect as much as $100 in damages. The law requires a resident to try to reach a solution with the smoker before filing a civil action, including providing written notice of the law and a written request to stop smoking in the common areas. The ordinance includes condominiums and does not grandfather smoking rights for existing rent control residents.
Meanwhile, one of the nation's most restrictive smoke-free laws went into effect on January 9 in Belmont, CA, a city approximately 20 miles south of San Francisco, after a 14-month grace period to allow apartments to comply. That law bans smoking in any apartment that shares a floor or ceiling with another, including condominiums. The 25,000-person city now only allows smoking in detached houses and yards, streets, some sidewalks and designated smoking areas outside. It was enacted as a result of a grassroots campaign by the residents of a federally subsidized retirement home who complained that secondhand smoke was adversely affecting their health.
A few private apartment firms have imposed smoking bans in their portfolios voluntarily. Guardian Management, LLC implemented the largest ban last January. The firm prohibits smoking inside apartments and in common areas as well as within 25 feet of any building on its properties. In a recent survey of residents at 17 of Guardian's federally subsidized properties, nearly three quarters said they were very or somewhat happy with the ban. Even among smokers, 30 percent said they were somewhat happy with the policy. More information on smoke-free housing is available on NMHC's web site at www.nmhc.org/goto/SmokeFree.
Miscellanea E-Verify. On January 28, the federal government for the second time agreed to postpone implementation of its controversial requirement that most government contractors verify the legal work status of their employees using the government's E-Verify system. The requirement was originally set to take effect on January 15. On January 9, the Department of Justice delayed implementation of the new regulation until February 20 in response to a legal challenge by the U.S. Chamber of Commerce and other industry groups. Last week's announcement postpones implementation until May 21, 2009. Meanwhile, the House-passed version of the economic stimulus package (H.R. 1) includes a provision mandating E-Verify participation for employers who receive federal contracting funds made available under the stimulus plan. For more information on the regulation, visit www.nmhc.org/goto/4976.
High-Level Multifamily Professionals in Obama Administration. Shaun Donovan was confirmed as HUD Secretary on January 22. Donovan brings extensive multifamily and private sector experience to the position and publicly expressed his support for a more balanced housing policy during his confirmation hearings. Rental housing has an unprecedented high profile in the new Obama Administration. In addition to Donovan, who spoke at NMHC's Board of Directors Meeting in 2005, President Obama named Valerie Jarrett a Senior Advisor. Jarrett was recently the CEO of The Habitat Company and was a member of NMHC. She spoke at the Council's Board of Directors and Advisory Committee meeting in 2006. NMHC has maintained a good relationship with both in the intervening years.
For more information, contact NMHC's Michael Tucker, at mtucker@nmhc.org or at 202/974-2360.

Senate Approves Isakson $15,000 Tax Credit Amendment to Stimulate Housing Market

WASHINGTON – The U.S. Senate today unanimously approved an amendment to the Fiscal Year 2010 Budget Resolution by U.S. Senator Johnny Isakson, R-Ga., that seeks to stimulate the nation’s declining housing market by providing for a $15,000 tax credit to individuals who purchase a home in the next year.

“Our economic crisis started with housing, and our economy will continue to suffer unless we do something now to immediately fix the housing problem,” Isakson said. “I’m pleased my colleagues in the Senate understand the importance of creating targeted incentives that will encourage Americans to buy homes again.”

Isakson’s amendment to the Budget Resolution would create a deficit-neutral reserve fund for providing a nonrefundable federal income tax credit for the purchase of a principal residence during a one-year period. It would also ensure that there is room available in the Fiscal Year 2010 budget levels for a homebuyer credit to be passed at a later date. Isakson plans to introduce his $15,000 tax credit as a stand-alone bill in the next few weeks.

On Feb. 4, 2009, the Senate unanimously approved an amendment by Isakson to the economic stimulus bill would have provided a direct tax credit to any homebuyer who purchases any home. The amount of the tax credit would be $15,000 or 10 percent of the purchase price, whichever is less. During conference negotiations between the House and Senate on the final version of the bill, Isakson’s $15,000 tax credit for all purchasers of any home was removed. Instead, House and Senate negotiators made only small modifications to the first-time homebuyer tax credit that was enacted in 2008 as part of the Housing and Economic Recovery Act of 2008.

