FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware

Thanks for the clarification Jeff...

STILL very confusing....Doesnt seem to me that it really did anything..and nothing has changed from the way that loans were approved 2 years ago.

Additionally, it doesnt do ANYTHING for any other type of loan, just FHA.  

Boy, I can see it now..100's of 1000's of EVEN MORE CONFUSED consumers..

Thanks..Darin

Exactly, and as you already know like we spoke this morning get ready for the disinformation machine to start rumbling here on AR and other places :) Like Darin said the Forbes article is short and there's also a big so what - WHO is actually going to make the loan and how shady are people going to not be to not use the loan for the down payment??? You know, the government is getting better and better at screwing up. But I digress - like always. GOOD POST JEFF! Saved me the writing.

Yes, it can be confusing that's for sure.  I always advise my clients and or customers to seek legal advise. I don't want it to come back to bit me!  OUCH.....

Patricia Aulson/Portsmouth NH Real Estate

Thanks for all your updates. I am sitting in on an FHA class next week to keep up with the updates. I don't mind people having to show reserves. It seems many Realtors are intent on getting back to 100% financing. To me the 3.5% down is like a savings account you don't touch for an extended period.

I just posted on it briefly...........you do such a great job with yours!  I did catch the 3.5% part. That could be confusing to folks as well as who can make the the whole deal avaible monetarily.

Thanks for explaining this so well. I wonder if any investors will waste time on this? 

Jeff - again an excellent and timely piece with important information!  I do know of one lender I've worked with here locally that was letting us know that this was 'fixin' to happen and would let me know more soon - that was about a week ago.  Will this help sell more homes? Maybe a few but probably because of the ambiguity of the program and consumers (leads) calling us up asking "How does this work?"

Brian.

ps I'm going to reblog! 

THIS THING IS A DISASTER!   All this does is permit folks who already have 3.5% to make a higher down payment or use the money for closing costs. 

"Accordingly, the proceeds 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 benefiting person or entity), may not be used to meet the 3.5% minimum downpayment, but may beused as additional downpayment, buying down of interest rate, or other closing costs."

The government sure put their foot in it this time.  I can't wait to see the wiggling.

That said, this will help buyers who are trying to buy properties whereby the seller will not or cannot pay any or sufficient closing. 

Oh well.  It is what it is.

Jeff - Ever since the first announcement of this plan, a couple of CA housing agencies have been working to bring about a program utilizing the tax credit.  Personally, I'm glad that at least they're doing something but as you stated, any program that a lender develops will not be used to replace the current FHA requirements.

Trust the federal government to give with one hand and take away with the other.  Nothing is ever as straight forward as it seems at first.  Thanks for clarification!! 

KATHY.... .  my pleasure and thanks for stopping by.

DARIN... . well, I think the letter is a tad confusing. The message to me is clear. I just wonder what those in gov't actually do and or think of?  This is something that should have been looked upon last year, when the $7,500 tax credit came out.  What I am scared about is.... How many will not know that you still need 3.5% of your own money first...??

KEN 'the master' COOK .... .  I think many of us digress big time, especially when it comes to this.  And yes, I wonder how much misinformation that will be out on this one...  in regards to saving you the trouble of writing this?  You should still write about this, because there are many people that follow you, that don't follow me. And we need to get the correct word out quickly, before some get the wrong message out there. I can see the headlines now...  Tax Credit monies can now be used for your down payment.  PS>.. thanks for that polite comment.

PATRICIA.... .  legal advice is good, but in regards to this issue, I think you need to speak to a loan officer/lender that is on top of this, or HUD.  I knew of lawyers and tax accountants that got the first part wrong last time around....  we all just need to be careful.

JOE.... .  my pleasure.... let us know what you find out in that FHA class.  Is it being given my a lender?  HUD?  thanks for stopping by.

ANNA.... .  it is confusing in a way and that part read like a lawyer wrote it. I am not sure why they just couldn't say... "bottom line, you need 3.5% of your own money, before using the loaned tax credit as part of your down payment... and thanks for that polite compliment.

Clear as mud.

I suppose this might help those who have their 3.5% but do not have closing costs covered and the seller is unwilling to assist with closing costs.  Typically, if the house will appraise, sellers are at least willing to up the price and pay the CC for the buyer but this isn't an option with some REO properties and/or short sales.

So, exactly where does a buyer go to obtain these loans anyway?

So let me get this straight: HUD is allowing FHA approved lenders to advance money on the credit to people who already have the necessary 3.5% downpayment to cover closing costs? I fail to see how this actually helps people in the long run, or even in the short run.

Jeff...

I think you did an excellent job of clearing this up. The money could be used for closing costs or to allow the purchase of a slightly more expensive property .. but it seems that's all that the upfront money is good for ...wow!

Jeff, the blogs are already hitting...

Argghhh....Thanks!!!

Richard did a good job in one sentence too!  :) LOL

Like everyone else here....thanks for clearing it up and explaining it very well. Also like everyone else; how does this really help. Buyers need money to purchase......I just see how it plays out.

The way I read this,the credit can now be used to buy more home or buy your way around a seller who does not want to help out that rotten buyer by paying "his" closing costs.

Those are great things, folks.

Or would you rather buyers get it 3-4 months after close (after amending their 2008 return) and spend it on something other than their new home purchase.

We are very likely not going back to 100% financing with a government guarantee.  Nor should we expect to.

Jeff,  WHAT? Thanks for clarifying this - that 'fine print' part. If you ask the man on the street, I'll bet 99.5% of them will think that the money can be used for the down payment. What Richard said is the fact. Reblogged! :)

Sharon

Jeff we here at the bank are offering a bridge loan to the 8000.00 with of course the opening of an account, with sure pay and direct deposit of your tax credit.  closing loans left and right.  We did get permission from HUD to do this recently.

Hi Jeff, Thanks for putting this out there in clear terms. I know that a lot of people will assume that the money can be used for the 3.5% down payment but reading the fine print shows that that is not the case. Don't know how this will really help.

Have a great weekend,

Anne Rains

Great article Jeff.  This whole thing is really just stupid and won't help but a tiny percentage of buyers.  If you still need the 3.5%, why even bother paying someone to get an advance of the $8000????  I'm not sure why the government wasted time coming up with this in the first place.

