"Monetizing" $8000 Tax Credit for Down Payment

On May 29, 2009, HUD released Mortgagee Letter 2009-15.

Initially this letter appears to help First Time Homebuyer's to use their $8000 Tax Credit as a part of their down payment before they actually receive the credit back from the government.

Based on my research this is not the case!

Currently their are 10 States that are participating in "First Time Homebuyer Tax Credit Loan Programs" - for purposes of this blog and since I work in AZ, please note that Arizona is not on the list.

In addition, if you read the entire Mortgagee Letter there is a very important Condition listed:

"Pursuant to 12 U.S.C. 1709(b)(9), the homebuyer's downpayment required for eligibility for FHA insurance may not consist of any funds (including funds derived from a sale of the homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction(or by any third party or entity that is reimbured, directly or indirectly, by the financially benefiting persons or entity). Accordingly, the proeeds of the sale of the tax credit to FHA approved mortgagees, the seller , or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefitting person or entity), may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs." - See Mortgage Letter 2009-15, Page 2

Notice the first part that says, "including funds derived from a sale of the homebuyer tax credit". You cannot use the money in place of the 3.5% down payment, based on the comment above.

The secondary financing essentially works like this: A company could "purchase" your $8k tax credit, charge you $200 for lending you the $8K and put requirements on how you pay them back.

Important points on how they can be repaid:

• No Cash Back to the Borrower
  
• Second lien cant exceed the total amount needed for down payment, closing costs and prepaid expenses.
  
• Secondary financing can be "soft" - Meaning no repayment required until the sale or refinance of the property.
  
• Must include payments in qualifying ratios if they are required.
  

Basically the mortgagee letter is intended to let buyers use the $8K tax credit to help pay for closing costs and any extra down payment above the 3.5% required by FHA.

There is no way, up to this point and based on my research, to not be required to put 3.5% down into the new home, unless the money is gifted from a relative.

Hopefully that clarifies the new mortgagee letter. I don't know whether it is good or bad...I just know that it might not be what people were hoping for. Sure it would help get more 1st time homebuyers into homes, but the DPA programs were opposed by HUD for a while, why would they enact a new guideline to help bring DPA programs back???

Kind of makes you stop and think that the perception this might be available in the future is just that - perception and not reality.
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here is good news though - 1st time homebuyers or people who haven't owned a home for the past three years, can still receive an $8000 tax credit on the purchase of their new home between now and December 1, 2009 (unless the bill is extended by President Obama).

Happy 1st week in June.

All Quotes taken from Mortgagee Letter 2009-15 from HUD Website: http://www.hud.gov/news/index.cfm

Volatile - Can I have the defintion please?

This week was the Scripps National Spelling Bee. I didn’t watch all of it but on Monday, I happened to catch about 10 minutes of it on ESPN. What I found most interesting was the way the kids showed their pleasure or discomfort with the words immediately. One contestant looked as if she was about to begin dancing when the moderator (or whatever they call him) asked her to spell ____________. (Heck I don’t remember the word, it’s not like any of them are used in daily conversation anyway!!!)

However, it does bring me to the word of the week – Volatility.

Can I please get the definition? a. Tending to vary often or widely,
b. Tending to violence; explosive

Can I have it in a sentence? a. Mortgage interest rate volatility was very high this week

Can I have the language of origin? a. Yeah – It’s frustration (doubt that’s a language).

Can I have it in another sentence? a. Many mortgage consultants were volatile this week because interest rates were volatile.

Volatile – V – O – L – A – T - = “Oh, who cares, just tell me what is going to happen next week with interest rates.”

I hope you get the idea. At one point, yields swung by a percent and rates jumped almost .75%. But then now, on Friday, only about .125% higher than where we ended last week! It’s enough to make a person well…volatile.

Outside of that, nothing fantastic happened. D-backs are winning a bit more, Detroit and Pittsburgh are in a rematch for the Stanley Cup Finals (check out games 1 and 2 on NBC this weekend), and HVCC still stinks.

My last tidbit of knowledge...Hold the ones you love close and dear to your heart because life is fragile and we are only guaranteed today.

(My thoughts and prayers go out to the Swartz family as they lost their mom to a stroke at the age of 45 this past Sunday. She touched many lives. May we all hope to do the same!)

Revival: A Blogger's Story

I AM STILL A MORTGAGE CONSULTANT!!!

Sure, I haven't posted anything to this blog in about 7 months, but most of the blog information is on my active rain blog.

No excuses! I neglected this little blog and those all important 8 subscribers. I have found renewed vigor in it as my foray into Facebook, showed me just how many people I know.

And yes it is more than I can count on my fingers and toes!

I actually feel lucky to know so many people. I hope they know that if they needed anything from me at any point, I would be willing to help.

Anyway, my goal is to make this blog better. To direct it in a way that people find it useful. But it will probably be more than just Mortgages. I will tell stories of my time as a Coach in competitve hockey in AZ, I will tell stories about my wife, our dogs, my car, the in-laws, the immediate family, the journey.

Hopefully, I will lead an interesting enough life that people will see the blog and decide that they might enjoy working with me as they choose to buy their first, second or last home. Perhaps they want to refinance their home.

So, here I am. Make of it what you will.