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First Time Home Buyer Tax Credit Closing Extension Passes House of Representatives
41 By Michael Kraus on June 29, 2010

This is a breaking story, more to follow.

Note:We are a direct lender and broker licensed in more than 20 states. You may view some of our lowest mortgage rates here.

If you would like to learn more about the First Time Home Buyer Tax Credit, please contact us or call us at 877-868-2503, and an expert loan officer will be in touch with you shortly.

Update 7/1/10: They waited until the very last minute, but last night the Senate passed the stand alone bill from the House of Representatives that would extend the closing date to claim the first time home buyer tax credit from June 30th until September 30th. The measure passed the Senate unanimously and President Obama is expected to sign the bill into law today.

Update #2: According to this article from Reuters and this one from Bloomberg, the measure has passed the House, 409-5.

Update: reader Karen kindly passed along this link to the legislation in the comments section. Thanks Karen.

We have learned that the House of Representatives is due to vote on the Homebuyers Assistance and Improvement Act of 2010 and the Restoration of Emergency Unemployment Compensation Act. (Hat tip to commenter David B. who alerted us to this in the comments today). It appears as though these are two separate bills so that opposition to the unemployment extension would not keep the extension of the closing date of the first time home buyer tax credit from passing.

This would be great news for many of you who signed a purchase agreement prior to April 30th but are having difficulty closing before June 30th due to the slow short sale process and the backlog facing many lenders right now.

This is a developing story and I will do my best to stay on top of it throughout the day. It is estimated that if the closing date is not extended, as many as 180,000 potential home buyers could back out of their purchase agreements.

On a side note: I have been somewhat overwhelmed by the response in the comments section and have enjoyed hearing feedback from readers. For all of those of you who are relying upon this extension, I hope it passes quickly.

Category: General
April Home Prices Boosted Slightly by First Time Homebuyer Tax Credit
By Michael Kraus on June 29, 2010

Today the S&P/Case-Shiller Home Price Index came out, and it showed a small improvement in home prices in April 2010. The data showed a seasonally unadjusted 0.8 percent rise over March 2010, coming in ahead of expectations. From the report:

“Home price levels remain close to the April 2009 lows set by the S&P/Case Shiller 10- and 20-City Composite series. The April 2010 data for all 20 MSAs and the two Composites do show some improvement with higher annual increases than in March’s report. However, many of the gains are modest and somewhat concentrated in California. Moreover, nine of the 20 cities reached new lows at some time since the beginning of this year. The month-over-month figures were driven by the end of the Federal first-time home buyer tax credit program on April 30th. Eighteen cities saw month-to-month gains in April compared to six in the previous month. Miami and New York were the two that fared the worst in April compared to March. New York is the only MSA to have posted a new relative index low with April’s report.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.

“Other housing data confirm the large impact, and likely near-future pullback, of the federal program. Recently released data for May 2010 show sharp declines in existing and new home sales and housing starts. Inventory data and foreclosure activity have not shown any signs of improvement. Consistent and sustained boosts to economic growth from housing may have to wait to next year. “

The final paragraph there is telling, and I think suggests what we all know on some level somewhere: the housing market (and the general economy) are not out of the woods by any stretch of the imagination, and we could be in for more price declines before the market has totally corrected itself. Right now home prices are about 30 percent below their summer 2006 peak. Mortgage rates are at all time lows. Despite these favorable buying conditions, mortgage applications have plummeted to a 17 year low since the expiration of the first time home buyer tax credit.

At the end of the day, it appears that the first time home buyer tax credit accelerated home sales into the spring at the expense of the summer and fall. It is unclear how many people bought specifically because of the tax credit, but it may have only prolonged the bottoming-out of the housing market. The bottom line is this: until we see marked improvements in the labor market and a reduction in the unemployment rate, we are unlikely to see many gains in the housing market.

What do you think? Let us know in the comments section below.

Category: General
180,000 Home Sales Could Fall Through if First Time Home Buyer Tax Credit is Not Extended
19 By Michael Kraus on June 28, 2010

Update 7/1/10: They waited until the very last minute, but last night the Senate passed the stand alone bill from the House of Representatives that would extend the closing date to claim the first time home buyer tax credit from June 30th until September 30th. The measure passed the Senate unanimously and President Obama is expected to sign the bill into law today.

UPDATE 6/29/10: It appears that stand alone bills that would extend unemployment benefits and the closing date for the first time home buyer tax credit will be introduced in the house today by Rep. Sander Levin of Michigan. This is a breaking story, more to follow.

