Obama to sign legislation tomorrow - will extend to June 30, 2010 - First Time Home Buyers still $8,000 and Some Existing Home Buyers Qualify for NEW $6,500 “Move-Up” credit ...
November 5, 2009
Congress acted with urgency today to get the Unemployment and Housing Credit bill out before the Unemployment numbers are reported tomorrow. As part of this, the House accepted the Senate amendments to the bill Extending and Expanding the Home Buyer Tax Credit. As reported in theNew York Times, minutes ago, the existing credit will both be extended through the first part of 2010 and expanded to higher income buyers. A new $6,500 credit will be there for some long-time existing homeowners, moving to a new home.
Some cheer, others not so. Is this the right thing to do? As real estate professionals we look forward to the increased activity, but what are the unintended consequences of congressional meddling with the market economy (see Clunkers and see Barney Frank demanding expanded qualification guidelines at FNMA.) How will it be paid for? The projection is that this extension will double to $21 billion the cost of the program.
Here are the important points:
$8,000 First Time Home Buyers credit continues
New $6,500 for existing “Move-Up” homebuyers
- Same home for 5 yrs of past 8-yr period
Contracts (EMA) signed by 4/30/10
Closings before 7/1/10
Home purchase price of $800,000 or less
Income limits expanded
- Old: $75,000 single, $150,000 Married
- New: $125,000 single, $225,000 Married
Tax Return filing will require HUD-1 be Attached
If you are a glutton for punishment, here is the text of the legislation.
As we have told you in the past, the true champion of the Housing Credit Extension is Senator Johnny Isakson (R-GA) a Realtor of 33 years.Here is what he had to say to explain the need for this extension AND expansion now:
“In addition to the $8,000 credit extension for first-time home buyers, a move-up buyer tax credit of $6,500. This is the cornerstone of the substitute before us now. It offers to any previous homeowner who has lived in their home for at least the last 5 years the opportunity to sell that home, invest in a new home, and take up to a $6,500 tax credit. That is going to help us boost what is the problem in the U.S. housing economy today, and that is what is called the move-up market. It is the gentleman who is transferred from Delaware with Hercules to Brunswick, GA, who cannot sell his house in Wilmington and cannot buy a house in Brunswick because the markets are so frozen and the move-up market is dead. Now he has an opportunity to sell that house and have an incentive for its purchase in Delaware and an incentive to come and reinvest that money in Georgia in a house in Brunswick. It will make a measurable difference over the next 7 months in our economy.
“We also raised the means test on income from $75,000 to $150,000, which is in the current credit, to $150,000 and $225,000 in the new bill for both move-up buyers as well as first-time home buyers. Those income thresholds will open the incentive to more Americans and I think will show a measurable increase in the amount of business that takes place.
“In response to the Internal Revenue Service concerns we expressed a few months ago on fraud, we put in every single request they made for fraud to see to it the HUD-1 is attached to tax statements, to see to it there is no fraudulent claim of the money, and to see to it the IRS has every tool they can to prosecute to the fullest anybody who would abuse this credit.”
If you are interested in reading the actual legislative language of the Home Buying Tax Credit Extension bill, it is available by going to this link: http://bit.ly/3UustY This is an amendment (S.AMDT.2724 to H.R.3548) to the Unemployment Extension Bill as offered by Senator Schumer.
As described previously the terms of the expansion to long-time homeowners includes a requirement that they have lived in the same principal residence at least 5 of the last 8 years. The credit will be $6,500 for those individuals.
Limitations are set at income of $150,000 single and $225,000 married (previously reported at $250k)
Maximum home purchase price is set at $800,000 to qualify for the credit. This will be of more interest in California and High priced regions.
Happy reading and remember it is still in amendments to a bill that hasn't passed yet. More legislative "sausage" to be made before we have something to send to the White House for signature.
One of our own realtors here in Bend is keeping up with the legislative efforts on the combined Unemployment Extension and Home Buyer Tax Credit.I am betting on action including a Senate vote and into conference this week.
