JEFF BELONGER wrote a fantastically superlative piece on this subject today (5/14/2009) highlighting the issues which were brought to light yesterday and gives updates that a essential to all agents, members of the NAR and not. It's a MUST READ!
That is incorrect, sort of. The tax credit cannot directly be used as down payment.
Specific HUD approved agencies may loan the money to the buyers as a second lien to the buyer. HUD approved lenders, like my Novation Mortgage, may offer a bridge second with no lien against the property in anticipation of the return of the funds at the time of the dispensation of the tax credit.
PLEASE STOP THE BAD INFO.
The Tax Credit CANNOT BE USED AS DOWN PAYMENT. It is a LOAN against the tax credt.
As a lender you are making a huge challenge of "well my agent says" for me and us - using incorrect verbiage.
UPDATE: It was obvious to me on 5/13 (yesterday) the information from NAR being repeated by agents was incorrect. Today the information is completely changed. Just another boggle in a new administration that needs to be curtailed.
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25 Comments
on FALSE Info Flying Around About First Time Tax Credit as Down Payment
MAY
13
2009
Good point, Ken. Explaining this to our first time buyers is a crucial part of the education we provide.
Funny - from the amount of comments this one got (from a HUD lender) compared to the amount the others got (written by agents) I can tell we lenders are in for massive re-education of loan applicants in the very near future :)
Pat/Wayne - there have been a couple of other local organizations who were doing something similar but this is exactly what the HUD letter is about. Thanks for pointing this one out - you are much in tune!
Ken... I am posting your link in several blogs and will be writing about this later. But I am getting sick and scared of a few featured blogs by realtors that are just piggy backing off the NAR or each others, as realtors... and putting misinformation out there. Even if not intentional, it's misinformation. Just because NAR backed it, without specifics, and doesn't explain it correctly, is misinformation. I am seeing too many comments acting like this is better than sliced bread. thanks for writing about this, I was just too tired to write about it.
The point of this post is absolutely correct. If you are in Missouri, the MHDC already has a tax credit loan advance program. The only thing that this does in Missouri is to allow other FHA lenders and FHA NFP to make the same bridge or advance loans as permitted under the existing MHDC loan program. It expands the concept to other FHA lenders who don't participate in the MHDC loan program. There is no Treasury check at closing.
Lorena - "Don't hit me." LOL - we don't hit people with common sense.
All - as you may now know the HUD letter has been rescinded and NAR has made announcements about being to quick on the draw. About 5000 real estate agents from Twitter, Facebook and AR need to do some back pedaling and I bet at least that many blog posts are having to be taken down today.
JEFF BELONGER wrote a fantastically superlative piece on this subject today (5/14/2009) highlighting the issues which were brought to light yesterday and gives updates that a essential to all agents, members of the NAR and not. It's a MUST READ!
Ken... first off, thank you very much for the polite mention. Hell, I want to know how you framed that and stuck it in your blog. But I also wanted to thank you to be one of the first to get this message out last night. I tried mustering this up yesterday afternoon, but I was busy, then tired later last night... and a tad lazy. ;o) But thanks for leading the charge, telling people that not every way could be used for the downpayment.
Ken, you and Jeff are a breath of fresh air in this murky smog-laden financial cloud we are searching through, I have been wondering about the sources of some of the stuff I have been seeing lately, thanks for clarifying they are not reliable as I suspected, some just want a headline to post to generate traffic it seems.
Thank goodness for Active Rain and the smart people on here like you and Jeff to keep us up to date. I was in a meeting today were they were telling us that these funds could be used as a downpayment. There are a lot of confused people out there right now.
Steve - kind of frightening isn't it how quickly bad information gets around at literally the speed od light?
Pam - it may not be as much smartness as self preservation! It is we lenders who ultimately have to address the facts - and we still will because the rumor is now alive. With as many FHA loans as we do I can almost guarantee that sometime in the next week to a month at least one applicant is going to tell us their agent told them they can use their tax credit as the down payment on an FHA loan. Then of course when we say that is incorrect the agent will tell them we're idiots and don't know what we're doing because "my lender can do it".
I found this through a link that Matt Stigliano posted.
Thank you for putting this down for the world to see. I am so tired of having the same conversation with clients about this subject. Why don't people understand that it is a "Tax Credit" and not a "Down payment assistance program?"
I bet the a lot of folks have been sucked in by this one.
Pat & Wayne... your comment even sounds misleading. Your comment would leave me to believe that there is a solution now, or that HUD put a mortgagee letter up stating that the down payment can be used with the tax credit and or from other lenders through bridge loans. The news from NAR says that HUD is working on something... in alll honesty, who cares, until there is a ML letter that states that this can take place. Secondly, so many are you don't understand. EVen if HUD comes out with this letter, that you won't have lenders jumping up and down, to supply the bridge loan. Which means it will have to come from the other sources. And the state sources? There are many requirements, such as income restrictions, that will keep more people from using these programs.
Sorry Jeff, didn't mean to mislead anybody, just thought someone might be interested in what NAR/HUD had to say. I should have been clearer. I'll think twice before posting anything again.
Pat or Wayne... sorry if it came across harsh, but by reading what you wrote and leaving a link, it almost sounded like HUD came out with a new ML letterabout the whole down payment/tax credit issue. Besides, I hate to assume and read into things... but let's break it down.
HUD puts a mortgagee letter out there about using a bridge loan to get monies as a down payment to take the place of the tax credit. Now you have an article dated the 21st that says this...
{"The technical details are still being finalized and will soon be published in a mortgagee letter and posted on our Web site," Lemar Wooley, a HUD spokesperson, told REALTOR® magazine Wednesday afternoon.}
Being finalized? Sorry, but what the hell was put out on the 12th then and then rescinded? And what else could they possibly change in the new mortgage letter? Ah, the typical gov't. Come on.... it's been 10 days now and still nothing. Sure, I bet they get something out there, but what the hell. 85% of that mortgagee letter is allowed by FHA anyhow... so seriously, let's think about this. Why is it 10 days??? to add what? And to actually put something out there and then decide to take it down? All of this just doesn't make sense and you have people out there still writing about this, that HUD put a letter out there, that this can be done. What a mess... thanks
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Good point, Ken. Explaining this to our first time buyers is a crucial part of the education we provide.