New Foreclosure Alternative To Keep Homeowners In Homes, Temporarily

A new program to help ease the pain of some homeowners heading for foreclosure has recently been rolled out by Citi Mortgage. This new plan is aimed at homeowners who are already seriously delinquent, having missed at least three monthly payments, and are on the road to losing their homes.

Under the new program, instead of borrowers falling further and further behind on their mortgages, leading to an eventual foreclosure sale, they can stay in their homes for up to six months, if they agree to then hand over the deed to the lender.

In these cases, by giving the house back to the lender, in a transaction called a deed-in-lieu of foreclosure, the lender saves considerable expenses, especially on legal fees.

The obvious advantage for borrowers is that it allows them time to plan their move to a new home. And while borrowers still lose their homes, the program promises to make the process more orderly and provides benefits for both lender and borrowers.

In fact, under the new plan, Citi Mortgage says that it will pay the borrowers a minimum of $1,000 to help with relocation expenses.

In addition, Citi will also provide relocation counseling and may even cover some monthly property expenses while the borrowers remain in their homes, if Citi determines the borrowers can't afford the expenses.

On the borrower's end of the transaction, they must agree to keep the homes in good condition and to meet with trained relocation professionals every couple of months to facilitate their final moves.

This specific program targets borrowers Citi believes would not benefit from mortgage modifications because they could not afford even sharply reduced mortgage payments. It also applies to borrowers who went through mortgage modifications but fell behind on their payments anyway.

In order to be eligible for the program, homeowners must have their first mortgages with Citi Mortgage, no second mortgage, live in the home and be seriously delinquent on mortgage payments, at least 90 days or three months late.

This new program will initially be confined to six states: Texas, Florida, Illinois, Michigan, New Jersey and Ohio. With plans to open up the program nationally if it works in those states.

It will be interesting to see how many homeowners this affects and its initial execution. And of course we will see if it will be rolled out nationally or if other lenders follow suit. As always we will provide further updates as they become available.

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS

HUD No. 10-011
Lemar Wooley
(202) 708-0685
FOR RELEASE
Friday
January 15, 2010





Measure to help bring stability to home values and accelerate sale of vacant properties

WASHINGTON - In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization."

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.

In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website.

Congress Passes Tax Credit Extension/Expansion

I just got this exciting email!


To: All REALTORS®

From: Charles McMillan, 2009 NAR President

Date: November 5, 2009

Re: Congress Passes Tax Credit Extension/Expansion

Dear Fellow REALTOR®,



I am VERY excited to report that Congress has answered our call to extend and expand the homebuyer tax credit!



Both the House and the Senate have passed an unemployment insurance bill, which includes an amendment that expands and extends the tax credit. That bill will be sent to President Obama for his signature in the next day or so.



I have recorded a special edition of my President’s Podcast, with details on the new tax credit and when it takes effect. Please take just a couple of minutes to listen.






We also have posted a comparison chart on Realtor.org. This can be a helpful resource as you work with buyers to take advantage of the credit in the months ahead.







On behalf of NAR, I thank you all for your participation in our advocacy efforts on this issue. Not only did we set a new record on responses to Calls for Action, but we helped move another step closer to a brighter future for America’s families and our economy.



Sincerely,




Charles McMillan, CIPS, GRI
2009 NAR President

r emails, please add NAR@newsletters.realtor.org to your address book now.

Questions or comments? Please send an email to presidentsreport@realtors.org.

National Association of REALTORS®
MandBD
430 N. Michigan Ave.
Chicago, IL 60611
--------------------------------------------------------------------------------

Senate Clears Homebuyer Tax Credit Extension; May Pass as Early as This Week

Posted By susanne On November 4, 2009 @ 5:36 pm In Home Buying 101, Homeowner's Toolkit, Real Estate, Today's Marketplace, Today's Top Story, Today's Top Story - Consumer | Comments Disabled

senate_1105 [1]RISMEDIA, November 5, 2009—After two weeks of delay, the Senate cleared the way to pass a seven month extension and expansion of the tax credit for homebuyers. By an 85 to 2 roll call vote, the Senate voted to cut off debate on a package of measures that includes the homebuyer credit, making it virtually certain that the legislation will reach President Obama for his signature this week.

The homebuyer tax credit, due to expire at the end of November would be extended through April 30 of next year. First-time buyers who are in the process of making a purchase would not need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline.

For the first time, the legislation that was recently cleared makes move-up buyers as well as first-time buyers eligible for a credit. The $8,000 maximum first-timer credit will continue and will now be available to couples with income up to $225,000, a nearly $55,000 increase above the level in existing law. A new $6,500 maximum credit would also be available to move-up homeowners who have lived in their current residence for five of the prior eight years.

For homebuyers across the country, the expanded tax credit would allow more people to qualify for the credit. While two-thirds of American families own their own home, and most earn less than the income limits that have been established within the extension, more buyers may be eligible. Move-up buyers don’t have to sell their current home to qualify for the new credit, but the money cannot be used to buy a vacation home. “It’s only for a primary residence,” said Regan Lachapelle, a spokeswoman for Sen. Harry Redi (D-Nev.), who helped engineer the deal. “In expanding the tax credit, we are helping first-time home buyers, as well as homeowners looking to move up to a new home, but we would exclude from the credit speculators who may have recently purchased a home intending to flip it for a fast profit,” said Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee.