The Senate on Monday voted 85-2 to place limits on further debate of HR 3548, a bill extending unemployment benefits that includes an amendment that would allow homebuyers to claim the credit on sales under contract before May 1. The vote to invoke cloture moves HR 3548 closer to a final vote in the Senate as early as today.
Stay tunned for continuing updates as news is released regarding the first time home buyer tax credit and repeat home buyer tax credit.
Plenty of news from last week and I mean even bigger than the Ducks’ smothering of the overmatched Trojans.
In FHA and FNMA home financing news, the High-Balance Conforming Limits that were set to expire this year have been extended through all of 2010.This is big residential real estate news.This legislation means that Central Oregon FHA limits will remain at $417k rather than rolling back to the ~$300k level they were headed for.And for Fannie Mae loans, while the difference in OR between “standard” conforming ($417k) and “high-balance” conforming ($447k) is minimal, the difference in markets that often provide buyers into Central Oregon is very important.California’s high balance limit of $729,750 when combined with a purchase-money second of $350,000 and an approx 20% down payment means that a home with a purchase price of $1,350,000 can be purchased without jumbo financing.FNMA-backed, conforming rates are better than Jumbo residential rates which still don’t enjoy a secondary market.
In economic news, the Q3 GDP numbers were published with a surprisingly high 3.5% growth.This news has to be tempered with a few caveats as cheerleaders call for the official end of the recession.The start of a recession officially waits for 2 consecutive quarters of GDP decline.People often look back to an earlier date to peg the start but it isn’t official until we’ve experienced the 2 consecutive quarters.With this one-quarter upturn, even at the surprising, >1% growth number, we need to remember some of the temporary stimuli that are included in the 3rd quarter, especially the Clunk of a car incentive program (see here for $24,000 per car taxpayer cost analysis.)Local inquiry resulted in one car dealership indicating that they have had ZERO new car sales in the weeks since Clunker ended.So, while we are happy for some upturn in the GDP, let’s watch for more signs of broad improvement before we relax.
In banking news, the FDIC shutdown 9 more banks on Friday and this was before the CIT restructure announcement.This brings to 141 the number of FDIC takeovers since the beginning of “The Great Recession” and 115 on the year.Incidentally, the 9 banks along with CIT are heavily invested in Commercial Real Estate.Many community banks are the repositories of land, development and commercial lending and we are just still seeing the tip of the iceberg on problems there.Once again this past week Signet stepped in to help a building owner who had been turned down on a loan renewal request with their bank (of 30 years!!) unwilling or unable to extend credit in this region.Please have building owners you know step forward early and get refinanced now rather than waiting for the current note to come due.Signet is ready to take care of their refinancing needs now.
In other legislative news, the Home Buyer Tax Credit Extension gathered momentum and some clarity this past week as we reported on Thursday.However, this is not yet a done deal.The progress last week included a voice vote of confidence in the Senate and an assurance of House passage, but the actual vehicle for passage in both houses needs to be finalized.The likely scenario has the Home Buyer Credit being attached to an unemployment extension bill that has similar levels of support.While the benefits of kick starting the economic engine are likely, the results still raise questions (see Clunker discussion above.)Assuming passage here are the high points again:
$8,000 FTHB credit continues
New $6,500 for existing homebuyers
Same home for consecutive 5-yr period
Contracts signed by 4/30/10
Closings before 7/1/10
Income limits expanded
Old: $75,000 single, $150,000 Married
New: $125,000 single, $250,000 Married
Military personnel extension into 2011
New tax return filing requirements
Fraud prevention
HUD-1 attachment to returns
I appreciate all of your support ... lots of changes in the industry and many have not survived - Thanks to you keeping us top of mind - Signet has continued to thrive and celebrated its 6th year in business this summer! As I am 100% referral based - I depend on you to keep growing! We have added exceptional professionals to handle the increase – don’t hesitate to call.
