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The battle to extend the First Time Home Buyers tax credit has taken an even better twist.  Senate Democrats are not only in favor of extending the original credit but are also seeking to include existing home owners as well.  This is very good news for those that have not already taken advantage of the credit but even better for those that did not qualify under the previous plan.  The new proposal is to include a $6500 tax credit to existing home owners if they have lived in their current home for at least 5 years.  The buyers must make under $125,000/year single and $250,000/year married filing jointly.  According to a Senator Harry Reid aide Regan Lachapelle, the new proposal still faces some resistance from Republicans.  More information to come.

According to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a down payment on a new home.   “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down-payment,” Donovan said.    FHA’s approved lenders will be allowed to “monetize” the tax credit which in turn will allow eligible home buyers to access the funds immediately at the closing table vs. waiting for the credit on their 2009 tax returns. 

Anyone looking to take advantage of Tax credit but was unable to come come up with the down payment can now get in the game.  So what are you waiting for?  For more information read here.  

UPDATE:  May 18:

It looks like it may not be etched in stone just yet.   The Boston Globe  reported on Thursday that the letter was rescinded by HUD and.or FHA.   More news to come..

UPDATE May 29:

Its official HUD announced on Friday that first time home buyers can use the credit as a down payment.  According to NAHB economist Robert Dietz, lenders purchase tax credits from the buyers and then collect the rebate from the IRS.   This appears to be a better option than the bridge loans offered by some states prior to this announcement by the feds.

Let the games begin!  Today, March 5 is the official first day that home owners can call their mortgage companies to apply for mortgage relief under the new Homeowner Affordability and Stability plan by the Obama administration.  Administration Officials said that homeowners could actually start making calls yesterday and banks like JPM Chase and SunTrust reported call volume increases of 150 and 50 percent respectively.   Homeowners will need to be patient as lenders scramble to get their systems in place to handle the huge increases in call volume.  Some callers have reported waiting for several hours before getting through to speak with a real person.  Banks such as Bank of America and Wells Fargo have given high marks to the plan along with many economists who think that the new guidelines will help with the current crisis.  Under the plan homeowners with loans as large as $729,750 may see their interest rates cut to as low as 2 percent.   The refinancing part of the program is expected to reduce payments for up to 5 million homeowners but is limited to loans owned or backed by Fannie Mae and Freddie Mac.  Homeowners must also apply by June 2010. 

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President Obama and Congress are finalizing an economic recovery bill that could be signed into law by next month. The bill has important implications for the Low-Income Housing Tax Credit (LIHTC).

The LIHTC is the nation’s largest, most successful affordable rental housing production program. But it has been hit hard by the financial crisis. Investment in the LIHTC fell from about $9 billion in 2007 to about $4-5 billion in 2008. It could drop even further in 2009.

Bringing the LIHTC program back to its full potential is one of the fastest ways to provide an economic stimulus while also assisting low-income working families, including victims of the foreclosure crisis.

BACKGROUND

The Low-Income Housing Tax Credit (LIHTC) is the nation’s largest and most successful affordable rental housing production program to date, financing more than two million homes since 1987 and about 120,000 annually in recent years. According to the National Council of State Housing Agencies, approximately 90 percent of all affordable rental housing is financed through the LIHTC. According to the National Association of Homebuilders, building 120,000 homes annually through the LIHTC supports 180,000 jobs annually. 

Source: Enterprise Community Partners

Note to president Obama… Our current financial system doesn’t work!  As if he really needed me to tell him that!  The current mortgage meltdown and credit crisis should tell us all one thing for sure.  We don’t know what the “h-e-double hockey sticks” we are doing in our financial markets.  Many years ago there were no banks or brokers to create this mess.  Banks served a great purpose in building our country to what it is/was.  But maybe its time that we do something different or in this case do it again but better.   What I am referring to is people investing in other people not banks.  Today this concept is commonly referred to as Peer to Peer lending. 

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 By now we all should know how our country got into this economic depression.  Anyone who doesn’t know isn’t paying attention.  Yes I did call it a depression just like I called it a recession before it was official.  It’s not just me either.  However, if you don’t know how it happened, here is my condensed list:

• Lenders
• Mortgage Brokers
• Regulators
• Mortgage Secondary Market
• Investment bankers
• Bernie Maydoff (yes he gets his own category)
• The Feds
• White House
• Congress
• Past Presidents
• New Home Builders
• Real Estate Investors
• Hedge Fund Managers
• Media Outlets

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As a house flipper, you should be constantly looking for ways to raise money.  Friends, family and associates can be a great avenue to get started.  However, you will want to be careful on the amount and the terms used for the money you receive.  Lets say your grandfather wants to help you get started in your house flipping business.  He offers to give you money for this duplex that you just got under contract.  This doesn’t mean that he can just write you a check for any amount and of you go.  Uncle Sam may want his cut. 

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Did you know your utility company gives discounts and rebates for your flip?  Depending on your project and whether or not you are holding or flipping, this can mean considerable savings for you or your tenant.  The discounts are normally available when you buy energy saving appliances, install additional insulation, replace old air conditioners, space heaters, install double pane windows, and many others upgrades. 

The return comes in the form of cash vs. a loan, and can cover anywhere from 50 to even 100 percent of the cost of the qualifying upgrade.  You will need to check with your local utility company to find out more information.  In some cases you need to apply before the work is performed.  The utility company may want to inspect the work before final approval. 

Well today I found out that my bank will no longer be offering rehab loans to investors.  This is a huge blow and the timing could not be much worse.  I was banking on this loan for the most recent property that I landed through a foreclosure auction.  My loan officer is attempting to get my loan through since it was already in progress, but there are no guarantees.  I’m not sure how this is going to affect my other loans but we will see.  In the mean time I will need to line up other financing.   I had become comfortable with this banker and the relationship was in place.  Its time to start a new relationship all over again! ARRGGG!!!!!  I really dread having to do this, especially in the current mortgage market.

As a business owner or entrepreneur we must remember that quitters become losers.  If we are easily discouraged by roadblocks or even failures we will never win.  If we learn from the experiences and continue to push on we can do nothing but succeed.  I’ll keep you posted…

In another attempt to fend off a recession yesterday, the Feds once again cut short term interest rate 1/4 point to 2 percent.  While this may not affect mortgage rates it does however affect Home Equity Lines Of Credit (HELOC).  These lines of credit are normally tied to short term rates vs. the long term rates that affect a traditional mortgage.  These short term rates are also typically lower.  Many property owners have benefited from the recent rate cuts.  It’s a good time to pay down your lines if credit.  One way is to continue making the same payments from before and applying the extra directly to principal.  However, there may be a better way to take advantage of these rate cuts.

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