The tax credit has fired-up the housing market, driving existing home sales to the highest level in over two years. The National Association Realtors reported sales jumped 9.4% to a seasonally adjusted annual rate of 5.57 million units in September and are 9.2% higher than the 5.10 million-unit pace in September 2008.

The legislation included provisions added to address complaints of fraud as well. The Internal Revenue Service is given greater authority to oversee the process to root out fraud, and provisions are added in response to past abuses of false sales or underage buyers. An investigation by the Treasury Department’s Inspector General for Tax Administration found that more than 580 children, some as young as four years old, had received $627,000 in first-time homebuyer credits. The IRS has identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.

Nelson Says Senate to Extend, Reduce Homebuyer Credit

Nelson Says Senate to Extend, Reduce Homebuyer Credit

By Ryan J. Donmoyer and Dawn Kopecki

Oct. 26 (Bloomberg) -- Senate leaders are negotiating to extend and gradually reduce an $8,000 tax credit for first-time homebuyers through 2010, Senator Bill Nelson of Florida said.

“We should be able to extend that later this week,” Nelson, a Democrat, told reporters traveling today with President Barack Obama on Air Force One to a speech in Jacksonville, Florida.

Senate Majority Leader Harry Reid of Nevada and Senate Finance Committee Chairman Max Baucus of Montana, both Democrats, may seek to add the homebuyers extension to legislation extending unemployment benefits that may be debated as early as this week, according to Regan Lachapelle, an aide to Reid.

Lawmakers are under pressure from real estate agents, mortgage brokers and homebuilders to extend the $8,000 credit before it expires Nov. 30.

Baucus and Reid made a proposal last week to Senate Republicans that would extend the homebuyer credit through 2010, Lachapelle said. First-time homebuyers who close before April 1 would get the full $8,000, and the credit’s value would be reduced by $2,000 in each successive quarter until expiring at the end of the year.

“Relative to current law, this is better. But it’s worse than people are expecting,” said Tom Gallagher, head of policy research in the Washington offices of International Strategy and Investment Group, an independent research firm. “This is a four-month extension and a nine-month phase-out.”

Homebuilder Index

A gauge of 12 homebuilders in Standard & Poor’s indexes slumped 3.4 percent, led by declines of at least 3.8 percent in Pulte Homes Inc. and D.R. Horton Inc.

The proposal was intended to counter one by Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and Senator Johnny Isakson, a Georgia Republican and former real estate agent, to extend the full $8,000 credit through next June and to expand it to all couples earning $300,000 or less. The Baucus-Reid proposal would continue limiting the benefit to first-time homebuyers, Lachapelle said.

The terms for extending the homebuyer tax credit are still being negotiated, Lachapelle said.

House Speaker Nancy Pelosi, a California Democrat, is waiting to see the final Senate agreement before deciding whether to support it. “Generally, we do support extending it,” Pelosi spokesman Nedeam Elshami said. “But it’s premature to say anything until we see what action the Senate takes.”

Business Tax Break

Baucus and Reid also proposed an extension of a business tax break that allows companies with losses in 2008 and 2009 to amend tax returns for any of the previous four years to get a refund of taxes paid. Without the benefit, companies would have to wait years to apply those losses against future profits.

A version of the benefit was included in last February’s economic stimulus bill, though it was limited to companies with receipts under $15 million. A lobbying effort by business groups, including the Washington-based National Association of Manufacturers, to extend the benefit to all companies failed at the time; the Obama administration has since proposed a broader benefit in its budget.

The Reid-Baucus proposal was drafted to have a neutral effect on budget deficits by delaying until 2017 a tax benefit that would let multinational corporations claim more interest deductions. The break, enacted in 2004, is currently slated to take effect in 2011.

Fraudulent Claims

The first-time homebuyer credit, while popular with lawmakers, came under scrutiny last week when government officials said millions of dollars in benefits were erroneously or fraudulently claimed.

The Internal Revenue Service has identified 73,799 claims totaling almost $504 million that may not be from first-time homebuyers. They also found that 582 taxpayers under 18 years old and ineligible to buy a home claimed almost $4 million in credits. Children as young as 4 years old received the credit, Treasury Inspector General for Tax Administration J. Russell George told a House panel.

Linda Stiff, the IRS’s deputy commissioner for enforcement, told the House Ways and Means Subcommittee on Oversight that her staff has identified 160 potential criminal cases and 115 are now under investigation. In total, 8,000 claims have been flagged for potential criminal fraud, she said. “We are and will continue to vigorously pursue those who filed fraudulent claims for the credit,” Stiff said.

More than 1.2 million borrowers through Oct. 9 have claimed almost $8.5 billion of the $13.6 billion set aside for “first- time” homebuyer tax credits this year, George said. The program is aimed at easing the worst housing slump since the Great Depression.