Look for expanded resources on our web site coming soon - an increased emphasis on Commercial Financing, Renovation Lending and Reverse Mortgages.
FTHB Still at $8k and Some Existing Homebuyers May Qualify for New $6,500 Credit
The Senate continues to drive for extension and expansion of the Home Buyer Tax Credit.As reported in the WSJ this morning, the existing credit would both be extended through the first part of 2010 andexpanded to higher income buyers, plus a new $6,500 credit would be created for some existing homeowners, moving to a new home.
Before I lay out the details, two words of caution:
Is this the right thing to do? As real estate professionals we look forward to the increased activity, but what are the unintended consequences of congressional meddling with the market economy (see Clunkers and see Barney Frank demanding expanded qualification guidelines at FNMA.)
How will it be paid for?Not yet clear, but the most recent House proposals all included a shift of unspent stimulus dollars to this focused cause.I could support that.
Now back to our usual rah-rah stance.Here are the important points:
$8k FTHB credit continues
New $6,500 for existing homebuyers
Same home for consecutive 5-yr period
Contracts signed by 4/30/10
Closings before 7/1/10
Income limits expanded
Old: $75,000 single, $150,000 Married
New: $125,000 single, $250,000 Married
As we have pointed out before, the making of legislation is a dark and messy affair.Some major hurdles still need to be crossed, but with Senator Harry Reid, House Speaker Pelosi and the White House backing this, it should find its way out the other end of the sausage-making machinery.Watch for it to be attached to the unemployment bill now on the floor for quick passage.
If it does make it through, you will have Senator Johnny Isakson (R-GA) to thank for it.One reason this is getting so much headway in the Senate rather than the House is the effort of Mr. Isakson.He is a former owner of a real estate firm in suburban Atlanta and worked 33 years as a Realtor. His impassioned plea on the Senate floor two weeks ago and his knowledgeable testimony before the Senate Banking, Housing and Urban Affairs Committee last week were strong statements in favor of the credit.He is seen as a very credible source of information on this topic in the Senate.
The most curious part of the whole legislative dance is that this extension seems to have the support of Senate Republicans but may be shot down by House Democrats who “have raised concerns that it carries a high cost to the government.” What the heck? Now there is a turn of the tables.
Rates continue to be excellent for home buying and refinancing, whether for personal use or investment.And while the MBS prices just dropped below the 200-day moving average we are still in better territory than we were all summer which was very good on its own.
Commercial property loans have also benefited from the improving rates recently.And while many lenders are just saying “no!”, Signet Mortgage’s lender connections are closing commercial purchases and refinances for owner-users and investors. During this past week, the White House was actively pushing for extending small business lending options (click here.).The key improvement that may affect commercial property owner-users is the expansion of limits where prior SBA caps were in the $2M neighborhood, would be moved to $5 - 5.5M.This will allow operators with existing SBA loans to go back to the well for additional loans. We are tracking legislation sponsored by Senator Landrieu (D-LA) to implement that change.
On the Homebuyer Credit front, hearings on the topic drew some attention in the week.For a good summary from Bulletin writer Keith Chu, scroll to the very bottom of this newsletter.One of those giving testimony was Senator Johnny Isakson (R-GA) who has been a Realtor in his career.Senator Isakson made a passionate plea for extension and expansion of the credit through the middle of next year.Other senators listen to him on Real Estate matters.Isakson’s testimony complete with charts showing examples of the pricing meltdown and the effect of foreclosures in the suburban Atlanta area is interesting and you can view it by clicking here.
A quick note on the residential lending process: I’m sure you have all experienced of heard of difficulties with residential appraisals recently.This has been the result of the HVCC imposed on banks and therefore borrowers by the NY State Attorney General.There is currently legislation making real headway in congress that would overturn the HVCC, allowing qualified lenders and brokers to order appraisals again.Another processing matter you need to be aware of is the change to Truth in Lending (TIL) rules.The effect is a 3-7 day disclosure requirement at the end of the process that can extend closings.Make sure you have baked in enough time to cover these longer turn times when writing contracts.