According to the National Association of Realtors, 180,000 home sales could fall apart if the $8000 first time home buyer tax credit closing date is not extended past the June 30th deadline. We have written about this topic extensively over the last several weeks, as amendments to extend the closing date for the tax credit have been approved by the Senate, only to be defeated when the bill they were attached to dies.

Many readers have commented on this site and others that they signed a purchase agreement prior to April 30th in order to claim the first time home buyer tax credit. Many of you are also having trouble closing your loan prior to June 30th, the date by which you need to close in order to claim the credit. Many people are having difficulty closing sales on distressed properties or short sales. These sales often require additional paperwork and hurdles to clear than traditional home sales. Adding to the problem is that many lenders, processors, underwriters, and servicers have been overwhelmed by the large numbers of sales that occurred right before the expiration of the credit.

Congress still has two days to pass an extension, and with luck they will find another bill to attach the extension to. Hopefully, it will be a less controversial bill than the tax extenders/unemployment extension bill that will be able to garner bipartisan support and pass quickly.

I will continue to monitor the situation and try and keep you up to date with any changes.

Category: General
First Time Home Buyer Tax Credit Closing Date Extension, Unemployment Benefits Fail to Overcome Filibuster
25 By Michael Kraus on June 25, 2010

Update 7/1/10: They waited until the very last minute, but last night the Senate passed the stand alone bill from the House of Representatives that would extend the closing date to claim the first time home buyer tax credit from June 30th until September 30th. The measure passed the Senate unanimously and President Obama is expected to sign the bill into law today.

UPDATE 6/29/10: It appears that stand alone bills that would extend unemployment benefits and the closing date for the first time home buyer tax credit will be introduced in the house today by Rep. Sander Levin of Michigan. This is a breaking story, more to follow.

A bill that would have extended unemployment benefits, as well as extended the closing date for the first time home buyer tax credit to September 30th, and extended a variety of other tax credits, failed to garner enough votes to defeat a Republican-led filibuster in the Senate yesterday.

The Democrats and Republicans failed to reach a consensus on this bill yet again, as lawmakers become increasingly concerned about deficit spending. Austerity is suddenly the watchword of the day, likely because of the debt issues that Europe is currently experiencing. These concerns about deficit spending seem to be selective, however.

The amendment to extend the closing date for the tax credit was approved by the Senate over a week ago, but the bill it is attached to seems increasingly unlikely to pass. Hopefully the extension can be passed as a stand-alone measure or attached to a less controversial bill.

As of this time, the closing date for the first time home buyer tax credit remains June 30th. If I learn anything new I will pass it along.

Category: General
Despite Low Mortgage Rates, New Home Sales Crash to Record Low
By Michael Kraus on June 23, 2010

If you are being pursued by a bear market, one of the best strategies is to play dead.

Well, May did not shape up to be a very good month for the economy. Consumer spending is starting to flag. Unemployment remains stubbornly high, and employers unexpectedly cut payrolls. Mortgage applications are at a thirteen year low, and now this: the new home sales report from the Census Bureau reports that new home sales collapsed in May, falling almost 33 percent from the previous month to the lowest levels on record. The census bureau has been reporting on this information since 1963.

Year-over-year sales were down 18.3 percent from May 2009, and the median sales prices of a home dropped 9.6 percent from May 2009. We are on an annual pace to sell 300,000 homes this year, substantially less than economists’ median expectations.

Once again, this appears to be attributable to the first time home buyer tax credit, which expired on April 30th. It pulled home sales from the fall and summer into the spring, and we are now seeing the ramifications of the credit.

Mortgage rates remain near historic lows, and yet the economy is not kicking into gear. The Federal Reserve concludes a two day meeting today, and it will be interesting to see their stance on the economy and what should be done with monetary policy. Many speculate that with interest rates near zero, there is not a lot of action the Federal Reserve can take.

Many commentators, including Barry Ritholtz of the awesome blog The Big Picture believe that we are in the midst of a second leg down in the housing market. If this is the case, we can probably expect to see more price adjustments and weak economic numbers in the near future.

Category: General
First Time Home Buyer Tax Credit Closing Extension Still Not Law
52 By Michael Kraus on June 16, 2010

Update 7/1/10: They waited until the very last minute, but last night the Senate passed the stand alone bill from the House of Representatives that would extend the closing date to claim the first time home buyer tax credit from June 30th until September 30th. The measure passed the Senate unanimously and President Obama is expected to sign the bill into law today.

