Last week, the Treasury Dept. announced a new plan to allow first time buyers (and those who haven’t owned a home in the past 3 years) the opportunity to use the $8,000 tax credit as a down payment for the purchase of the property. The way this would be handled would be with a bridge loan until the home buyer received the tax credit cash.
Yesterday, the Treasury Dept. rescinded the rule – wiping out any trace of the initial announcement, and not offering any formal announcement that the rule had been rescinded. The rule was apparently rescinded when a backlash arose from some people who are amazed that the federal government is pushing to basically allow people to buy homes with nothing down. (More on this below.)
It’s hard enough to keep abreast of the changing rules and regulations of HUD, Fannie Mae, Freddie Mac, and Treasury in this housing crisis. There isn’t a week that goes by where you don’t see a series of major changes, new initiatives being introduced, and websites being launched. Separating fact from fiction and hearsay is hard enough. But when rules get made and the rescinded, you’re left with a lot of questions and 404s (web pages that have been pulled but not redirected to anything).
Other rule changes we’re running down in the ThinkGlink.com world headquarters:
I heard from one of my radio show listeners this week that she can’t refinance her mortgage because Fannie Mae mysteriously bought and paid for a credit risk (or credit protection) insurance policy when she got her loan. For some reason, Fannie Mae did this with a lot of loans and for another unknown reason, it now is prohibiting these folks from refinancing under the Making Home Affordable plan. We have a call into Fannie Mae headquarters in D.C. and will update you as soon as we know what’s going on. (Apparently, the problem is “fairly significant,” according to one major lender who asked not to be named since he has no interest in rocking the boat.)
Shaun Donovan, the new head at HUD, announced last week that he is going to revisit RESPA, the Real Estate Settlement Procedures Act. Donovan is under the impression that the HUD-1 form is confusing. (A HUD-1 form details how the cash comes in and out of a transaction; you’ll get one for a purchase, sale or refinance.) Donovan believes that if the HUD-1 form is cleaned up, home buyers and owners can more easily shop around for cheaper pricing and will save an average of $700 per transaction. Given what I know about how the housing market and closings actually work, I find this hard to believe. I’ve asked real estate attorney Sam Tamkin to take a look at the proposed rule changes and the new HUD-1 form and we will hopefully publish something on this soon.
Is the government going to extend the $8,000 tax credit for first-time buyers, extend it to all home buyers or figure out some other way to have a zero down payment purchase plan to help sop up all of the excess inventory out there? Perhaps. The real question is why push it? Are there first-time home buyers out there who have access to capital, good jobs, and savings who for some reason aren’t already enticed by interest rates at 50-year lows and an $8,000 tax credit? We’re continuing to explore what’s going on and will report back here, on the ThinkGlink.com blog, and on my Sunday morning radio program.
May 19, 2009