To contact the reporters on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.netDawn Kopecki in Washington at dkopecki@bloomberg.com
Last Updated: October 26, 2009 17:58 EDT

Breaking News: Senate Plans to Extend and Expand Tax Credit

[1]RISMEDIA, October 30, 2009—(MCT/The Wall Street Journal)-The Senate has reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers, a boost the housing industry believes will help it pull out of its two-year-old downturn.

While its passage remains uncertain, the agreement would extend the existing credit for first-time homebuyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all homebuyers who have been in their current residence for a consecutive five-year period in the past eight years. Lawmakers in Washington also raised the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000, housing-industry sources said. Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, said the sources. The measure still faces votes in the full Senate and the House.

Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan are in full support of the Senate’s proposal to both extend and expand the first-time homebuyer tax credit and called on Congress to approve key housing measures that include the tax credit. “We welcome efforts taken by Congress to extend the First-Time Homebuyer Tax Credit for a limited period. This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide,” said Secretaries Geithner and Donovan. “In extending the credit, we urge Congress to include strict measures to combat tax fraud and protect responsible homeowners.”

The current tax credit did little for the new-home market in September, the Commerce Department recently reported—news that took many industry analysts by surprise. Sales fell 3.6% from August and 7.8% from September 2008. Industry observers had expected a fifth consecutive monthly increase in new-home sales, believing that the tax incentive for qualified first-time buyers—credited with 357,000 sales of previously owned homes so far this year—would do the trick. Instead, sales of typically more expensive newly built houses slipped. “The decline in new-home sales seems to us to be more a function of the attractive pricing available on resales in the current environment than a reflection of weakening demand,” said Michael Feder, president of Radar Logic in New York, which tracks the market.

“Since hitting rock bottom in March, demand is up 20 percent,” said Joel L. Naroff of Naroff Economic Advisers in Holland, Pa. For Naroff, the robust rise in existing-home purchases—9.2% year over year in September—indicated that the housing market was not faltering. “Maybe the issue is supply, which fell to its lowest level in 27 years,” he said. “Builders, at least those left standing, have been making sure they don’t have any houses sitting around, and they have been very successful in controlling inventories.”

IHS Global Insight economist Patrick Newport echoed that, noting new-home inventories “sank for the 29th straight month to their lowest level since November 1982.” Naroff maintained housing has recovered enough to stand without the tax credit, but Newport said that if the credit were not extended and expanded, housing demand would take a hit, and home sales would drop.

The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real estate market a bigger boost while preventing real estate investors from benefitting. While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor.

(c) 2009, The Philadelphia Inquirer.

Distributed by McClatchy-Tribune Information Services.

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TELL CONGRESS TO EXTEND THE HOMEBUYER TAX CREDIT!

Extend the Homebuyer Tax Credit to Assure America’s Economic Recovery

The tax credit is working, homebuyers are using it, sales have increased and it’s helping to move both housing and the economy forward.

But time is running out. Homebuyers have only a few weeks left to put in a contract on a house and benefit from the tax credit—it expires on December 1. Congress should extend the tax credit until December 31, 2010 to allow more homebuyers to take advantage of this incentive and help America’s economy continue to recover.

The first-time homebuyer tax credit is working:

*
Home sales to first-time homebuyers increased by 25% in 2009 and now account for 50% of all sales.
*
The tax credit is reducing the inventory of foreclosures that are sitting on the market, helping our neighborhoods and communities recover.
CLICK HERE TO HAVE YOUR VOICE HEARD

Mortgage Help For Unemployed Borrowers? - FDIC Has A Plan

The Federal Deposit Insurance Corp has begun to push a plan to help unemployed homeowners at risk of foreclosure to get a temporary break on their mortgage payments.
The FDIC said it is encouraging certain banks to reduce mortgage payments for the unemployed or underemployed for at least six months.

However, initially only a percentage of the unemployed will benefit from this recommended plan because the effort would only apply to a handful of institutions. Specifically, it would affect those that bought failed banks and participate in loss-share agreements with the FDIC. In such deals, the agency covers some of the losses incurred on the assets of the failed banks. Some 53 institutions, mainly regional or community banks have entered into such arrangements since January 2008.

The existing foreclosure-prevention programs, including the president's loan modification plan, generally do not help the jobless because they don't have enough income to sustain even reduced monthly payments. Administration officials have said they are exploring ways to help the unemployed -- including through reduced payments, typically called forbearance plans.

This plan is also in response to the fact that while many servicers have offered forbearance plans in the past, fewer are these days. That's because financial institutions no longer feel that borrowers will be able to land a comparable job within a few months.

Under the FDIC's recommendation, unemployed or underemployed borrowers would have their payments reduced to an affordable level for at least six months. However, unlike a typical forbearance plan, where the arrears would have to be paid back within a year, the FDIC endorses allowing borrowers to catch up over the life of the loan.

Borrowers who cannot afford their payments once they get jobs would be considered for a loan modification program approved by the FDIC, which includes the president's plan. Eligible borrowers could have their monthly payments reduced to 31% of their pre-tax income if doing so would cost less than foreclosing on the home.

In the end the FDIC believes that both modification and forbearance plans could ultimately save the FDIC money if they reduce losses from foreclosure. If and when this plan takes its final shape and moves forward, additional information will be provided.