UPDATE 6/29/10: It appears that stand alone bills that would extend unemployment benefits and the closing date for the first time home buyer tax credit will be introduced in the house today by Rep. Sander Levin of Michigan. This is a breaking story, more to follow.

Note:We are a direct lender and broker licensed in more than 20 states. You may view some of our lowest mortgage rates here.

If you would like to learn more about the First Time Home Buyer Tax Credit, please contact us or call us at 877-868-2503, and an expert loan officer will be in touch with you shortly.

Update 6/25/10: The Tax Extenders Bill that the amendment to extend the credit failed to overcome a filibuster by Republicans in the Senate. As of now the closing date for the tax credit is still June 30th.

Update: Over the past week there have been several updates to this story. On Wednesday, an amendment was approved by the Senate to extend the closing date to September 30. It still needs to be approved by the Senate and the House of Representatives. At this time the extension is not yet law. For more information see Adam Quinones’ article from Mortgage News Daily here.

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.

Update: After this story was written, an amendment to extend the date was passed by the Senate. The bill it is attached to still needs to be approved by the Senate, voted upon by the House, and signed by the President to be finalized.

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.

Category: Mortgage Rates
First Time Home Buyer Tax Credit Closing Extension Not Yet Law
15 By Michael Kraus on June 15, 2010

Update 7/1/10: They waited until the very last minute, but last night the Senate passed the stand alone bill from the House of Representatives that would extend the closing date to claim the first time home buyer tax credit from June 30th until September 30th. The measure passed the Senate unanimously and President Obama is expected to sign the bill into law today.

UPDATE 6/29/10: It appears that stand alone bills that would extend unemployment benefits and the closing date for the first time home buyer tax credit will be introduced in the house today by Rep. Sander Levin of Michigan. This is a breaking story, more to follow.

Update 6/25/10: The Tax Extenders Bill that the amendment to extend the credit failed to overcome a filibuster by Republicans in the Senate. As of now the closing date for the tax credit is still June 30th.

Developing Story Bill Defeated In Senate: Also Read and participate in discussion here.

There was a tremendous response to a blog that I posted last week regarding the possible extension of the first time home buyer tax credit. We received over 50 comments, most of them from potential home buyers who have a deal in place but are having difficulty closing on their home prior to June 30th.

Almost without exception, these commenters are dealing with servicers, underwriters, processors, and lenders who are severely backlogged because of the huge spike in mortgage volume that occurred prior to the April 30th expiration of the tax credit. According to a video on MSNBC today, as many as 20 percent of those who signed contracts prior to April 30th may not be able to close by June 30 in order to claim the tax credit.

As a result, Sen. Harry Reid (D-NV), proposed an amendment to the American Jobs and Tax Loophole Closing Act of 2010 that would extend the closing date to claim the tax credit three months to September 30th. Earlier in the week it appeared that the bill was unlikely to pass, due to the fact that there are a lot of other provisions in the bill that would extend a variety of other tax breaks and unemployment benefits that would add about $80 billion to the deficit over the next decade.

It now appears that an amendment from Sen. Jon Tester (D-MT) that would reduce the cost of the bill was enough of a compromise to bridge the gap between the parties. Harry Reid called for cloture on the measure, which would end debate and force a vote on the bill. The Senate will likely vote on it before next Monday. If the bill passes, it would go back to the House of Representatives for a vote on the Senate amendments to the bill.

According to reports, Senate Democrats are confident the bill will pass. There are only two weeks before the original expiration date, so Congress will need to move uncharacteristically fast in order to enact this legislation. I will do my best to stay up to date on all the newest happenings with this legislation and pass them along in this space. Stay tuned.

Category: Mortgage Rates
First-Time Home Buyer Tax Credit Closing Date To Be Extended?
108 By Michael Kraus on June 11, 2010

Update 6/25/10: The Tax Extenders Bill that the amendment to extend the credit failed to overcome a filibuster by Republicans in the Senate. As of now the closing date for the tax credit is still June 30th.

DEVELOPING STORY UPDATE 6/15/10: This proposal now appears likely to pass in the Senate. See updated article here.

An initiative was introduced in the Senate yesterday that would give home buyers attempting to claim the first-time home buyer tax credit an additional three months to close on their homes.

In order to claim the tax credit, a potential buyer needed to sign a purchase agreement prior to April 30 and had to close on the home prior to June 30. Under the new proposal introduced by Senator Harry Reid, those who signed a purchase agreement by April 30 would now have until September 30 to close their sale.