If these process headaches have been making you ill, you will want to check the helpful chart further down that compares the H1N1 swine flu symptoms to the common cold. Most important to remember is, if you have the flu, stay away from others for 24 hours after your fever (100°) has subsided for 24 hours without fever reducing aids like Tylenol
Important economic news in the coming week includes housing on Wednesday, jobs and GDP on Thursday and Consumer Prices/Inflation (PCE) on Friday.
Through all of this, rates remain fantastic.Is there anyone you know who would benefit from receiving this kind of timely information?Please hit the reply button and let me know – I’ll be happy to help them make informed decisions in this important time.Or give me a call anytime at 541 318 0888.I look forward to helping you, your clients, family and friends get the best professional advice and service available.Make it a great week!
Fall colors are in full swing and the chill of inflation is just starting to be seen in early reports.While we don’t feel inflation will roar until unemployment has peaked and a hot economy starts to pay more and hire more, it will start to make its presence known in the coming months.This week we saw it in the CPI numbers coming in a little higher than expected and a little higher than the prior month, too.Only a tenth higher and that wouldn’t be as concerning except for the fact that the CPI measure includes all the cash for clunker rebates as if they were price decreases.Certainly we would have seen an even-hotter CPI increase if the pre-rebate price had been used.Another small indicator was the NY State Manufacturing index coming in at 34.57, not high on its own but when compared to expectations of 17.25 it was noticed.
Remember that two things drive long-term real estate interest rates: INFLATION and SUPPLY AND DEMAND.On the scorecard, mark inflation as a tiny rattle of the sabers this week.Supply and Demand remains in our favor, BUT we like Belshazzar are reading the writing on the wall and it too isn’t pretty for the near future.The Fed purchases of MBS will taper off but continue through about 3/31/10.Over the past many months they have purchased at about a $25B/wk run rate.This week was $16B and on average it would be near $14B to hit $1.25T in March.You can mark your scorecard here as Writing-on-the-wall, still helping but it won’t be there for long.
One further indicator we use measure the two keys mentioned is the words of the Fed. And this morning, even as we write, Fed Chairman Ben Bernanke is speaking in San Francisco.Watch for news on this tonight and in the a.m. to see if he gives any further hints on their exit strategy from the current near-zero interest rate policy, weak-dollar actions and inflation watch.Another powerful voice is FDIC Chairman Sheila Bair.She testified before the Senate Banking Committee this past week that the biggest pressure that will bear on insured lenders in the near term will be troubled commercial real estate (CRE) loans.She recommended modifications and workouts as the way to head off this trouble at the pass.Watch for more news on CRE workouts.
On the Legislative front, Homebuyer Tax Credit extension bills are multiplying and sitting.The Military Extension that passed the house waits in the Senate Finance Committee for discussion and eventually a floor vote. The other extension bills are in two camps, the “As-is until June 1, 2010” camp and the “Take-it-to-the-Limit, $15k, All-Buyers, January 1, 2011” camp.The latter sounds like the NAR drafted the bill.In fact, the chief proponent of that approach, Senator Johnny Isakson, R-GA, spoke up this past week.He wants the “All-in” approach but is willing to extend it just to June 30.Read his entire comments by clicking here, or read a taste of it: “So I would submit that when we look at the sunset date of November 30 on the first-time home buyer tax credit, we should extend it--not forever but through midyear next year, to the end of June 2010. There is a reason for that recommendation. The worst 3 months of the year in any housing market anywhere in the United States are December, January, and February because it is winter and because it is the holidays.” Right now bills for both camps are in the Senate Finance and the House Ways & Means committees.The working proposal for paying for either camp is now to ratchet back some of the discretionary ARRA stimulus act spending, and reallocate it. We’ll keep our eye on progress there and let you know.