Making Home Affordable Program

On February 18, 2009, President Obama announced his Making Home Affordable Program (MHA), designed to help up to 7-9 million families avoid foreclosure by restructuring or refinancing their mortgages. In doing so, the plan not only helps responsible homeowners behind on their payments or at risk of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs.

For more detailed information, visit MakingHomeAffordable.gov.
Making Home Affordable Program (MHA):
Guidelines and Latest News

The Plan
On March 4, 2009, the Obama Administration announced new U.S. Department of the Treasury guidelines to enable servicers to begin modifications of eligible mortgages under the Administration's Making Home Affordable Program (MHA) – announced by President Barack Obama on February 28, 2009.
NAR's Detailed Summary of the Obama Housing Plan> (PDF: 112K)
Key Components of the Plan>


Modification of Second Mortgages
On April 28, 2009, the Treasury Department announced an expansion of the Making Home Affordable Program (MHA) to help reduce payments on second mortgages.

Modification of Second Mortgages under the Making Home Affordable Program> (Treasury Dept.)


Financial Incentives and Uniform Process for Short Sales - The Foreclosure Alternatives Program (FAP)
On May 14, 2009, Treasury Secretary Geithner and HUD Secretary Donovan announced new details on the Making Home Affordable Program to help homeowners facing foreclosure.

Treasury Department press release> (Treasury Dept.)

Realtors® Help Buyers, Sellers Navigate Short Sales>

Uniform Process for Short Sales Will Help Struggling Home Owners>

View detailed guidelines> (PDF: 316K)

Treasury's FAP factsheet> (PDF: 44K)


Visit the Treasury Department links below for the latest guidelines and information:

Making Home Affordable - Summary of Guidelines> (PDF: 53K)

Borrower Information: Making Home Affordable Refinance and Modification Options

Borrower Q&As> (PDF: 82K)

Housing Counselor Q&As> (PDF: 72K)

Modification Program Guidelines> (PDF: 90K)

Fact Sheet - Updated Detailed Program Description> (PDF: 73K)

Modification of Second Mortgages under the Making Home Affordable Program>

New Details of the Program to Help Homeowners Facing Foreclosure>

Fact Sheet - The Foreclosure Alternative Program (FAP)> (PDF: 44K)

Making Home Affordable Progress Report, May 14, 2009> (PDF: 20K)


Fannie Mae and Freddie Mac Guidelines
Fannie Mae and Freddie Mac released guidelines on refinancing and loan modification options that implement President Obama's Making Home Affordable Program.

GSEs Home Affordable Refinancing Programs>

GSEs Home Affordable Modification Programs>


Determining if a borrower's loan is owned or securitized by Fannie Mae or Freddie Mac:

For Fannie Mae, 1-800-7FANNIE (8am to 8pm EST).

www.fanniemae.com/loanlookup

Freddie Mac, 1-800-FREDDIE (8am to 8pm EST)
www.freddiemac.com/avoidforeclosure

HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME

----------
DONOVAN ANNOUNCES RECOVERY ACT'S HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME
FHA plan will stimulate new home sales and help stabilize housing market

WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. 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. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA's new mortgagee letter, visit HUD's website.

"We believe this is a real win for everyone," said Donovan. "Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation's housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, 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. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today's action permits the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit.

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. Given FHA's current market share, it's estimated that thousands of families will be able to purchase a home by allowing the anticipated tax credit to be applied toward their purchase together with an FHA-insured mortgage.

Homebuyers should beware of mortgage scams and carefully compare benefits and costs when seeking out tax credit monetization services. Programs will vary from organization to organization and borrowers should consider whether the services make sense for them, as well as what company offers the most suitable and affordable option.

For every FHA borrower who is assisted through the tax credit program, FHA will collect the name and employer identification number of the organization providing the service as well as associated fees and charges. FHA will use this information to track the business closely and will refer any questionable practices to the appropriate regulatory agencies, as necessary.

source www.hud.gov

Homeowner Affordability and Stability Plan

The following is taken directly from the U.S. Treasury in regard to the Homeowner Affordability and Stability Plan. It provides answers to many common questions about the new program announced by President Obama to help current homeowners. Full guidelines for the new program are set to be released on Wednesday March 4, 2009.

Also remember, the first time buyer is eligible for a direct tax credit of the greater of 10% of purchase price or $8,000 on either the '08 or '09 tax return.

Borrowers Who Are Current on Their Mortgage Are Asking:

1. What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?

Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.

2. I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.

3. How do I know if I am eligible?

Complete eligibility details will be announced on March 4th when the program starts. The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

4. I have both a first and a second mortgage. Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

5. Will refinancing lower my payments?

The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable

payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

6. What are the interest rate and other terms of this refinance offer?

The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.

7. Will refinancing reduce the amount that I owe on my loan?

No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

8. How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?

To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.

9. When can I apply?

Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.

10. What should I do in the meantime?

You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available. This includes:

information about the gross monthly income of all borrowers, including your most recent pay stubs if you receive them or documentation of income you receive from other sources

-your most recent income tax return

-information about any second mortgage on the house

-payments on each of your credit cards if you are carrying balances from month to month, ----and payments on other loans such as student loans and car loans.