Isakson has pushed hard for a non-repayable tax credit for homebuyers because he knows that it will work. In the mid-1970s, America faced a similar housing crisis when a period of easy credit and loose underwriting flooded the market with new construction. Interest rates rose, the economy slowed and America was left with a three-year supply of vacant homes. Congress responded by passing a $2,000 tax credit for anyone purchasing a new home for their principal residence. Isakson, who was in the real estate industry in Atlanta at the time, says the results were clear and swift as home values stabilized, housing inventory dropped and the market recovered.
Last year, Isakson introduced legislation to specifically target those homes that were causing the unprecedented increase in housing inventory by offering tax credits to individuals purchasing a foreclosed home or a home where foreclosure is pending. In April 2008, the Senate passed legislation to stimulate the nation’s declining housing market that included Isakson’s proposal. However, the final version of the legislation that was signed into law included only a $7,500 tax credit for first-time homebuyers that must be repaid over a 15-year period. Isakson spent more than three decades in the real estate business, beginning his business career in 1967 when he opened the first Cobb County, Ga., office of a small, family-owned real estate business, Northside Realty. Isakson later served as president of Northside for 20 years, presiding over the company’s growth into the largest independent residential real estate brokerage company in the Southeast and one of the largest in America.

First Time Home Buyers and Investors

When buying foreclosed homes you may want to hire a buyer's agent to walk you through the mindfields and pitfalls of the transaction. First time home buyers may be eligable for up to $8,000 tax credit toward down payment or closing. For more information, call, Robert Wood, CCIM, CRB, ABR; Centergy Realty Brokers, Inc. 678-378-4820 or e-mail me at robert@centergyrealty.com.

New Federal Rules To Prevent Future Runs on Bad Loans

Paramount in new federal regulations approved to foster more responsible mortgage lending, are the implications for consumers shopping for a home loan.
The Federal Reserve Board's new rule amends the "Truth In Lending Act," Regulation Z under the "Home Ownership and Equity Protection Act (HOEPA)".
HOEPA was originally passed in 1994 to target abusive practices in home equity lending. The Fed's new move extends protections to home purchase loans.
Critics complain the rule is long over due because unfair, abusive and deceptive home mortgage lending practices get much of the blame for the current housing crisis that has already put millions of properties in foreclosure and former owners on the street.
Also, most lenders long ago curtailed many of the practices now forbidden by the new regulations, critics say. The horse is already out of the barn, so to speak, and the new regulations will do little to corral the market's downward stampede.
However, the new rules should help prevent future runs on bad loans by helping remove them from the market. Perhaps more important, key provisions in the new rules will give consumers cause to pause before shopping for a mortgage.
Effective October 1, 2009, the new rule's four key provisions (along with how each will impact consumers), for a newly defined, but yet to be detailed category of "higher-priced mortgage loans," include protections that will:
· Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value.
· This forces lenders to more closely scrutinize a borrower's debt-to-income ratio, looking for less debt, more income and savings, larger down payments and other liquid assets the borrower can fall back on. Consumers may have to take more time saving and paying off debt before buying a home.
· Require creditors to verify the income and assets they rely upon to determine repayment ability.
This provision will make it especially tough for home-based business owners, self-employed people, contract workers and others who don't get a regular pay stub. Lenders were already asking many of these borrowers for a CPA's or other tax professional's certified profit-and-loss statement to reveal income viability.
· Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years.
Without this lender risk-reducing tool they are more likely to offer a narrower variety of loans, forcing some consumers out of the market and more of them to spend more time shopping around. Shopping around, of course, is a smart practice.
· Require creditors to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans.
This means borrowers will have to figure on paying more each month than just the home loan's principle and interest (or interest only, where available). This is actually a useful tool for borrowers, especially those who procrastinate and gamble they'll have the lump sum cash when the insurance premium or property tax comes due. Financial counselors have always advised spreading out the cost of insurance and taxes over 12 monthly payments is much easier to fit into a household budget than the lump sum risk.
In addition to rules for higher priced home loans other rules include:
· Creditors and mortgage brokers are prohibited from coercing a real estate appraiser to misstate a home's value.
· Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees. Servicers are also required to credit consumers' loan payments as of the date of receipt.
· Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer's principal dwelling, such as a home improvement loan or a loan to refinance an existing loan. Currently, early cost estimates are only required for home-purchase loans.
· The rules also specifically outlaws seven deceptive and misleading advertising and requires more extensive information about rates, monthly payments and other loan features.