Through all of this, rates remain fantastic.Is there anyone you know who would benefit from receiving this kind of timely information?Please hit the reply button and let me know – I’ll be happy to help them make informed decisions in this important time.Or give me a call anytime at 541 318 0888.I look forward to helping you, your clients, family and friends get the best professional advice and service available.Make it a great week!
Catching up on the recent blog posts this one is from 10/19 - if you would like to receive these real time, send me an email: dave@signetmortgage.com.
Progress Continues on Credit Extension Bills – Military Extension Passes the House, Moves to the Senate
The US House of Representatives passed H.R.3590 on a roll call vote 416-0.This bill, officially named the “Service Members Home Ownership Tax Act of 2009” extends for 12 months the familiar first time homebuyers tax credit for those military and government employees who have served overseas for at least 90 days in calendar year 2009.A full summary of the legislative activity can be found by clicking here.It has now moved to the Senate where it has been read on the floor and referred to the Senate Finance Committee.
The Senate has a broader effort to extend the existing tax credit for all first time homebuyers by 6 months.Senate bill S.1678 remains in the Senate Finance Committee with a Sponsor and 11 heavyweight Co-Sponsors waiting for debate.A full summary of this legislative activity can be found by clicking here.
Some other points of interest: the Service Members extension has a cost to taxpayer.All legislation must pay for itself.In this case the bill includes provisions to increase estimated taxes in 2014 and increase penalties on filers of Partnership and S-Corporation tax returns.The Senate version, will have a much higher price tag.The legislative text of this bill does not yet have a method for payment.The broad reaching Senate bill has been tagged with a Halloween target date for action.The play out of these two bills will be interesting.
We have some great things learned in this past week and if you take nothing else away from today’s email remember 2 things:
Rates are still unbelievably good, near 5.125% with no origination and 4.875% with normal origination and closing costs for conforming, conventional 30-yr Fixed, principal and second home purchases; and
Don’t sit by waiting for improvement in rates. If you have a friend or client who wants to sit by and see if they can get to 4.5% or 4.625% like we saw earlier last week, advise them to take anything near 5%.
The bond market (MBS) dropped off suddenly on Friday and while the big red bar in the chart below has some technical movement (30-day rollover) that makes it look worse than it is, it was still a rocket sled ride from 180 day highs we were enjoying. What happened?A few things:
Stocks got a jump start on expectations for this week’s earnings season (buy on the rumor, sell on the news);
Jobless claims came in better at 521k than expected (but really! It is still ½ a million jobs lost);
Bernanke spoke about protecting against inflation (it’s all about inflation);
Ben also reiterated that unemployment will get to 10%; and
the unspoken and perhaps biggest factor: the lower rates of the past 17 days spurred more demand for MBS than buyers – a first real sign that the Fed tapering off over the next 180 days will put upward pressure on rates
In the commercial lending arena, the looming refi needs (>1 Trillion in next 18 months) continue to be a dark cloud on the horizon as lender credit is still limited.There is some hope for additional Treasury purchases of CMBS, but no real sign from them that it is forthcoming.We are still hoping the Goldman Sachs projection has legs that 10-year treasuries will get down to 3.0% before rising, but they snapped back up above 3.25% again this week and it is inflation and supply and demand there as well.We still have lenders making great commercial loans on Owner-User AND Investor properties with good economics and strong borrowers.
Quick update on the two key bills addressing the $8,000 homebuyer tax credit (if you missed the Thursday full report click here): The Senate bill only added one senator since last Monday, but it is Christopher Dodd, once again a very influential, power-broker.The Charlie Rangel bill focusing on servicemen added 11 Congressmen since Monday and is now up to 40 Co-Sponsors.Our expectation is that these two will be the ones to make it into conference for a battle that will determine if anything gets extended.The hope is still for action by Halloween, but there was not further indicator this week that this will be met.The White House remains mum on the topic.
Career advice: check out the discussion below on feedback and 360 reviews made easy at checkster.com.Something to consider with your bosses, peers, and key customers.
