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    Monday, May 25, 2009

    States taking steps to turn $8,000 home-purchase tax credit into cash

    States taking steps to turn $8,000 home-purchase tax credit into cash

    Instead of making buyers wait until they receive their tax refunds, some states have created bridge-loan programs that advance purchasers the money they need for their closings.
    By Kenneth R. Harney
    Los Angeles Times
    Reporting from Washington -- For the housing market, it's the equivalent of financial alchemy, and it's hot: Turning the $8,000 federal home-purchase tax credit, which normally isn't spendable until after you've gotten your refund, into immediate, hard cash, available for your down payment and closing costs.

    Congress' stimulus-bill tax credit for 2009 is generating efforts nationwide to find ways to "monetize" it -- providing money upfront to buyers who need dollars for down payments right now, not next year after they file their federal returns and get refunds. The credit is available only to qualified taxpayers who have not owned a house during the previous three years, and who close by Nov. 30, among other requirements. Buyers can amend their 2008 returns to claim the credit or claim it on returns for 2009.
    In recent weeks, at least 10 states say they've come up with ways to work this monetary magic. They have created innovative bridge-loan programs that advance credit-eligible buyers the cash they need for their closings. Generally the advances take the form of second mortgages -- with or without interest charges -- that become due and payable whenever buyers receive their credits in the form of refunds from the Internal Revenue Service.

    In Missouri, which was the first state to create such a program, buyers can get a no-cost "tax credit advance" of up to 6% of the home price. The advance is actually an interest-free second lien that is repayable no later than June 2010, once the buyers have received their $8,000 tax credit.

    If buyers can't meet that repayment deadline, the advance morphs into a traditional second mortgage with a 10-year payback term and a fixed interest rate one-half a percentage point higher than their first mortgage rate. The underlying first loans are all fixed-rate 30-year mortgages issued by private lenders participating with the tax-exempt bond programs of the Missouri Housing Development Commission.

    Colorado kicked off a similar program, known as JumpStart, on April 14. Delaware, New Jersey, Tennessee, Idaho, Washington state, Ohio, Pennsylvania and New Mexico have come out with their own versions, some with modest interest charges on the second mortgage from the beginning.

    In Washington, where the state Housing Finance Commission already runs a tax credit bridge-loan program for buyers using its mortgages, state Treasurer James McIntire wants to make it much bigger. He has been pushing for creation of a "public-private" down-payment program that could reach far larger numbers of consumers than is possible under the housing commission's current funding constraints.

    McIntire has proposed depositing $25 million of state funds into interest-earning accounts at an FDIC-insured bank. The bank would then provide revolving lines of credit to the state housing commission to greatly expand its down payment bridge-loan efforts. In a novel arrangement, the Washington Assn. of Realtors has pledged $400,000 as a backstop for McIntire's plan to cover any unexpected losses on the credit monetization transactions. The state Legislature has authorized the program in its new budget.

    McIntire is also trying to persuade the Obama administration to allow the state to tap into bridge loan-assisted home buyers' amended 2008 tax returns and be directly assigned all or a portion of the tax credit refunds. Under current IRS rules, McIntire said, tax refund checks are sent only to the taxpayer's address. To ensure prompt repayment of bridge loans, the state would like to have refunds mailed to the housing finance commission in cases in which repayment of a bridge loan is due.

    Bottom line: Since other state housing agencies reportedly are considering rolling out credit-monetization programs on their own, keep your eye on what's happening in your area. A no-cost advance tied to the $8,000 credit just might get you the down payment and closing cash you need.

    Thursday, May 21, 2009

    FHA and USDA loans

    I recently have had many questions about FHA and USDA loans and the difference between the programs. Please see the attached documents to see the difference in current programs. Included there is a map of Indio to show where you can still get funding for USDA loans with an Indio address. It is the light yellow box.

    Remember you can also get a USDA loan for properties in Coachella, Desert Hot Springs, and parts of Thousand Palms. Call for more details or specific requirements. Homes with pools are NOT eligible.

    The jobs report is slowing with the number of job losses for the first time in three quarters! This is good news for the housing market and the slowing of the recession.
    Fed Chairman Ben Bernanke said last night that the results from the stress tests on the 19 largest US Banks yielded "encouraging" results and has calmed the Stock markets after yesterday’s sell off.

    Mortgage Bonds are also little changed but have managed to weather some early morning profit taking that had pressured prices lower after the recent gains.

    If Stocks falter, it would give Mortgage Bonds the momentum needed to push through the overhead ceiling. I can recommend to carefully float for now, but be ready to lock if the market dictates.

    Make it a great week! I’m never too busy for any of your mortgage referrals!

    FHA Financing Update:

    There are continuing changes to the FHA programs. Please call your lender to verify the pre-approval before writing any offers.

    FHA Financing Update:
    New loan limits are supported and available to lock at $500K.
    Down payment requirement is still only 3.5%.
    Fico score is also the same, which is required to be a 620 Fico.
    Call me regarding details for the two appraisal requirement.
    Market Update

    Mortgage Bonds are near unchanged, but off the best levels seen earlier in the day. Stocks are starting the week on an upbeat note with Bank of America receiving a very strong buy recommendation by being put on Goldman Sachs conviction buy list. Lowe’s Companies posted positive earnings, also adding to the boost in Stocks.

    Oil prices are moving higher in advance of the summer driving season. Unleaded gasoline has risen every day for the past three weeks and is now at $2.31 a gallon.

    There are no economic reports set for release today, however there are several key reports this week, which include Thursday’s Initial Jobless Claims, that will give us a better look at the condition of the economy.

    With prices in a sideways trend near the 25-day Moving Average, I recommend carefully floating for now.

    I am never to busy for any of your referrals!