There needs to be a program available like Nehamia or Ameridream where first time buyers can get ahold of downpayment money up front.  That was *not* the problem with the mortgage crisis, the problem was unqualified people being approved for more than they could reasonably afford and people looking at homes as commodities that would keep improving in value with no end in sight. 

I appreciate the update!

Jeff ~ I hope the lenders in my area are keeping up with this the way you are. It can be confusing and yet so important for those buyers seeking to use the monies for a down-payment. I am going to re-post as a follow up to your other articles about the $8000 tax credit.

Thanks for the very thorough explanation Jeff.  THere is a ton of confusion going on about the 8K.  I fear buyers getting the incorrect info & being disappointed in the outcome. 

Tell me a mortgage company that is going to do this for $200.

Wait a minute.  I just thought of a few.

Don't count out the use of the $8000 tax credit as a downpayment just yet....

READ

Jeff - thanks for the timely info. I just reblogged this to get the word out. I'm on the fence about how I feel regarding using the money for down payment...on one side I see where the buyers should have to "pony up" but also see the need to help others needing the cash. Hmmm....

Well, at least this could be used to buy down the rate and help with costs but wasnt the main idea originally to help those that dont have the 3.5% saved up? Which is a large percentage of the first time buyers?

Hey everyone.... I will get to everyone's comments later on.  It's the end of the month.  But I did want to address Phil Anderon's comment....

PHIL....  not calling you out, but the thought process.  Please read the date of this article that you link to...  Article from Realtor.org ..

Phil, this article was written on the 21st of May.  The mortgage letter, ML 2009-15, was posted as of today, May 29th.  That was just an article and Mr. Donovan giving everyone hope. I already had my doubts and they are proven correct as of today.  Just food for thought when linking to something old, when new news has been put out.  thanks

Jeff: Thanks again for the thorough explanation. I appreciate it. As someone who initially had to have skin in the game, I understand. Although it doesn't benefit us, it appears the powers that be don't care. Keep up the good posts. I do agree with you about the FHA comment above. It wasn't that that caused the mess. It was more like a perfect storm. Think loose underwriting all around and too easy access to money! Thanks!

Thankfully this was featured before some bad info got out.

Well, in all honesty, how does this truly help? What is the gov't thinking here? As a buyer, I would still need the initial 3.5% of my monies for the down payment. Again, needing money to buy. I know some of you are for this fact, that buyers should have skin in the game. But keep in mind, this was not the true demise to our foreclosure mess. We need to sell houses to keep this economy going.  Just my opinions and food for thought.  thanks

Those are my thoughts exactly. I have a couple of buyers that are waiting for this and well - now not going to happen. 

I see nothing "stimulus" about his -

I'm pushing state bond money (Oklahoma) that's available for the 3.5% down-payment. It's a capped amount, so first come, first serve. I had heard about Lenders promoting using the stimulus $ to use as the 3.5% down, but I thought that sounded a little crazy. Thanks for clarification!

Can someone keep the NAR out of the mortgage commentary industry? Just like About.com "professionals" and some television "guests" - like Dr. John says ... wrong wrong wrong wrong wrong ♫ http://blip.fm/~77erp And who has to spend hours convincing borrowers that informationw as incorrect? Why THE PEOPLE WITH THE MONEY of course. Speaking of which ... I have a closing. Caio!

Thank you! I've been waiting to read your thoughts on this. And thank you for putting all the links to your other posts in here too. I may need them. I think it sucks that the buyers will still have to come up with the required 3.5%. Even if it can be gifted, there are some people who won't even know anyone who's in the position to do so =(  I think I'll add my thoughts on this, when I contact the White House on June 5... Did you read Midor's post about that?

Well, it would allow the purchaser who does have 3.5% to bring more money to the table, thus taking on less debt.  I am assuming that first time buyers who do not use it as a credit at closing will still be able to easily use it as a tax credit for 2009...that is the way I read the letter.

Thanks for all the good information both in the post and in the comments.

I just wanted to add a little something.  There is more than one kind of fraud in the eyes of IRS.  The least of which is civil fraud where a taxpayer knowlingly puts false information on a tax return.  It doesn't matter who may have told them that is okay to do so, even if that person is their CPA.  A prudent person should suspect that the information is false.  You posted a copy of the IRS form on your FRAUD ALERT post where you highllight areas suggesting the taxpayer read instructions or follow directions which is exactly what they need to do.  

Of course if there are any questions about any of the posts or comments including mine, one would be wise to check with their attorney or CPA.

In my previous life I was an Appeals Officer for IRS.       

I read the letter and other things, and already received an email from a lender saying that I could use this for my Downpayment (Yikes).....we do indeed need to be careful.

Holly - They can also file an amended 2008 tax return and claim the credit.  Have them check with their accountant as there are time frames, etc.

Jeff,

Thank you for this timely post.  I have been ask questions on it and now I know the answers.

Kathy: Yes, indeed, you need to be careful. And look to Loan Offiers like Jeff for ACCURATE information.

Jeff, Thanks so much for the clarification.  Do you think they will change their minds again?  Honestly, I don't know how to keep this all straight.  Right now, I'm thinking anyone who applies for a loan between now and oh, say, Monday, may actually get to use this as additional down paymnet or closing costs.

Also, I'm going to reblog this, if you don't mind.

Jeff, thanks for you help in trying to clarify the bad information that's out there. I can't believe how misinformed people are about this and it cetainly doesn't help when we have a government agency putting out information that they retract the next day.

Jeff - I've been waiting to see you post (or Ken) and finally saw this.  I saw a bit of activity on blogs today and some on Twitter, but overall, all was quiet on this today for the most part.  I think a lot of people learned a lesson on May 12/13th when it came and went so fast no one knew what happened.  I myself tweeted about it this morning, but for a different reason - one that I think you and Ken would be proud of:

@rerockstar: HUD has put Mortgagee Letter 9-15 back up (with some extra links). Time to call my lender and see what he says.

