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Therefore, HUD has withdrawn the proposal.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.