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Not to be outdone by TMZ, the $8000 tax credit rumor mill is buzzing that the on again off again monetization of the credit for use as a down payment mentioned earlier this month by HUD Secretary Shaun Donovan appears to be on again.
Then again, according to a Wall Street Journal report, the program was ne
ver off. The FHA may well have simply needed to iron out some issues and get White House approval before the program can make its debut.
Once in place, the Journal anticipates it may take several weeks for the program to become operational.
The plan had been for FHA approved lenders to be authorized to provide bridge loans to first time home buyers secured by the tax credit the buyer will be receiving.
Nonprofit organizations, as well as state and local agencies would also be authorized to provide the loans in the form of a second mortgage secured by the house.
This program would allow people who haven’t owned a home in the last three years to use their anticipated tax credit as a down payment on property. Of course, this “first time home buyer tax credit” extends to any principal place of residence, including duplexes and other multi-family units.
Both the real estate and home building industries believe this initiative would go a long way toward jump starting the housing market.
And you thought government news wasn’t as juicey as Hollywood’s.
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Last week, HUD Secretary Shaun Donovan announced a government plan that would allow first time home buyers to use the $8000 tax credit as a down payment via a bridge loan program.
It seems in the days since, HUD has reversed their position, taking the program out of the spotlight entirely.
Apparently there was fear the proposal was too similar to the now-illegal seller-funded down payment assistance programs like Nehemiah, Genesis and Ameridream. IRS officials also expressed concern that the proposal could complicate tax issues.
Therefore, HUD has withdrawn the proposal.
While this is disappointing to lenders, home builders and Realtors who felt the ability to use the tax credit as a down payment would open the housing market for more first time buyers, I feel that the proposal existed at all is reason for optimism.
The administration clearly understands that while there are qualified first time home buyers ready to jump start the housing market, many are simply short some or all the required money for a down payment.
Simply helping them bridge that gap might be the missing ingredient to get things rolling again.
Stay tuned.
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HUD Secretary Shaun Donovan
Remember when Congress abolished seller down payment assistance programs like Nehemiah and Ameridream last fall?
At the time, many Realtors saw the move, however well-intentioned, as disastrous to the housing market. See, while there are, believe it or not, many first time home buyers with excellent credit, they haven’t all saved quite enough for the FHA’s required 3.5 percent down payment.
What’s more, one of the most traditional sources of down payment assistance; mom and dad’s 401(k), isn’t as plentiful as it once was.
Well, in an address to several thousand Realtors earlier this week, HUD Secretary Shaun Donavan said the Federal Housing Administration is going to allow its lenders to allow homeowners to use the $8000 first time home buyer tax creditas a downpayment.
Donovan said the change will help consumers buy a home. According to the plan, the FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. Via this mechanism, eligible home buyers will be able to access the funds immediately at the closing table.
The change had been called for by the National Association of Realtors.
Details of how all of this would work haven’t been announced.