One of the things we were talking about was the point you two were trying to make when this first surfaced.  It doesn't matter what HUD says, if no lender adopts the use of the mortgagee letter, it still isn't possible.  We chatted for awhile about it and both of us seemed to agree, this didn't look like much.  I see its potential use to help those who are buying properties where the seller won't help out with closing costs and the potential for using it as a supplemental down payment, although I'd like to see the numbers - would it be better to file an amended return and wait for your tax credit check, then pay it as additional principal or take it as a loan from a lender (with interest and possible fees) and use it as a down payment?  I am not a mortgage whiz, but I would think that paying it as additional principal (after receiving your IRS refund) would work to a buyer's advantage in the long term (and the short term gain of taking the loan would be slightly less significant).  Would love to hear your thoughts on that.

Phil - I saw your comment about Realtor.org and thought I'd put this out there:

Under the guidance that's under development, state agencies and other HUD-approved entities would be able to provide short-term bridge loans that households could use to help with their downpayment. The loans would be repaid with the proceeds from the households' federal tax credit.

The emphasis is mine of course, but I think the word "help" is key here.  No promises, but it might "help" people with their downpayment.  And according to this latest release of Mortgagee Letter 9-15 it could help...if you want to put down more than 3.5%.

Phil - I forgot to add: Realtor.org took a hit in all of the May 12/13th mess.  They have posted several articles since then and if you read them, they are all carefully worded to not promise anything (which they should be cautious, as they should be a trusted source of news for us as much as HUD should be).  I wrote about what happened on May 15th that only made this mess deeper (if you ask me) and the commotion it caused - "NAR, You Silly Old Goat...Why Would You Let This Be Emailed To Every Realtor® After Yesterday?"

Jeff - Please feel free to remove my link if you're not happy with it being there.  Everyone is different on their opinions on links in comments, but I do feel this one is relevant - but it's your blog, so I can understand if you're not a fan of cross-linking posts in comments.  I would never just drop in a bunch of my random links or any self-promotional links.

Thanks for trying to enlighten us but I still don't completely understand this.  That's why we need good lenders we trust.

Kathy

Too bad Secr. of Housing Shaun Donovan had to open his mouth about this program at the NAR mid-year convention.  Especisally before the details had been worked out.  Donovan raised the hopes of many first time home buyers with his comments, but based on what has now come out in Mortgage Letter ML 2009-15, http://portal.hud.gov/pls/portal/docs/PAGE/FHA_HOME/LENDERS/MORTGAGEE_LETTERS/2009_MORTGAGEE_LETTERS/09-ML-15%20USING%20FIRST-TIME%20HOMEBUYER%20TAX%20CREDITS.PDF, these were falso hopes.

It continues to amaze me how this administration can bend over backwards to help banks, car companies and others, but when it comes to the little guy trying to realize the dream of home ownership or trying to keep his home, they continue to kick the little guy in the face.  How I wish we could immediately vote them out of office and put in place people who care as opposed to people who have a political aggenda they are trying to achieve.

Jeff--Good information once again...Appreciated! It was fun to chat with you yesterday...Always love connecting with a voice instead of just the keyboard. :)

Jeff, what happens if the taxpayer's liability for the year they purchase is under $8,000?  I know that if they were not using it as a down payment, it would probably carry over to the next tax year, but does that complicate things at all?

OK, so the majority of comments above state that they dont really see a point to this ability to get a loan to get this money upfront, because the buyer still has to produce the 3.5% DP anyway.

What if the buyers closing costs are $8K ? (which they are a LOT in my area).

I read the following directly from HUD's website from the release TODAY.

under the terms of today's announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate.

If the loan for the tax credit can be used to pay the closing costs then doesnt that immediately allow the buyer to have use of the $8K they had put aside for their closing costs ?

... essentially giving them the $8K in their hand that they didnt have before ???

To me that doesnt sound like "a whole lot of nothing" to me ???

If I was a buyer that qualified for the $8K tax credit - I'd be pretty ecstatic about this announcement .

What am I missing Jeff ??

JEFF  Mr. Anderson's LINK that he provided in his short retort to your blog, goes to an article dated 5/21/09.

If it didn't happen TODAY in the Mortgage Business, it didn't happen!

Bucky...errr...Darin

this is why i have several lenders that keep me up on what's going on...I can't follow it since it moves so quickly....I too had seen the nar email, and called my trusted lender since I have several first time homebuyers that wanted to use this credit. 

I am still getting emails..... People have been told by their realtors that they can use this for down payment. I can only assume that they have a dummy for a preferred loan officer.

MELISSA..... my pleasure, thanks. In regards to any investors wasting their time in putting this out there?  I don't really see it happening. I would think there would be a lot red tape to get this going in the right direction. Just my opinion. Let's see who jumps out there first and how quickly. I still blame a lot of this on the gov't, for poor planning... period.

BRIAN & MARIE......   I actually have a client that this could help, if we or the investor, would do the actual second, to get the loan to closing.  In regards to the lender that you work with locally, that has said that they are working on this, or had been. I never tried saying that. Sorry, but to me, that person was just giving hope. It's almost like saying, hey, we shouldn't have any problem with your loan. Unless you have ESP, a wand, or a crystal ball, to me, again, it's just someone creating hope. Why wasn't I on this band wagon, because in my comments the first time around, HUD's first mortgagee letter on this, was illegal. And I didn't really seem them changing that. Wow, andyou know what, they really didn't. You still can't use the money for your initial down payment. Sorry for the comment.... but I was very frustrated with those that used headlines or comments or e-mails, telling people that HUD was working on this. Sorry, but how did they really know this?  Because of Donovan's first comments?  A big joke. If you called HUD directly, they reported nothing. Yet we had all of these brainiacs say that they were working on this.  Sorry again, that part just semi ticks me off, if I am making any sense.  ;o)

But we will agree, that this should only help sell a few, just as the original tax credit. Why?  Very easy and common sense... you still need money to buy, before you can even get this money back to pay yourself back. And thanks for the polite compliment.

LENN...... lol.. thanks for the laugh. The gov'tput their foot in their mouth?  I think they did a lot more than this and there were only a few of us from day one that made this exact same statement. Not that I know it all or that I am always right. But to me, it goes back to common sense. It was just plain illegal by HUD's standards. And as you stated in your reblog, that unless they had time to work this out, to change that policy, then this is just garbage for the most part.  Andyou went into depth about what other problems that HUD and the gov't was facing...  ie. The Acorn issue...  lol  Another joke of a story...  just so sad. ANd who pays for all of this?