Along with historically low mortgage rates and low home prices, the tax credits hoped to fuel home sales in the latter part of 2009 and early 2010.

It can take a long time to close on a home because lots of paperwork needs to be completed and filed by the buyer, seller, and various parties attached to the sale. The process has been made somewhat more complicated because of the disclosure requirements of the Good Faith Estimate (GFE) and the Real Estate Settlement Procedures Acts (RESPA), two acts aimed at increasing the transparency of lending process. Additionally, the expiration of the tax credit created a flurry of home sales, which has caused a backlog with lenders and processors.

According to the National Association of Realtors, almost 180,000 potential buyers who signed a purchase agreement before April 30 would fail to close on their home before June 30 because of the delays.

According to an article in today’s Washington Post, Democrats are having difficulty getting enough votes to pass the bill, which has a variety of other tax initiatives attached to it.

Are you attempting to claim the tax credit? Are you having difficulty closing before June 30? Let us know in the comments section.

Category: Mortgage Rates
First Time Home Buyer Tax Credit to be Made Permanent?
1 By Michael Kraus on June 9, 2010

I’m a little late picking up on this story, but on May 25th Congressman Ron Paul introduced legislation that would make the first time home buyer tax credit permanent, and would extend the credit to people whose homes were destroyed by a natural disaster. From the press release:

“Renewing the first-time home buyer’s credit will help Americans purchase a first home with their own money, instead of having to rely on government-funded or backed programs. The other sections of this legislation were inspired by conversations my staff and I had with constituents who had to purchase new homes because Hurricane Ike destroyed their prior homes. The first-time homebuyer’s tax credit could be of tremendous value to these people, yet the law denies them the credit because they are replacing destroyed homes. My bill not only reinstates that first-time homebuyer’s credit, it also corrects that oversight.”

I am not entirely clear as to whether the permanently extending the tax credit would really create significantly greater demand for housing. Home sales really only ramped up in the final months before the expiration of the tax credit. It seems as though it was the transitory nature of the credit, not the existence of the credit that really prompted people to act.

Additionally, the economists at the Brookings Institute estimate that the tax credit cost taxpayers $43,000 for every person who would not have bought a house without the tax break. A very expensive stimulus indeed.

It is also somewhat curious that someone who claims to be against government intervention in financial markets would introduce a bill like this, but I digressâ€¦

As of right now, it is not clear what chances this bill has of getting passed. What do you think about the possible re-institution of the tax credit? Good policy, bad policy, or otherwise? Let us know in the comments section below.

Category: Mortgage Rates
Housing Recovery Status Report
By Robert Hyder on June 1, 2010

To many, April’s housing figures seem to indicate the housing market is firmly on the mend. With Americans purchasing new one-family homes at a monthly increase of 15 percent from the previous month and nearly 50 percent from April 2009, in addition to an overall sales increase of an unanticipated 7.6 percent from March, these numbers suggest the housing market is back. Why would anyone assume otherwise? After all, month-to-month figures illustrate that sales have now escalated to their highest point since November 2009.

Some housing analysts feel the need to rain on this parade however. As the U.S. economy continues to signal progression in the areas of job growth and improvement in the stock market, the belief is consumers will likely demonstrate their confidence by increasing their spending. But it is anticipated that such spending is unlikely to occur in the housing sector as a result of continued decline in housing prices.

The coming months will reveal that the now-expired first-time home buyer tax credit was not much more than an artificial boost to the housing market. As a result, it is anticipated that the number of empty homes will probably not decline through the end of the year. In fact, the economy as a whole will likely remain sluggish.

In addition to the federal tax credits designed to induce home buying, the historically low mortgage rates also compelled potential homeowners who had been fence sitters to delve into the world of home ownership sooner than they may have originally planned. Sustained through the harshest point of the economic crisis, the housing market may take another dip sooner rather than later.

According to David Stevens, the Assistant Secretary for Housing at the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Commissioner, “This is a market purely on life support, sustained by the federal government â€¦ Having FHA do this much volume is a sign of a very sick system.” As the Federal Housing Administration (FHA) tightens its lending guidelines, even more home buyers could be eliminated from the prospect of home ownership.

If there is a silver lining, a glimmer of hope for continued housing sales exists because of the incredibly low mortgage rates. As a result of the economic crisis in Europe, mortgage rates in the United States may remain low for the foreseeable future. But with rates at or near historically low levels for more than a year already, it is not likely low rates will spur an additional demand.

Robert Hyder

Category: Mortgage Rate Trends and Analysis