$8,000 fast cash for first-time homebuyers

HUD plans to tweak $8,000 tax credit rules so first-time homebuyers can get instant down-payment assistance.

NEW YORK (CNNMoney.com) -- Home prices are cheap. Affordability is at a record high. And the market is littered with distressed properties looking for a buyer.

But there is one big obstacle for many first-time house hunters looking to take advantage of the market: cash for down payments. The typical first-time buyer has only saved enough to cover 4% of the purchase price, according to the National Association of Realtors.

As part of the stimulus package, Congress created a refundable first-time homebuyers tax credit in hopes of helping on-the-fence buyers to take the home-purchase plunge. But buyers couldn't collect the $8,000 credit until tax time, rather than at closing time - when it's needed.

Now the U.S. Department of Housing and Urban Development is planning to change that. The agency is working on a plan that will allow Federal Housing Authority-approved lenders to provide buyers with the tax credit cash up front.

"We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment," said Shaun Donovan, HUD secretary, in a speech last Tuesday before the National Association of Realtors.

States first
Donovan did not reveal many details, but the plan could be modeled after programs in Colorado, Missouri, New Jersey, Pennsylvania, Tennessee and Washington. To quickly infuse cash into their housing markets, these states created "bridge loans" that allow buyers to borrow against the $8,000 credit and then repay it with their tax refunds.

The first state to launch such a plan was Missouri, which rolled out its Missouri Housing Development Commission Tax Credit Advance Loan program on January 14 - a month before Congress approved the stimulus package. Since then, Missouri has approved applications by more than 300 borrowers and closed on 128 of them.

Lamar Cherry and his wife, Chrishanna, used the program to augment their down payment when they bought their home in Kansas City.

The couple purchased a four-bedroom, three-bath split-level home for $150,000, putting about 6% down. Much of that $9,000 came from the loan program, which they tapped so they wouldn't have to drain their reserves.

"We had money saved up that we were going to use for the down payment," said Cherry. "Now we can use some of that to buy some things we need for the house."

At closing, the Cherrys, like all buyers in the program, signed for their first mortgage, plus a second mortgage issued by the state. The second note is good for 6% of the price of the home, up to $6,750; there is a $350 set-up fee, but no interest is charged if the debt is repaid by June 2010.
In Missouri, borrowers can only access $6,750 of the $8,000 credit for down payments. "We wanted them to have a cushion below that $8,000 in case other tax liabilities show up," said Greg Spurgeon, the single-family homeownership administrator for the Missouri Housing Development Commission.

If borrowers don't pay off the note, it becomes a 10-year fixed-rate mortgage with an interest rate one-half percentage point above that of their first mortgages. For example, borrowers paying 6% on their first mortgages would be charged 6.5% on the second.

So far, Spurgeon said, a significant proportion of participating homebuyers have repaid their loans. He expects most of the others to do the same before the deadline.

Cherry has claimed the federal tax credit on his 2008 taxes, but he hasn't gotten his refund yet. He definitely intends to repay the loan before the 2010 deadline because, he said, not doing so would add about $75 a month to his house payments.

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

Mortgage aid program will likely help millions

Some questions and answers about how it could affect payments, taxes

NEW YORK - It's welcome relief for homeowners struggling with mortgage payments.

The new federal program to let people refinance or modify their mortgages is expected to help millions of Americans lower monthly payments and avoid foreclosure. So what strings are attached?

You might be concerned about the impact to your credit report or the tax implications, for instance. Others who are still paying low introductory rates might fear their monthly bills could skyrocket.

Here are some questions and answers on concerns people might have about the Making Home Affordable program.

Q: How will my credit profile be affected?

A: Refinancing generally doesn't affect your score since it's simply a rewritten mortgage, according to Norm Magnuson of the Consumer Data Industry Association, a trade group based in Washington.

This is especially true of refinancing under the federal program, since one of the terms of eligibility is that homeowners can't have missed a payment in the past year.

It's not yet clear what impact a federal loan modification — an adjustment to terms of an existing mortgage, rather than a new one — will have on credit profiles, however, Magnuson said. Regulators haven't yet determined how the loan modifications will be reported, if at all.

If you're applying for a loan modification under Making Home Affordable, it means you've already missed payments and hurt your credit profile. A loan modification should improve your credit profile in the long-run since the idea is to get you on track for meeting payments.

It might also free up money to pay off other debts.

Q: Is it possible my payments will be higher?

A: If you're still paying a low, introductory rate, it's possible your monthly mortgage payment will increase slightly under the federal refinancing program. But the idea is to avoid the big interest rate spikes that typically come with adjustable-rate mortgages.

After applying for the Making Home Affordable program, your lender should give you a "good faith estimate" that includes your new interest rate, mortgage payment and the total cost of the loan. Compare the numbers with your current loan; you might decide that refinancing isn't an improvement.

You can also check out the payment reduction estimator on the government's Web site at http://www.makinghomeaffordable.gov/.

Q: Should I wait to see if mortgage interest rates come down in a couple of months before applying?

A: Probably not, since mortgage rates are at historic lows.

Last week, rates on 30-year mortgages inched upward to 4.87 percent, but that's still close to the lowest level in decades. Waiting for the rate to go any lower might backfire, said Ken Inadomi, director of the New York Mortgage Coalition.