Borrowers Who Are at Risk of Foreclosure Are Asking:

1. What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?

The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

2. Do I need to be behind on my mortgage payments to be eligible for a modification?

No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.

3. How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

4. I do not live in the house that secures the mortgage I'd like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?

No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.

5. I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?

Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.

6. I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?

Only the first mortgage is eligible for a modification.

7. I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?

The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender's discretion modifications may include upfront reductions of loan principal.

8. I heard the government was providing a financial incentive to borrowers. Is that true?

Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.

9. How much will a modification cost me?

There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.

10. Is my lender required to modify my loan?

No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.

11. I'm already working with my lender / housing counselor on a loan workout. Can I still be considered for the Homeowner Affordability and Stability Plan?

Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.

12. How do I apply for a modification under the Homeowner Affordability and Stability Plan?

You may not need to do anything at this time. Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria. After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks. If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.

13. What should I do in the meantime?

You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes information about the monthly gross income of your household including recent pay stubs if you receive them or documentation of income you receive from other sources

-your most recent income tax return

-information about any second mortgage on the house

-payments on each of your credit cards if you are carrying balances from month to month, and payments on other loans such as student loans and car loans.

14. My loan is scheduled for foreclosure soon. What should I do?

Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower's eligibility. We support this effort.

HOME BUYER TAX CREDIT REVISED:

$8,000 TAX CREDIT TO TAKE EFFECT WITH NEW BILL

After debate over the final dollar amount, the new economic stimulus bill awaiting President Obama's signature on Tuesday will contain an $8,000 tax credit. First-time buyers can claim the credit worth $8,000 or 10% of the home's value, whichever is less either on their 2008 or 2009 taxes.

This credit will be refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of withholding they paid during the year plus anything extra they had to pay when they filed their returns - was less than that amount.

To qualify for the credit, potential home owners must have purchased January 1, 2009 or later and will have up until November 30, 2009 to close on their new home. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. Although higher-income buyers may receive a partial credit.

In addition, applying for the credit will be easy as home buyer will be able to just claim it on their return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.

This new plan improves on the current $7,500 tax credit, which was passed in July and was more of an interest free loan than an actual credit. But it did not go as far as a proposed a $15,000 non-refundable credit for all homebuyers.

According to the National Association Realtors, the $8,000 credit will bring an additional 300,000 new homebuyers into the market between now and its expiration on November 30, 2008 which should somewhat improve the housing market.

In addition, a carryover effect may occur because each first-time homebuyer sale will lead to two more trade-up transactions down the line. As it will allow more existing sellers to sell their homes to potential first time buyers. The true impact is yet to be determined, but the credit is a step in the right direction to help further stimulate the housing market.

American Recovery and Reinvestment Act of 2009

H.R. 1, the “American Recovery and Reinvestment Act of 2009,” passed the House on February 13, 2009, by a vote of 246 - 184. The Senate also passed the bill later that day. The President is expected to sign the bill soon. The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010.
View how the U.S. House of Representatives voted>

The mix of provisions of interest to REALTORS® changed frequently throughout the legislative process, with changes continuing to be made just hours before the measure was released prior to the vote. In the end, the elements of NAR’s housing agenda were included. Congress and the President have announced that a finance and housing package (including tax provisions) will be the next “big” initiative, so Congress has by no means finished its work as it affects the housing industry and REALTORS®.

The bill includes the following provisions:

Homebuyer Tax Credit
FHA, Fannie Mae and Freddie Mac Loan Limits
Neighborhood Stabilization
Commercial Real Estate
Rural Housing Service
Low Income-Housing Grants
Tax Exempt Housing Bonds
Energy Efficient Housing Tax Credits & Grants
Transportation Investments
Broadband Deployment

Homebuyer Tax Credit – The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.
Chart Highlighting the Major Modifications to the First-Time Homebuyer Tax Credit> (PDF: 309K)
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FHA, Fannie Mae and Freddie Mac Loan Limits -The bill reinstates last year's 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans. These limits were equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750. For the few areas where the 2009 limits were higher, the higher limits will apply. In addition, the bill includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any “sub-area”, i.e.an area smaller than a county. The Secretary's discretion is again limited by the $729,750 cap. These 2009 limits will expire December 31, 2009.

The inclusion of these loan limit provisions in the final bill is a victory for homeowners, buyers and Realtors. While these new limits were included in version of the original stimulus bill approved by the House, the bill first approved by the Senate did not. NAR's Call for Action to both the House and the Senate prior to the final vote advocated strongly for the provisions which were then included in the final bill approved by both Chambers.