In the meantime, the rates are fantastic.Is there anyone you know who would benefit from receiving this kind of timely information?Please hit the reply button and let me know – I’ll be happy to help them make informed decisions in this important time.Or give me a call anytime at 541 318 0888.I look forward to helping you, your clients, family and friends get the best professional advice and service available.Make it a great week!
While the White House remains mum on the topic, an interesting battle is developing in congress around extending the current $8,000 homebuyer tax credit.Two bills have been introduced with very different objectives.Let’s hope the two merge into a true extension of the credit before it expires in 53 days.
The House Bill H.R.3590, introduced by Charlie Rangel (D-NY), has added 10 more co-sponsors just this week, now with 40 congressmen pushing for it.HR3590 would extend the credit through 2010, but unfortunately, only to certain servicemen and other federal employees.
We are more interested in the Senate version, S.1678, introduced 3 weeks ago by Senator Ben Cardin (D-MD), which would extend the credit as is, to first-time homebuyers buying before June 1, 2010, fully a 6-month extension.The Senate bill has just this week attracted 2 more co-sponsors including Oregon’s Jeff Merkley (D-OR).The good news is that this bill already has 11 Senators backing it including Senator Harry Reid, Charles Schumer and other powerbrokers, more than 20% of the Senate and from both sides of the aisle.The bad news is that as this is a revenue matter, it must be initiated in the House.
This takes us back to the House Ways and Means committee, chaired by Charlie Rangel, sponsor of H.R.3590. With the legislation process being much like the sausage-making process, bills will rise up in committees of both houses, be voted-on and referred to their respective floors, debated and voted-on separately and then referred to a conference committee where the final legislation will get hammered out and returned to the floors for another vote.Note that at least 4 competing bills around this topic currently languish in Ways and Means.Which do you think Charlie Rangel will allow through to the floor?
We’ll keep an eye out and let you know the developments.In the meantime, here are the words used by Senator Cardin when he introduced the S.1678 on September 16th.Note that he was then and is now hoping for conclusion before November 1.Maybe a Halloween treat; or is this just a trick?
[photo courtesy of sxc.hu]
From Senator Ben Cardin (D-MD). “The legislation I am introducing today with my colleagues Senators Ensign, Harry Reid, Isakson, and Stabenowwould change the expiration date from December 1, 2009, to June 1, 2010.
“I know my colleagues understand the time delay here which requires that the houses go through settlement in order to qualify for the credit. So I think it is important that we act timely, not waiting until November 1, but to try to get this bill moving quickly. It has been an incredibly important tool to help the housing market to help restore our economy.
“This is a direct extension, a clean extension. It basically extends it for 6 months. I have talked with my colleagues about ways this credit perhaps could be improved, and I know we will get into that debate. But I want to make sure we don't have a lapse in this credit being available to help first-time home buyers. It has been very valuable. As we work to perhaps modify this proposal, let us make sure we continue it so as we are fighting to get our economy back on track, we don't regress and lose this tool that is available to help the housing market.
“The credit has been a huge success in helping to revive a depressed housing market.
“As many as 40 percent of all home buyers this year will qualify for a credit. That tells us this credit is working. It is getting people who have never owned a home before into the home-buying market, knowing that the Federal Government is providing an incentive. It is estimated the credit is directly responsible for roughly 300,000 to 400,000 purchases this year. According to the National Association of Realtors, those additional sales have pumped approximately $22 billion into the economy. This is a modest tax incentive to help an industry that is vital to our economy, that produces an incredible amount of economic activity and jobs. Mortgage applications increased nearly 10 percent for the week ending September 3 from late August, the largest gain since early April.
“Extending the credit is prudent and a fiscally responsible measure. It provides the help. We know it works. We know what has happened. We know we are still in difficult times. It is not the time to eliminate this tool that we have available. That is why I am recommending an extension, not a permanent extension, because we want this credit to be available to get us out of our current economic problems. We know we still need it. A 6-month extension is the minimum we should do. At the same time, we should look at other ways to improve and help the housing industry and to help the recovery of our Nation.”
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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