Even introductory rates shouldn't be that much lower than fixed rates these days — in some cases, they may even be higher. So it's probably in your best interest to apply for refinancing now.

In case you decide to wait: The Making Home Affordable program expires on June 10, 2010.

Q: What are the tax implications?

A: Charges for refinancing a mortgage are tax deductible. The total cost should be evenly divided to be deducted over the life of the mortgage, Inadomi said. Other costs, such as attorney or appraisal fees, are not deductible.

You'll also have to adjust your mortgage interest deduction if you get a lower rate.

Q: Can I try to refinance or modify my mortgage on my own, without going through the program?

A: Working directly with a lender shouldn't be a problem if you think you're not eligible for the federal program. Just beware of getting a third party involved, especially if they ask for an upfront fee.

Last week, government officials warned homeowners of scammers that charge fees of $1,000 to $3,000 to help with loan modifications. Officials say such operations almost always are fraudulent, and that help is available for free from government-approved housing counselors.

Officials said the scams often go by official-sounding names designed to make borrowers think they are using the Obama administration's program.

updated 7:05 a.m. ET, Tues., April 21, 2009

http://www.msnbc.msn.com/id/30197516/

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

Obama launches mortgage rescue plan

First participants in the Treasury Department's program to help homeowners avoid foreclosure include some of the nation's largest banks.

NEW YORK (CNNMoney.com) -- The Obama administration's loan modification program is finally underway.

The Treasury Department announced Wednesday the first six participants to sign up for President Obama's plan. They include three of the nation's largest banks: JPMorgan Chase (JPM, Fortune 500), which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo (WFC, Fortune 500), $2.9 billion; and Citigroup (C, Fortune 500), $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million.

Additional loan servicers will be added to the list over time, a Treasury spokesman said.

Several major servicers, including JPMorgan Chase and Wells Fargo, said they began modifying loans under the government initiative earlier this month. CitiMortgage signed up for the program on Monday and will start processing applications soon.

"We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership," Wells Fargo said in a statement.

Distressed homeowners and housing counselors have been eagerly awaiting the program's launch since Obama first announced it on Feb. 18. However, it took weeks for the government to clarify the terms and for the financial institutions to update their systems and start accepting applications, frustrating many of those in trouble.

Billed as helping up to 9 million borrowers stay in their homes, the two-part plan calls for servicers to reduce monthly payments to no more than 31% of eligible borrowers' pre-tax income or to refinance eligible mortgages even if the homeowner has little or no equity. The government is allocating $75 billion to subsidize part of payment reduction, as well as provide thousands of dollars in incentives for servicers and borrowers to participate.

The Treasury Department said Wednesday it is capping the payments to servicers to allow more companies to participate. It is allocating $50 billion to the program, with Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the Department of Housing and Urban Development providing the rest.

The modification plan calls for the servicer to reduce interest rates so that the monthly obligation is no more than 38% of a borrower's pre-tax income, and then the government would kick in money to bring payments down to 31% of income. Servicers can also reduce the loan balance to achieve these affordability levels. The government will share in the cost, up to the amount the servicer would have received if it had reduced the interest rates.

Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify. Also, Treasury will not provide subsidies to reduce rates to levels below 2%.

It was not immediately clear whether the servicers must pay the incentives to homeowners and investors out of their funding share.

In addition to subsidizing the interest rates, servicers will use the Treasury funding to pay for incentives for themselves, homeowners and investors. The program gives servicers $1,000 for each modification and another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.

Homeowners, meanwhile, will get up to $1,000 a year for five years if they keep up with payments. The funds will be used to reduce their loan principals.

The Treasury Department set the caps based on public data about the mortgages the servicers handle. Though the program mandates that servicers modify all loans that meet the requirements, the department feels the servicers will have sufficient funds to cover all troubled borrowers' applications.

"We're confident we'll have enough money," said Treasury spokesman Andrew Williams.

Separately, major servicers also recently started accepting applications under the refinance portion of the program.

By Tami Luhby, CNNMoney.com senior writer

Last Updated: April 16, 2009: 10:15 AM ET

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

New Web Site Provides Home Owner Relief Information

A new Web site for consumers seeking information about the Obama Administration’s Making Home Affordable loan modification and refinancing program — www.MakingHomeAffordable.gov — was launched last week by the Treasury Department and the Department of Housing and Urban Development.

The site includes interactive self-assessment tools that enable borrowers to determine if they are eligible for the program and to calculate the monthly mortgage payment reductions they stand to realize.

First announced by President Obama last month, the program will offer assistance to as many as seven to nine million home owners who have making a good-faith effort to pay their mortgages.

Since releasing the guidelines on March 4 to enable servicers to begin modifications to eligible mortgages under Making Home Affordable, representatives from the Treasury, HUD and other members of a broad interagency task force have conducted detailed briefings and training sessions for mortgage loan servicers and investors, nonprofit housing counselors and borrower advocacy groups.

More than 2,500 participants were briefed on the Administration’s plan in the first two weeks following the release of the program’s specifics.

The Treasury has reported that a wide array of servicers — from large banks to small lenders — have agreed to participate in the program.

Features of the www.MakingHomeAffordable.gov Web site also include:

• Extensive information about the Administration's Making Home Affordable plan
• Resources to find free, HUD-approved counseling services for borrowers who have additional questions
• A handy checklist to ensure that home owners collect all the documents they need before calling their servicers

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.