Will the Homebuyer credit be extended?
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Senate Democrats are close to compromising on a provision that would extend the first-time homebuyer tax credit, according to Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.. In fact, the Senate will extend the $8000 tax credit for first-time homebuyers until April 2010, with a separate $6,500 credit for second home purchases. Legislation creating the extension could be included in a bill that will extend unemployment benefits and could go to debate as early as this week, according to numerous media reports. What we don’t yet know are the terms of the extension.
Some reports indicate the extension would run through June 2010 and expanded to include all homebuyers, not just first-time purchasers, and others that would extend the full credit to first-time buyers until April 1, with $2,000 reductions every quarter until it dissolved at the end of 2010. The National Association of Realtors (NAR) and National Association of Home Builders (NAHB), along with the Mortgage Bankers Association (MBA) continue to lobby federal officials to extend the credit. According to the latest Department of Housing and Urban Development (HUD) and Census Bureau data, the rate of new home sales declined 3.6% in September, and some have speculated the impending expiration of the credit is contributing to the decline.
IRS gives Homebuyer Tax Credit to aliens and minors
Ok, we knew it would happen, right? We all love the tax credit – if only the government didn’t have to be the one administering it. The Treasury Inspector General for Tax Administration (TIGTA) believes the Internal Revenue Service (IRS) may have paid out millions of dollars in first-time homebuyer tax credits to individuals not eligible to receive the $8,000 credit. Nearly $4 million of incorrectly paid credits were due to both alleged fraud and filing errors on claims by 580 taxpayers less than 18 years old. The youngest of these was 4 years old, TIGTA head J. Russell George said in prepared testimony to the House Ways and Means Oversight subcommittee. TIGTA also found 3,200 taxpayers with Individual Taxpayer Identification Numbers (ITIN) claiming the credits. ITINs are used to track income tax for resident aliens, in lieu of a social security number, and it’s possible that as much as $20.8 million in tax credits was paid to resident aliens ineligible for the credit. As of August 22, 2009, more than 1.4 million taxpayers claimed the tax credit for homes purchased in 2008 and 2009, representing total foregone tax revenue of about $10 billion, according to estimates presented by Government Accountability Office (GAO) director of strategic issues James White.
Obama programs hurting recovery, helping banks
Blackrock Inc. Chairman Laurence Fink claims that Obama administration programs to help homeowners stave off foreclosure may hinder the recovery of the mortgage market while benefiting banks that own second loans on the properties. Fink said policies introduced this year to reduce foreclosures are flawed because they don’t require home-equity loans to be wiped out before the mortgage is modified. Instead, in a break with the intentions of contracts, he says the second loan’s terms may also be revised, spreading the financial loss among lenders. Fink is the highest-profile investor to call attention to potential conflicts when banks that service mortgages handle loan modifications. One concern is that many servicers, which handle billing and collection for mortgage owners, also hold home-equity loans that would lose all value in a foreclosure. JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co and Citigroup Inc, the four largest servicers, own almost $450 billion
of home-equity loans, according to Laurie Goodman, an analyst at Amherst Securities Group in New York.