Overall, you are correct.. this will help those that are facing sellers that don't want to give seller help.  .. for the most part.  thanks for your feedback.

DONNE..... in regards to some CA agencies trying to make this work?  Sorry to say this, but I don't really care. Why do I say this?  Because they already have gov't ,monies & funding, andother sources .. (your tax monies), that can create a program such as many states already have. Basically what I am stating is that many states already have 1st lien loan programs, using bond money and other resources, I feel that it should be a no brainer to allow seconds.  The state of CT is a great example of this.  They have a 1st & 2nd state program in place now. It didn't take long to plan this. Gee, look at HUD... the first ML letter came out on May 12th.  Donovan andrumors where saying that they were working on this... Gee, 17 days later, this is what they came out with? Pathetic in my opinion... and sad.  Besides, as we both agree, the guidelines are the same prior to this mortgagee letter with one exception... that the lender, the mortgagee, can actually give a loan now.

JUNE.....   please, don't get me started with the government..  LOL   Just not in the mood and I would need about 10 pages of white space.. lol In any case, my pleasure and thanks for stopping by.

TIM & SUSAN..... I think this is clear as mud... lol Wait, my blog is clear as water.  The HUD mortgagee letter is clear as MUD...  lol   But I like that, thanks.  But in regards to where you can get this money?  As stated, the same sources prior to this mortgagee letter, withone exception. Lenders can now participate now.  I would either check withyour state, in regards to their state program... a bond program for first time homebuyers.  Also, there are some non-profit companies, state or local, that give monies if you take classes. I am in contact with Nehemiah, trying to see if they are working on this.  I will keep you all posted.  thanks

Here's a new link....sorry...it's SUCH a weird situation!!!  :)   I've heard one thing, then another.  I'm just trying to get the word out on the current process.

From HUD:

5/29/2009: Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments.

READ

My mortgage guru says:

The mortgagee letter is back on the HUD website and it appears at first glance that you can now use the tax credit for down payment and closing costs. However, when you read the news release, you discover that the borrowers still need to have some skin in the game. They can use the tax credit after their own 3.5%, or they can apply it toward closing costs.

So, the big question is: Does this help? If you still have to come in with 3.5% and you can get a seller credit of up to 6% for closing costs with FHA, when would you not pocket the $8k? Only when you can't get a seller credit, or the seller credit is not enough to cover right?

Phil says:

It's a wild time to be in this biz!   Thank you all for your comments!   :)

Okay everyone..I am jumping ahead again to reply to a comment that I think needs some attention. 

@ PHIL ANDERSON....  I am confused.  You stated, "sorry, it's SUCH a weird situation."  Can you explain this in detail?  What is weird and what situation?

Here is what I find annoying, which is not weird to me....  Donovan made both of these statements in what you pointed out to me, the HUD release about the tax credit.

"Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country."

and

"We believe this is a real win for everyone," said Donovan.

Help stabilize?  Are we just believing and HOPING, that anything that the gov't says, that we all will be safe?  Haven't we learned much from what Obama states, it's all about hope, crossing thy fingers per se. At least that's my opinion. All they are doing is using words to make the average consumer feel good about a screwed up market. Let's face the facts and reality.  The writing is on the wall, period.  And we believe this is a real win for everyone?  Who?  Crapola,... first off, why did it take about 14 months to even come out with this plan?  I have several of my own reasons for this.

Overall, I appreciate you stopping by and commenting,  But if you are going to leave a link, I would truly appreciate some feedback to as why and what you agree with.  I just couldn't make heads or tails of what is weird and what situation that you are talking about.  thanks

PHIL... thanks.. you just came back to add to your comment.  So let me give you my opinion and disagree with your mortgage guru.  And advise that you find another one... seriously, this is not that hard to understand, especially if you are a good loan officer. Just my opinion.

This is what your mortgage guru states per your comment...

"The mortgagee letter is back on the HUD website and it appears at first glance that you can now use the tax credit for down payment and closing costs. However, when you read the news release, you discover that the borrowers still need to have some skin in the game. They can use the tax credit after their own 3.5%, or they can apply it toward closing costs."

Again, I am going to disagree 110% with your mortgage guru, hence why there are confused people out there and so much misinformation out there. When I first glanced at the mortgagee letter this morning, I read it the same as when I wrote this and the same as when reading it now. It always stated that you need at least 3.5% of your own money. How can your mortgage guru think differently at first?  It specifically states that you can use part or all of the tax credit for any part of the down payment after the first 3.5% of your own monies. ... after the borrower coming up with their own monies of 3.5%.  

Overall, the mortgagee letter and the news release by HUD state the same thing. So I guess I am confused why there is some confusion. I called a few people today and they read the letter the same as I did. I will admit, it's not 100% clear, but you can still understand their main point. There is one sentence that clarifies it all... "you need 3.5% of your own money..."

Thanks for adding your input to this..

Well, thank you for your quick reply.

I think this whole tax credit issue is a difficult situation...both difficult for the consumer and difficult for any governmental agency to apply.

One week, it's on, one week, it's off.  Very little info from HUD/FHA or the Obama admin.   I found the comments from one of my best lenders valuable.

Still, as a previous blogger said, it's as clear as mud.

Hey Jeff.

I'm not trying to take away from what you are saying.  I'm just trying to add to the conversation, right or wrong.

Good luck to all of us.

Agents, consumers and lenders alike need to tread carefully into these waters...HUD needs to just pick a process, post it and stick to it.  No more knee jerk reactions with no forethought!

It doesn't help at all in my opinion.  We can usually get all the sellers concessions we need.

Thanks for your post Jeff.  I read the mortgagee letter myself today and was preparing to write a post, but I agree wholeheartedly.  Buyers definitely need to beware because many think that this announcement means that they will not need money to purchase a home....so much confusion and misinformation. 

Great job, Jeff!

I sooooo appreciate you clarifying this process.

I know that we are ALL looking for a legitimate positive spin on virtually anything in this market.

I guess only time will tell but, to be perfectly frank with you, I cannot see how anything significantly positive will come of this.

The best news is that at least now we have a much better idea of what it's all about!

Thanks again!

