Taxcredit closing deadline may get extension

[30ashopper]

Home buyers hoping to take advantage of a lucrative federal tax credit would get three extra months to complete their purchases under a proposal introduced in the Senate on Thursday.

Senate Majority Leader Harry M. Reid (D-Nev.) co-authored a proposal that would allow those eligible for the tax credit to close on a home by Sept. 30 to give lenders more time to process a crush of applications.

Reid and his co-sponsors hope to attach the measure to a separate bill moving through the Senate that would extend a variety of tax breaks as well as emergency unemployment benefits. But even if senators succeed in attaching the tax-credit initiative, Democrats are still struggling to assemble the votes needed to pass the overall tax bill.

To qualify for the tax credit -- $8,000 for some first-time buyers and $6,500 for certain current homeowners -- buyers must have signed a contract by April 30 and close on the their transactions by June 30.

The National Association of Realtors said many home buyers will not be able to meet the June 30 closing deadline because of the surge in loan volume and delays related to home appraisals and short sales, transactions in which lenders allow struggling homeowners to sell their homes for less than they owe on them.

washingtonpost.com

There are no assurances this gets passed, and it wouldn't really impact much, since it only effects contracts signed before april 30th. But for those rushing trying to get that 8K or 6.5K rebate, it might help.

Personally I think over the long term additional losses on the value of the property in most areas (especially SoWal) will exceed the credit.

 

[30ashopper]

A key provision of the bill would grant the agency authority to raise the annual fees it charges borrowers who take out FHA-insured loans so that the agency can beef up its cash reserves.

The fee is currently capped at 0.55 percent of the value of the loan. The bill, which passed 406 to 4, would raise the cap to 1.5 percent.

FHA Commissioner David H. Stevens said the agency does not plan on raising rates to the maximum limit if this bill becomes law. Instead, the agency wants to raise the fee for new borrowers from 0.55 to 0.9 percent next year, Stevens said.

The increase would help the FHA raise capital as well as make its fee structure more consistent with that of the private mortgage insurers, which have been crowded out as FHA's market share has exploded.

The FHA's share of new single-family home-purchase loans has surged from 3 percent in 2006 to 30 percent after the mortgage market unraveled and private lenders retreated.

The FHA helped fill the vacuum, enticing lenders back into the market by insuring them against losses. But as the agency's loan volume skyrocketed, its default rate climbed and its financial cushion eroded.

Also in the bill, an increase to FHA's fees, which has crowded out private lending over the last two years.