Estimated 2009 FHA, Fannie Mae and Freddie Mac Loan Limits> (PDF: 1.3M)
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Neighborhood Stabilization – Division A, Title XII of the bill provides $2,000,000,000 in additional funding for the Neighborhood Stabilization Program (NSP). The NSP was created by the Housing and Economic Recovery Act of 2089 (Public Law 110–289) to provide grants through the Community Development Block Grant program (CDBG) to states and localities to address the problems that can be created when whole neighborhoods are decimated by foreclosures. The funds can be used to purchase, manage, repair and resell foreclosed and abandoned properties. In addition, the funds can also be used by states and localities to establish financing methods for the purchase and redevelopment of foreclosed properties. After purchase the homes must be used to assist individuals and families with incomes at or below 120% of area median income. Twenty-five percent of funds must be used for households with incomes at or below 50% of area median income. By leveraging their expertise in partnership with others from both the public and private sector, Realtors® in many communities have been making important contributions to their local communities’ neighborhood stabilization programs.
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Commercial Real Estate - Commercial real estate is impacted primarily through those provisions of the bill focused on green building and energy efficiency as well as business tax incentives. H.R. 1 provides significant funds for state energy programs, which could be used to support commerical property owners' investment in energy efficiency upgrades while commercial property owners seeking to invest in alternative energy systems for onsite power generation would benefit from the Department of Energy Renewable Energy Loan Guarantees Program. Of particular benefit to small businesses would be certain provisions of the bill that provide tax relief in the area of bonus depreciation and capital expenditures, as well as the 5-Year carryback of net operating losses for small businesses.
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Rural Housing Service

Rural Housing Service – The bill provides an additional $500 million to existing USDA Rural Housing programs. The RHS provides both a guaranteed loan program and a direct housing loan program for those meeting the program’s eligibility criteria. The direct loan program will receive $270 million while $230 million will be allocated for unsubsidized guaranteed loans. It has been reported that this level of funding would provide for an additional 192,000 homeowners.
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Low Income Housing Grants - Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations.
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Tax-Exempt Housing Bonds - Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds.
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Energy Efficient Housing Tax Credits & Grants - To promote green jobs and energy independence, ARRA invests significantly in efforts to make homes and buildings more energy efficient. The bill provides state and local governments with $6 billion in energy efficiency and conservation grants for energy audits, retrofits and financial incentives. Through 2010, homeowners will be able to claim a 30% tax credit (up from 10%) for purchases of new furnaces, windows and insulation. Another $5 billion will be available to modernize the nation’s electricity grid and install smart meters on homes that help to save consumers money. There is also $5 billion for weatherization assistance for low income households and $2 billion for federally assisted housing (section 8) efficiency efforts.
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Transportation Investments - The bill provides $46.7 billion to states and localities for capital investment for surface transportation projects including highways, bridges, transit, and rail projects. NAR policy supports increased spending on the types of transportation infrastructure addressed in the bill with the exception of Amtrak and high-speed inter-city rail where NAR has no policy. These investments will tend to moderate traffic congestion and support a variety of transportation alternatives which will improve the quality of life of American communities and bolster the value of real estate.
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Broadband Deployment - The bill creates $7.2 billion in grants to promote broadband deployment in unserved and underserved areas and for mapping the availability of broadband service in the U.S. Any entity is eligible to apply for a grant including municipalities, public/private partnerships and private companies as long as they comply with the grant conditions. The grants are subject to “network neutrality” requirements to ensure that broadband networks be free of restrictions on content, sites, or platforms, on the kinds of equipment that may be attached, and on the modes of communication allowed.

The bill also charges the FCC is with developing a national broadband plan that shall seek to ensure that all Americans have access to broadband capability and shall establish benchmarks for meeting that goal.

These provisions are important victories for REALTORS because increased broadband access promotes economic growth and expands opportunities for home sales. A 2006 Commerce Department report determined that property values are 6% higher in communities where broadband is available.

provided by Realtor.org

Geithner unveils new bank rescue plan

At long last, the Treasury Secretary has announced how the Obama administration will try to stabilize the financial sector.

Colin Barr, senior writer

Last Updated: February 10, 2009: 11:46 AM ET

NEW YORK (Fortune) -- Treasury Secretary Tim Geithner sketched out the broad strokes of the latest government attempt to stabilize the financial sector Tuesday morning.

Speaking in the Cash Room at the Treasury Department in Washington, D.C., Geithner introduced a four-point plan that aims to restart the flow of credit to businesses and consumers.

The administration didn't put a price tag on the new plan and said it won't ask Congress for more money, at least right away.

"Instead of catalyzing recovery, the financial system is working against recovery. And at the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it," Geithner said. "It is essential for every American to understand that the battle for economic recovery must be fought on two fronts. We have to both jumpstart job creation and private investment, and we must get credit flowing again to businesses and families."

The key points in the administration's new Financial Stability Plan include:

Testing the health of big banks to weather an even deeper economic downturn. Geithner said the Treasury will "stress-test" the biggest banks and provide capital to those that need it, as the nation sinks deeper into its worst recession in decades.

He said the stress test will apply to institutions with more than $100 billion in assets - a list that comprises 13 banks, from giant JPMorgan Chase (JPM, Fortune 500) to Cleveland's KeyCorp (KEY, Fortune 500), according to a report from analysts at the Stanford Group in Washington.

Analysts say big U.S. banks could use at least $1 trillion in new capital as job losses mount and more borrowers default on mortgage, auto and credit card loans. But Geithner said the administration won't ask Congress now for more money - raising the question of how much capital it actually expects to provide.