Edith Schreiber - Dallas, Texas

I think I'm going to prospect for cash buyers only. If I find any, is that discrimination? KIDDING KIDDING KIDDING

Jeff - I'm going to take advantage of the Tax Credit & make a trip to Atlantic City and indulge in free drinks and rabid gambling.  Or, I could just sit back and digest the facts of the matter.  The fact is that government shouldn't be involved in all of this... in my factual opinion:)  The fact is that many are confused about all this... in my opinion.  The fact is getting the facts out are education worth understanding as we work towards the long-term solution to a hectic situation.  Perhaps my opinion and facts aren't mutually exclusive, yet time usually tells what are facts and what becomes a band-aid over much needed stitches.  It seems you still need your money, this just helps with the IRS debacle;)

Jeff, I don't really see the benefit here either.  The 3.5% is the barrier to entry in my area.  The other costs generally total less than 2% and are easily negotiated to be paid buy the seller.  I can imagine a few situations where it would help.  But, I don't think those few will 'accelerate' the housing market.  Unless it directly affected my ability to buy, I'd rather file an ammended tax return and have the full $8000 in a few weeks than pay fees and interest to have it now. 

Jeff: Thank you for this very inportant update on the tax credit !

WILLIAM..... I agree for the most part. I had a good conversation with a realtor from AR tonight who thinks the opposite. But it was about his area only, that he is seeing how this is helping 75% of the people in his area. I pointed out 2 things..

• Real estate is local

and

• it was helping those that already have the 3.5% down payment. He didn't fully understand that these are people that can already buy. What about those that could own, have a job, make payments, but just can't save. Many misunderstand this part and just assume, because 75% of the people that they deal with, don't fit what I just mentioned... but that they do have money.

Overall, would any of us disagree that if we were able to help many of these people buy foreclosures, and that we sold 50% of all foreclosures, those without money, but that are a homeowner now... yet in 1 year, 25% of them go back into foreclosure.  Couldn't we assume that we would still help the market?  Sure, there are going to be pros and cons with these numbers... but the end result, the overall result in my opinion, would be that we could fix part of the housing crisis then... more than 50% of the crisis... 

RICHARD..... thank you very much. Yes, it will help those more that already have the money, to either save...having extra money after closing now, or to put more down, or to lower the rate. But what about the person or family that could support a home, a mortgage, but just can't save... or those that bought 7 years ago, could sell now, and they have money from the sale of their home. thanks

DARIN aka Bucky.... my cheese buddy... I know that some blogs are hitting the mainstream media, and some people are misleading many... or are even more confused than before. This ticks me off...  we should be doing a better job when it comes to information and education. thanks

JIMMY...... my pleasure and thanks.  And I agree, it doesn't help like some think it would... and even in this case, as Mr. Donovan states...  read my comment above to William....  about 3 comments up. This is what I am assuming, those that think these comments are negative, that most of these people think this won't do anything.  I think it's more of a frustration comment. I think more people would agree that this would help some, but will still be negative, because of how the gov't & HUD just dragged this out and made us HOPE.  Damn, hope...  don't get me started on this... lol  thanks

JIM.... .  I agree with your statement... and I think most people in these comments would agree on what you stated... "The way I read this,the credit can now be used to buy more home or buy your way around a seller who does not want to help out that rotten buyer by paying "his" closing costs."

My problem with this is that this will help the few, not the masses.  Here is another comment from Secretary of HUD, Sean Donovan, who stated... "According to estimates by the National Association of Home Builders, the Administration's homebuyer tax credit will stimulate 160,000 home sales across the nation - 101,000 of which will be first-time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home."

Okay, 160,000 units sounds like a ton of homes sold.  But wait, isn't that like the equivalent of filling up the Lincoln Field for the Philadelphia Eagles like two Sundays???  And how many foreclosures are out there?  Over a 800,000 nationally?  Maybe because of this tax credit, it might get 60,000 foreclosures bought? 

My whole point... this is just a small part.  I don't think that this planned, thought out.. at all. If it was, last year this time, the gov't & HUD would have been trying to implement this HUD mortgagee letter back then. It just all seems so ass backwards.  thanks

FRANK & SHARON..... yes, I agree, that the majority of the people out on the street will think this can be used for the down payment. Look at what a realtor has said, from what their loan officer said. .. that it could be used for the down payment. Either they are wrong 110% or just not clear. I read another comment on facebook, that their loan officer told them today, that this could be used for the down payment.  This crap needs to stop. It's really not that hard, in my opinion.  And thanks for reblogging this.

Splendid, what I look forward to after working 20 hour days..........more objections!

I'm glad you clarified this.  I'd read about it earlier and wondered how it would work given that the previous informatione was rescinded.

Yo, Had to chime in ONE MORE TIME....arghh...sorry...I know this is a MINOR thing Jeff, but the Great Sardini brought up "MY OWN MONEY"...  Believe it or not, I think there are STILL alot of people who dont know what that mean...Oh, and I mean Realtors, Consumers, LENDERS (sadly), AND the fact that it means different things based on the TYPE of loan the customer is getting!

It would be nice at some point for YOU to define it, and for people with huge followings like Lenn, Jason, Jason Crouch, Ken Cook, Robert Rauf and others to REBLOG it as ONE HUGE MASSIVE REBLOG!

Thanks!

Darin

Thank you Jeff...hmmmm...less confusing....gov't program...probably shouldn't use all those terms in the same sentence...Massive re-blog...that's a thought...it won't be massive but I will do it anyway...thanks again.

Jeff, thank you, as always, for setting the record straight when it come to FHA & this whole mess. I guess I still don't understand how this helps. I am not going to advertise it -- somehow I see another revision down the line...

Jeff, I got the letter emailed to me from my mortgage lender, I was NOT going to have egg on my face again but I did mean to send it to you and this morning, logged on and found several reblogged posts of yours.

Thanks for the clarification.

Excellent article. What is the government thinking. How is this going to help the majority of folks. What a waste of our money.

This was very helpful and a good reminder that our government doesn't know what it's doing.

I have always believed that home buyers should have to put something down. Unless they are true stakeholders in the property, for many it is easy to just pick up and walk away. Those who do conventional financing and put 20% down will only walk away if they REALLY have to. And the lender's loss should be somewhat less. But even 3.5% is something. I believe home ownership, just like college education should be available to all. However, I believe if you have to work for it either to make the money for the tuition or to get a scholarship, it is all that much sweeter and appreciated.

