Tax Credit Guidance for FHA Loans Announced by HUD Today

In his speech at the National Association of REALTORS^® Housing Summit on May 12, 2009, US Department of Housing and Urban Development (HUD) Secretary Shaun Donovan announced a program that allows borrowers to use the first-time homebuyer tax credit for a down payment or closing costs on a FHA-insured mortgage.  The Secretary said "We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit."  

The details of the program were announced today in Mortgagee Letter 2009-15.  A government entity and instrumentalities of government may provide a second mortgage.  Currently, 10 state housing finance agencies offer a product buyers can use that will effectively monetize the tax credit for down payment purposes.  These states are Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee.  State Associations are encouraged to work with their respective housing finance agency to implement similar programs.  The 3.5 percent down payment may also be a gift from a family member, employer or nonprofit, charitable organization.

The original guidance permitted lenders and HUD-approved nonprofits and lenders to offer bridge loans via second lien financing or short term loans.  Guidance released today allows lenders to offer the monetized tax credit for down payments in excess of 3.5 percent, closing costs and interest rate buy downs.  Mortgage industry leaders have indicated that this type of product may not be immediately available to consumers.  Lenders will need some time to develop documentation for what will effectively be personal loans to the home buyer.  

Read the HUD Mortgagee Letter at http://portal.hud.gov/pls/portal/docs/PAGE/FHA_HOME/LENDERS/MORTGAGEE_LETTERS/2009_MORTGAGEE_LETTERS/09-ML-15%20USING%20FIRST-TIME%20HOMEBUYER%20TAX%20CREDITS.PDF


For information on FHA contact Jerry Nagy at 202.383.1233, jnagy@realtors.org.

For information on the IRS contact Ken Trepeta at 202.383.1294, ktrepeta@realtors.org.

For information on state issues contact Bill Gilmartin at 202.383.1102, wgilmartin@realtors.org.




Jerome M. Nagy  |  Regulatory Policy Representative
National Association of Realtors®  |  500 New Jersey Ave., NW, Washington, D.C. 20001