Making credit more available to consumers and businesses. The Treasury will provide $100 billion in seed money to expand the Federal Reserve's Term Asset-Backed Securities Loan Facility, in which investors in bonds backed by credit card and other loans can swap those bonds for Treasury securities, enabling them to get additional financing.

The move - which could create as much as $1 trillion in financing for consumers and businesses - shows the government is eager to bolster the capital markets, which provided a large percentage of funding for consumer loans before the bond markets seized up in late 2007.

Creating a private-public partnership to take toxic assets off banks' balance sheets. Policymakers believe clearing bank balance sheets of badly deteriorated loans and securities is a prerequisite for restoring the normal flow of credit into the economy. Geithner said the plan will aim initially to use public financing to create as much as $500 billion in private sector buying capacity, with the prospect of an expansion to $1 trillion down the road.

Observers say drawing private capital back into the market is a key objective of any workable plan.

"Because the new program is designed to bring private sector equity contributions to make large-scale asset purchases, it not only minimizes public capital and maximizes private capital," the Treasury Department said in a fact sheet about the plan. "It allows private sector buyers to determine the price for current troubled and previously illiquid assets."

It remains to be seen, however, how the administration can break the stalemate between banks that are holding troubled assets at one price and investors who would buy only at a lower one.

Addressing the housing crisis. The Fed and Treasury will commit $50 billion to reduce mortgage payments and establish loan modification guidelines. Firms that receive federal aid will have to commit to participate in foreclosure mitigation plans, the Treasury Department said.

The administration said it will soon announce a comprehensive housing plan, which will lean in part on the Fed's efforts to drive down mortgage rates by buying mortgage-backed securities issued by government-sponsored mortgage companies Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

The new financial rescue plan comes at a tricky time for the Obama administration.

Economic fundamentals are in steep decline around the globe, with the U.S. having lost 598,000 jobs in January and more than 3 million since the recession started in late 2007. Economists have called on governments to expand their spending to avoid a downturn as severe as the Great Depression.

But the $800 billion-plus fiscal stimulus plan championed by congressional Democrats has won little support from Republicans. Many of them say current stimulus proposals will be wasteful and ineffective.

Meanwhile, the government's first effort at righting the financial problems - the Bush administration's Troubled Asset Relief Program, which pledged some $350 billion to banks and other big companies starting in October - has been criticized as a giveaway to well-connected financial interests.

Geithner admitted Tuesday that the shortcomings of the first half of TARP are weighing on Americans' minds.

"Our challenge is much greater today because the American people have lost faith in the leaders of our financial institutions, and are skeptical that their government has -- to this point -- used taxpayers' money in ways that will benefit them," Geithner said.

"We believe that the United States has to send a clear and consistent signal that we will act to prevent the catastrophic failure of financial institutions that would damage the broader economy," he added.

The Obama administration has said it will tighten the terms of further aid to financial companies and demand greater accountability for how taxpayer funds are used. Last week, the administration unveiled a plan to restrict CEO pay at firms receiving government assistance.

Geithner didn't ask Congress for additional funds Tuesday, though he suggested such a request could come down the road. Observers say the government will need much more money to fill the holes in the financial system before an economic recovery can take place.

"I want to be candid: this comprehensive strategy will cost money, involve risk, and take time," Geithner said.

Realtors® Urge Congress to Help 'HOPE For Homeowners'

Realtors® Urge Congress to Help 'HOPE For Homeowners'

WASHINGTON, February 03, 2009

The National Association of Realtors® today announced its support for new legislation introduced by House Financial Services Committee Chairman Barney Frank, D-Mass., that is designed to ease loan modifications and improve refinancing options for America’s troubled homeowners by revamping the HOPE for Homeowners program.

“HOPE for Homeowners, was designed to help families refinance into safer, more affordable mortgages, in many cases helping those families avoid a devastating foreclosure,” said NAR President Charles McMillan. “Despite being well-intentioned, the HOPE for Homeowners program has had limited success. Lenders have found the program difficult to participate in because of many of the program’s constraints. This legislation, H.R. 703, is expected to make the program more lender-friendly, while preserving the benefits to homeowners. It would also limit risks to the FHA fund and to the American taxpayer. This is important legislation and we hope Congress will move forward with it.”

The legislation would also provide access to Troubled Asset Relief Program funds for small institutions and community banks and encourage additional actions to expand mortgage funding capacity in the primary market. “Stabilizing the housing market will help the nation’s economic future,” said McMillan. “H.R. 703, along with other stimulus bills being considered, will go a long way to help families keep their homes.”

NAR continues its push to enact legislation that will help stabilize and stimulate the housing market. Its four-point plan, introduced in November, is designed to spur home sales and stem the rapid rise in foreclosures by lowering mortgage interest rates and unclogging the credit market, extending the home buyer tax credit, making the increased loan limits permanent, and increasing liquidity in the both the commercial and residential real estate market.

NAR expressed support and vowed to work with Congress and the administration to establish strong housing legislation that will help stabilize home values, prevent foreclosures and put the U.S. economy on the road to recovery. “Providing relief for families facing foreclosure will help stabilize our real estate markets and our economy,” McMillan said.