Jeff = Great job in clarifying this confusing situation.  I agree with Sheldon, yes the buyer will still have to come up with the 3.5% down payment but the $8000 advance via approved institutions could provide the closing cost which so many don't have or it could be used as additional down payment to me that is positive.

People... before I start to reply to other comments, I wanted to say this....  I will assume a little in the statements above, the replies in this thread and say this.... I think many of us that are stating that we don't see the benefit of the new mortgagee letter, or that it really won't work, or it doesn't do squat is because :  I think those are statements of frustration because of the hype and the false hope that HUD and Mr. Donovan gave to the public and to the real estate industry that this was going to help stabilize our economy.  Here are some exact statements from Sean Donovan, that was taken from the HUD release article.

"Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country."

and

"We believe this is a real win for everyone," said Donovan.

 Sorry, but how is this possible?  He then went on to say that it will help about 160,000 new borrowers.  That may seem like a lot, but to me, it doesn't. 

Here is my issue with this and an argument from a realtor that I respect. He told me that he is seeing a ton of business and that this will help.  But we determined that these are borrowers that already have money and the down payment. So wait... what it will do is allow my borrower that has the 3.5% down payment, just put more money in their pocket. Will this make an additional 160,000 borrowers flock the streets, buying up properties?  I don't think so.  I smell smoke screen...  this new amendment will help 160,000 people save more money or get into the house without seller help. But what about those standing on the sidelines that would qualify and be excellent owners, but don't have but maybe 1% of their own money.  I would bet you if they could get to this money first and use as there 3.5 down payment, that we could then open the flood gates... and possibly get another 150,000 new buyers out there. Now, that would stimulate the economy, in my own, honest opinion.

Overall, I agree, this does help and maybe more so in certain/specific areas. Keep in mind, real estate is local. In some areas, you have great jobs and people with $20,000 in savings to use to buy a house.  And yes, this program will help some, but will it stabilize the economy?  I don't think so, not like HUD is predicting. Again, in my opinion, with false numbers. If you have a million foreclosures, and with this HUD statement, you get 100,000 of the market.. that is a small dent. You make a specific program from HUD, stating that you buy a foreclosure, you have to put no money down, or get the $8,000 tax credit, which has to represent 3.5% of the down payment, then in my opinion, I WOULD BET that you could get another 200,000 foreclosures off the street. You would have a better shot at stabilizing the economy then.

MICHAEL.... .  that has been my whole point alone, that much of what the letter states, that you can get secondary financing, even prior to this new mortgagee letter. Now, my question to you, which you didn't state.  That bridge loan can't be used for the down payment, right?  Besides, you said you got permission from HUD before this letter came out?  There is more than meets the eye?  Just curious...  Let me ask you this question. Do your borrowers still need their 3.5%. of their own money, in order to make any of this happen?  Thanks

ANNE.... .  my pleasure. And I really don't think it's fine print, just a bunch of sentences that sound like they were written by a Harvard law graduate.  One sentence stands out to me... "You still need 3.5% of your own money, and then you can use part of the $8,000 tax credit as additional down payment monies, but after using 3.5% of your own monies"  I guess time wiill tell.  thanks

DAVID & LISA.....  I agree and semi disagree.  Just as I wrote that statement above this comment, I don't think this is stupid, because if I had the money, and now I am able to get the money quicker, without using my other monies, this does help. Or, if the seller was going to give me seller help to add to the cost of the house, now I don't have to raise the purchase. But yes, I would rather add to the price and keep the money in my pocket. But you will always have someone argue this point. 

Overall, so I will agree for the most part, that this really doesn't do anything else than what we have. That one realtor that I talked about above, is telling me that this now gets the fence sitters of the fence.  I will actually disagree 110% with that statement, but I couldn't get this through to him on the phone. What he thinks is a logical comment, is not. Here is why.

He tells me that these so-called fence sitters have the money, but now that they can't get the money upfront, so they don't have to spend their money, will now jump off the fence. But wait a second, if they file an amended tax return, in 2 months or so, they will get this money back ANYHOW...  so this is where I will disagree with him, when he tells me that this now gets the fence sitters that have money, the 3.5% down, off the fence. That comment is really not thinking outside the box, but just a comment that agrees with your fence sitters.  And..

Those fence sitters that don't have the money for the down payment?  That is my argument... they can't get off the fence unless they have at least 3.5%... so overall, I will say that I really disagree with most of what this other realtor is saying then.. and will agree with most, that it doesn't matter. If I put this down in a chart per se, then it might make more sense to him, But as it stands now, and after our conversation last night, he just believes that this new move will get the fence sitters off the fence.  Again, I ask, how is this?  When you either get the money now or you replace your money in 2 months. And PS... it will in most cases cost you some money, maybe like $500 more, to get this money upfront. To as if you waited for your tax credit in 2 months, it wouldn't cost you anything. How about them apples... lol

PS.. thanks for the kind words and for the compliment.

TERRIE.....  I don't think all loan officers and or lenders are keeping up with this. Many in my office have no clue about this topic... and I am now hearing some realtors out there that are being told by their loan officers, that they can use this tax credit for their down payment... but they are missing 1 important ingredient...  that you need 3.5% of your own money.  thanks

KRISTIN.....  my pleasure and nice to see you stop by. It's been a loooonnng time.  ;o)  I love writing about this kind of stuff, that people just confuse, assume, or don't bother doing their homework... just telling the borrower anything, just to get them in the door per se... and then worry about the problems. But yes, there is a lot of misinformation out there, and many people will be disappointed at the end, unless they speak to a real professional that cares about the right info. If not sure, they the loan officer, should be asking and not assuming.  I just ran into this kind of issue with a borrower on another type of loan.  Sad...

LENN.... .  lol   Wait, you actually do know a few people that would do this for $200?  I know HUD is going to monitor this and any abuse, that people aren't overcharged for borrowing the tax credit. But wait.. 2 things.

• HUD is going to monitor it?  When they haven't monitored many other things in the past?  Like those companies and loan officers that abused the system. Screwed up good faith estimates?  The bait & switch?  False advertising of the rates?
• Secondly...  what amount is considered abuse?  $500?  $1,000?   This is what HUD says in the mortgagee letter about this.

