Over the past week, we have heard from a great many people who signed a purchase agreement for a home prior to April 30th in order to claim the $8000 first-time home buyer tax credit. Many of you are also having difficulty closing on your house prior to June 30th, which is another requirement to claim the credit. The massive spike in home sales that resulted from the credit has left many mortgage servicers, processors, underwriters and originators snowed under a mountain of paperwork. The delays are frustrating many of the potential buyers and could cause many of them to become ineligible for the credit by no fault of their own.
To this end, Senator Harry Reid (D-NV) attached a proposal to extend the closing date from June 30th to September 30th. He attached the proposal to the controversial 2010 Unemployment Extension Benefits and Tax Extenders Bill, HR 4213. Despite optimism yesterday that the measure would pass, the bill was defeated in a Senate test vote today, 52-45.
The bill would have extended unemployment benefits and a variety of other tax breaks. It was defeated largely because of the cost of the legislation, which would have added something in the neighborhood of $80 billion to the deficit. The total cost of the bill would have been more than $140 billion dollars. The growing concern over federal deficits and the (nominal) push toward fiscal austerity caused many Senators to vote against the measure.
Democrats will now head back to the drawing board, hoping to make enough concessions to get the necessary votes to pass the bill. Whether the extension of the closing date of the first-time home buyer tax credit will be in a reconstituted bill remains to be seen.
I will monitor this issue and do my best to keep you up to date on all the developments.
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