$700 Billion TARP Funds To Now Be Used For Consumers: Second Half Of Funds Should Be Aimed At Main Street

With today marking the inauguration of Barack Obama, new is that his presidency will focus more on helping consumers, local governments and businesses than banks as his administration deploys the second half of the $700 billion rescue fund, said Lawrence Summers, the president- elect's top economic adviser.
"The focus isn't going to be on the needs of banks; it's going to be on the needs of the economy for credit," Summers said on CBS's "Face the Nation" program. Obama's team will manage the Troubled Asset Relief Program "in a very different way," he said.

In fact, Summers' remarks indicate banks and their executives face tougher scrutiny in seeking money from the bailout after the Obama administration takes office Jan. 20. The TARP may be redirected to address "housing to prevent foreclosures," "automobile loans, consumer credits, small business, municipalities," he said.

On the other hand, Treasury Secretary Henry Paulson committed most of the initial $350 billion of the TARP to capital injections in exchange for warrants and preferred equity. Summers said banks will be subject to more oversight in their use of the funds.

"There's going to be a very different level of rigor in the evaluation of institutions, the plans that are designed, and the expectations for institutions," Summers said. "Institutions that are healthy, that don't need it just to survive, are going to be expected to lend above their baseline levels as part of this program."

Following up, Treasury Secretary-nominee Timothy Geithner and his advisers will be "carefully" monitoring Wall Street bonuses of banks that have participated in the TARP, Summers said.

Bank Take Overs
Summers also said, "What's not going to happen is the funds that could be supporting increased lending are going to be used to finance acquisitions that may serve a bank but don't serve the country". The new administration will also prevent banks that accept government funds from pursuing acquisitions to the detriment of increasing lending, he said.
Summers said the results of TARP so far have been "unsatisfactory," a sentiment echoed by another Obama adviser speaking today in a separate interview.

"It's clear that it has to be administered in a much different way," David Axelrod Obama's chief political adviser, said in an interview on ABC's "This Week" program. "The point is to get credit flowing again to businesses and families across the country -- that hasn't happened with the expenditure of the first $350 billion."

$825 Billion On The Way?
Summers said he is confident Congress will pass a spending plan, coupled with tax cuts, similar to the $825 billion package that Obama has offered. Such a stimulus has been forecast to create 3 million to 4 million jobs, he said.

"I expect the program will pass within in a month," Summers said. "He is going to do what is necessary to get us out of this economic hole."
As the U.S. economy showed further signs of buckling, according to reports last week, it is clear there is still work to be done.

"There's almost no question that the economy is going to decline for some time to come," said Summers, who served as Bill Clinton's last Treasury secretary. "Our errors are not going to be of standing back."

House Bill Aims to Stabilize Housing, Addresses Foreclosures and Stimulus

A bill that embraces the need for righting the housing market—the first big step toward economic recovery—was introduced Friday in the U.S. House of Representatives.

Washington, January 09, 2009

H.R. 384, The TARP Reform and Accountability Act, was offered by Rep. Barney Frank (D-Mass.), chair of the House Financial Services Committee. The bill would require the Treasury Department to develop a program, outside the Troubled Asset Relief Program, to stimulate demand for home purchases and lower property inventories, by making affordable mortgages available for qualified buyers through interest rate buydowns, a priority of the National Association of Realtors®.

The measure would amend the TARP provisions of the Emergency Economic Stabilization Act of 2008 to make significant steps to reduce foreclosures, strengthen accountability and close loopholes. Treasury could consider the impact of areas with the highest inventories of foreclosed properties.

NAR President Charles McMillan was heartened by the legislation that would move the housing market forward. “The bill proposed by Chairman Frank is an important first step toward launching a real estate recovery. Housing has always led this country out of economic downturns, and this bill recognizes that the key to bolstering the overall economy is creating stability in the real estate markets. With foreclosure relief, improving the Hope for Homeowners Plan, and expanding TARP to support commercial real estate loans and commercial mortgage-backed securities, this legislation will help create housing stability.”

“By directing the Treasury Department to increase the availability of affordable mortgages rates for qualified home buyers and to offer reduced rate loans designed to stimulate demand for home purchases and clear inventory of properties, Chairman Frank has responded to the most critical issues facing potential homeowners," McMillan said.

Foreclosure relief, using the second half of the $700 billion previously authorized by Congress, would be conditioned on stipulation that $50 billion be used for foreclosure mitigation and calls for a plan to be put into action by March 15. That would allow the Treasury to begin committing the remaining TARP funds for the plan no later than April 1.

The plan would require that foreclosure assistance must apply only to owner-occupied residences. Further, the bill would provide liability protection for loan servicers who engage in loan modifications. Such servicers would have to report regularly to the Treasury.

In addition, the Treasury would be authorized to provide support for commercial real estate loans and commercial mortgage-backed securities, an NAR priority.

NAR has been urging the incoming Obama administration, as well as Congress, to address critical housing needs. “This legislation is a great beginning, but more needs to be done. We must continue to bring potential homebuyers into the market by ensuring low mortgage interest rates, making the higher 2008 conforming loan limits permanent, and applying the $7,500 tax credit to all homebuyers and making it non-repayable,” McMillan said.