Saturday 16th of January 2021

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Senator Wants Homebuyer Tax Credit Extension

The chairman of the U.S. Senate Banking Committee wants to boost home sales by allowing the $8,000 homebuyer tax credit program to continue through next June while including more borrowers.

Sen. Christopher Dodd was joined by Sen. Johnny Isakson, a former Realtor, in urging colleagues to back their push to allow the tax credit program to continue past its Nov. 30 expiration. They also want couples earning $300,000 or less to be able to participate. Currently the income restrictions are less than $75,000 for individuals a ceiling of $150,000 for couples.

Realtors and mortgage bankers credit the current program for helping stabilize the housing market a year after the slump began. “The work of stabilizing the housing market won’t be done” by the end of next month,” Dodd said at today’s committee hearing. “We still need to use every tool at our disposal to fix this problem.”

Record foreclosure rates will continue to rise through late 2010, reaching the highest point only after the nation’s jobless rate reaches 10.2 percent in the second quarter, the Mortgage Bankers Association forecasts. Currently, about 3.9 million homes are on the market. As many more homes have mortgage payments at least 90 days overdue, which makes them part of a “shadow” foreclosure inventory, according to the group.

The Mortgage Bankers, National Association of Homebuilders and National Association of Realtors support an extension of the credit program, attributing it with boosting home sales. So far about 2 million buyers have used the credit. The Mortgage Bankers’ chief economist estimates the federal government will pay less than $17 billion if the program is extended and expanded as Dodd wants.

Sen. Richard Shelby warned against promoting any programs with the potential of inflating home process artificially and exacerbated the fast increase in home values that brought the housing bubble to the point of bursting.

In other action, state and local home finance agencies will get help with mortgage financing for first-time homebuyers as well as building rental housing, thanks a new program from the administration.

Fannie Mae and Freddie Mac will combine mortgages issued by the agencies then sell them as bonds to the U.S. Treasury. The value of the program will depend on the demand, officials said.

Short-term financing assistance for the state and local finance agencies also will come from Freddie Mac and Fannie Mae. If loan defaults occur, losses will be covered by fees paid by the agencies. “The expected cost to the federal government is zero,” according to Michael Barr, an assistant treasury secretary.

The agencies help 100,000 to 200,000 first-time home buyers annually. But because of the state of the economy, they have managed to sell only about $4 billion in tax-exempt bonds – a quarter the total in a normal year. In turn, the smaller amount sold restricts the number of loans issued.