"FHA will monitor the purchase of tax credit transactions closely. Charging of excessive

fees or costs in the purchase of the tax credit or increasing other fees or charges in the transaction

without FHA approval may result in referral to the Mortgagee Review Board, and particularly with

respect to entities that are not FHA-approved mortgagees, referral to the Federal Trade

Commission, or referral to the appropriate State Attorney General office, as may be applicable."

So, you tell me....  ??

PHIL.....  I responded to your comment in comment # 29.. thanks

KIM.... . I understand some people's concerns about ponying up money, to buy a house. But let's take a very clear look at the USDA and VA loans, that require ZERO percent down. Their foreclosure rates are lower than the national average.  My view points on this... 2 things.

• The foreclosure mess was not because people put no money down and walked away from their homes.  Those are misleading assumptions with no proof. In my opinion, a lot of it was the job industry, the loss of income. I know many people that foreclosed that had put 10% or 20% down.
• Secondly...... the programs mentioned above and FHA have stricter credit guidelines than did the subprime world. And that we had loan officers that put borrowers into loans that weren't good for them. If we did the correct studies, I would bet that it was the loss of jobs followed by bad subprime mortgages that allowed front end housing ratios of 50%... 50%!!!  That is 50% of your income, before taxes, going to just your mortgage payment.

Overall, thanks for your input. I just wanted to spell out what I consider to be some of the so-called myths out there.  thanks

Good stuff Jeff!

....  LOL !!!!

    LUV YA LIKE A BRUTHA !!!!

NOW I get it!  Ya' know...I used to be pretty smart, but I'm beginning to wonder.   And wander!  :)

Thanks for the info, Jeff.  I was missing the nuance of the difference between the required 3.5% downpayment, and the use of the tax credit as a downpayment.

It's still being widely reported incorrectly, or incompletely.   See this article at CNN from Friday (I double-checked the date!).   They almost have it right.  You should write them and make sure they have it straight!

Thanks for the update and clarification - I'll stop back in another couple of days for another update & it will all be changed again!

Hey, you have to watch out who your hanging around with in bars!

Well Jeff, it seems that you are passionate about the fact that someone may not understand the facts and possibly misunderstand what ACTUALLY is going on.  I appreciate your passion for the consumer.

The misconception from HUD should be CLARIFIED by someone in that department through press release or news release.

Just goes to show that something is wrong here.  In governement and in HUD. 

Why is it that WE as Real Estate Agents and loan Brokers have to DECIPHER the current HUD situation and changes allowable incentives for consumers?

I think it is Wrong....wrong...wrong

I wish our government were more organized - seems like a lack of communication across the board!

I am writing Obama NOW and urge you to do same!

Change only comes with noise, and we must start some now and end this madness!

Jeff,

Thank you for all the work you put in on this post.  Great information! 

Buyer beware of the tax credit? It's a bad thing because...? Actually, I think the most recent press release was clear; not confusing at all. It would have been nice if HUD didn't jump the gun the first time, but it is the govermment after all. Of course, buyers should consult with their lender/attorney/accountant just like they would anyway when buying a house.  All in all, this is one of the few things I think the new administration is doing right.

I believe that unusual numbers of foreclosures started appearing several years ago before the recent market crash and job losses and were certainly due to subprime lending. Otherwise how to explain why this didn't happen in countries that didn't allow subprimes (like Canada)?

Of course we call think the government could have done more/better, but I'm grateful for what they are doing. It will help.

And then we're going to run in to the problem of how the banks are going to handle this. I've read they are in no way, shape, or form geared up to handle this. How long it will take is anyone's guess.

Here is a link to an excellent article that puts it all in a nutshell: http://www.lloyds.com/CmsPhoenix/DowJonesArticle.aspx?id=431194#

Hi! Jeff,

I was looking forward to your post on this!  Since this still seems to be in the formative phase in many ways, I wish "they" would consider pushing back the date that the party is over.  Time is running out for it to make much difference in the housing crisis.   Since many homes are not appraising for enough to cover the 6% seller contribution toward closing cost/prepaids, I can see the benefit there, but those situations are not the norm in my area.  I say they have many miles to go to get this right.

I find it and the comments very helpful and interesting. 

I see this helping those with 3.5% down to make the decision to buy.  It just doesn't go far to help those who less than 3.5% down. 

I agree FHA "was not the true demise to our foreclosure mess".  How could it be.  Everyone was doing 80/20's to avoid the mortgage insurance, that is the safety net for the lenders.

Thank you for the great information.

Thanks Jeff.  I continue to read posts on this topic to try to sort through all the ocnfusion out there.  Yours is the 2nd to state the same terms so I'm feeling more confident now.

Hopefully this will go through a lot smoother than the last time.

Kudos for you for hitting the street with this and getting the nuances of the deal out to the public in a timely manner.  As all things empowered by the "administration", this one, too, will go through it's interpretations and transmutations... depending on who is doing the reading and executing.

One point, though, and maybe I'm missing something plain in MY interpretation.. the Mortgagee Letter specifically states a list of entities who cannot put money in peoples hands to use as the required 3.5% down payment.. seems to be the major rub of your readers.  As I see it, this list did not include the government agencies.  They are not in a postition to be construed as someone who would "benefit from the transaction"..  so isn't this the part of the program we are all waiting for?  A state or regional program taht advance loans the money to use as down payment?  The Letter doesn't seem to preclude this to me..

Am I missing something?

Thanks for this series Jeff. I posted links to it from my AR and personal sites, after all, why re-invent the wheel, especially when someone more qualified has done so.

JOSH..... . I agree with you 110%...  sure, it can help pay to buy the rate down, or if you couldn't get seller help.  But we are talking about the minority. The majority in my opinion would be those that don't have the 3.5% down payment.. or who might have 1% or 2%, but not the whole down payment. And many of these people would be viable buyers, and maybe help pick up the economy... and get many foreclosures off the market.  thanks

PAUL.....  I think many of us will agree that this will help some, but that we need to focus on those that don't have the down payment. And some of us will agree about not having skin in the game would be the problem.  I would rather get the buyer their 3.5% down payment from a source than do a 80/20, to where your total payment would be higher because of that 2nd mortgage rate in today's market.  thanks

TOM.....  I agree and thanks for your support. And thanks for reblogging this a few days ago.

JO..... don't get me wrong, there was a slight stimulus about this. It did get a few off the fence or help.  A few is better than nothing. But as you, I am looking at this from the larger perspective.  It won't help the masses as the 'blind' gov't thinks it would.  thanks

LORI..... yes, some states have the bond moneys and can supply a second to help with the down payment.. that is legal by HUD's guidelines. Or even assistance, as in monies from non-profits to be used for down payment or closing costs.  But not every state has this and I am extremely disappointed that the gov't & HUD didn't think this threw. Hell, the tax credit has been out since like May of 2008.  It's not May 2009 and we still can't get this right... that is my opinion and .02.  thanks

KEN aka Novation mortgage......  I agree, those that are even part of real estate, such as the NAR, should sometimes just back off and stop trying to be out there, FIRST, and in front of the public. They and HUD have stuck their foot in their mouth on several occasions.  Misinformation just scares more people later on.  And even if not, when put online, you might never get to read about the correct information, just the bad.  thanks

Thanks Jeff!  This was getting pretty confusing...Too many people were jumping the gun with the information (mainly NAR).

Your are correct in that it was not the low down payments that started this mess, a big part of it was the short term intro payments and stated income loans. 

Hi Jeff, So many comments, so little time! I actually poured over all these comments. The tax credit is better than, well nothing. I have 5 clients who will soon get their rebates. They are all pretty excited about that!

Jeff,

The contradicting information on the tax credit is staggering.  Thanks for the up-date.

Jeff, PLease walk us through a scenario, step by step by step exactly so we see hbow the process works. I , too am still confused, as are many other people. PLease take this all part and put it back together again, in a numbered, step by step process so we can all see how the complete transaction works.

Thanks! You rock!

Sarah

CNNMoney via the following link, http://money.cnn.com/2009/05/29/real_estate/tax_credit_as_downpayment/index.htm?postversion=2009060109 says that the $8,000 at closing can be used for downpayment assistance.  Wish all parties could get on the same page.

Everyone, I am still trying to get back to all the comments above. But I wanted to clarify something that Bob Mori mentioned above.

BOB MORI...... .  thanks for the link. I did read that article just now, yet I am confused on what you are trying to say. In my opinion, CNN is on the same page. This is what they said in the first paragraph...  "First-time homebuyers will now have access to quick cash to help them with their down payments."

And then they stated this in the 2nd paragraph...  "using FHA-approved lenders can now get an advance on the $8,000 tax credit created by the stimulus package and apply it toward their down payments or closing costs." 

As you can see, they said apply it toward. Sure, it's very easy to assume that they are saying that you can use the tax credit for the down payment, in both sentences mentioned above. But... but if you read further, it's the 6th paragpraph that they mention this..... 

"The mechanics of the new program, according to NAHB economist Robert Dietz, allow lenders to purchase tax credits from the buyers and then collect the rebate from the IRS. Homebuyers must still come up with FHA's mandatory downpayment of 3.5% on their own, but they can use the tax credit to lower their principal balance and save on monthly payments."

So overall, I am not sure what page they should be on. After reading the whole article, they basically stated the same things that I did in my blog.  Unless I am missing something else.  thanks

Jeff:

In your opening comments yousay, "ML 2009-15, it states that you can't use this tax credit for the required down payment of 3.5%."  Yet in the CNNMoney article whose link I included in my previous response and that you quote above, "In my opinion, CNN is on the same page. This is what they said in the first paragraph...  "First-time homebuyers will now have access to quick cash to help them with their down payments."

And then they stated this in the 2nd paragraph...  "using FHA-approved lenders can now get an advance on the $8,000 tax credit created by the stimulus package and apply it toward their down payments or closing costs." 

My confusion is that in CNNMoney I see nothing that says the $8,000 cannot be used for the 3.5% downpayment for FHA loans.

By the way, I am more inclined to accept what you have said in your opening as opposed to the writer for CNNMoney.  I doubt that he has to deal with this stuff everyday as you do.

BOB... . thanks for stopping back....   I guess I would have to assume that there should be no confusion, because this is what they state in the 6 paragraph of the article which I mentioned above...

"Homebuyers must still come up with FHA's mandatory downpayment of 3.5% on their own, but they can use the tax credit to lower their principal balance and save on monthly payments."

The second part of that sentence says that they can use the tax credit to lower their principal balance.... and with the first part of the sentence stating that the borrower must use their own funds to cover the 3.5% of the down payment. It might not be 100% clear, but from how I read it, it's about 98% or more clearer.   Thanks

Jeff, I appreciate you keeping us updated on this ever-changing issue.  I need to have the correct info as soon as it comes out, so I can be an advocate for my buyers!

Jeff - Great points and clarification ! Is a little confusing but I think I got most of it !  If not, all one has to do is come back and read this post for the answers !  ~ Chris

I have mixed feelings about the past confusion of the tax incentive being offered as a down payment. I was worried, should it have been possible, that folks who really were not prepared to manage a housepayment would get into trouble like the sub-primers of  a few years ago. An angle to this credit that many are not aware of is that the borrower can have a co-signer and still qualify. I presently have two deals going where this is the scenerio. Are you seeing much of this?

Does anyone know who or where i can write to in regards to the 2008 "Tax Credit" or interest free loan of $7500.  I don't fell that it is fair that in 2009 people would get $8000 "Tax Credit" that they DON'T have to pay back. I feel that we should be allowed to keed the money without paying it back, or that those in 2009 should have to pay thiers back as well. Those of us who purchased a home last year helped the economy as much as those who purchased in 2009.  If anyone has info please e-mail me at KJS7654@cox.net  Thank you!!!

99 days left for the tax credit in 2010.  Most buyers not only don't understand the program details - but are unclear on the specifics, deadlines, etc.  Great piece.  Worse, right now, inventory in our market in St Louis is low - sellers think that spring here doesn't start for another 60 days and may miss the push of buyer activity. I issued a statement discussing need for sellers to get on the market by early Feb which has fortunately been picked up by the local press.

I really like your post hope to read more from you.

Regard,
Epoyjun

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