Las Vegans, Housing Incentive Debate in House and Senate
The Senate is presently debating a major housing bill that includes both tax and FHA changes designed to shore up the troubled market. The Senate bill (H.R. 3221) has four tax provisions. It includes a one-time special property tax deduction of $500 for individuals who do not itemize their deductions. A second provision directed to homebuilders provides them with additional tax benefits associated with net operating losses generated during 2007 and 2008. The bill allows state housing agencies to issue mortgage revenue bonds (MRBs) up to $10 billion to refinance subprime mortgages. Finally, the bill creates a tax credit that would be available for one year from date of enactment to individuals who purchase foreclosed properties. The credit would be a $7000 credit to be taken in increments of $3500 for two years from the year of purchase.
The House Ways and Means Committee will mark up a package on Wednesday, April 9. Like the Senate package, the Committee’s bill will include additional authority for state housing agencies to issue MRBs for refinancing subprime mortgages. The package will also include important modifications of the low-income housing tax credit. The credit was enacted in 1986; these changes are intended to modernize several of its provisions. Of primary interest to Realtors is a proposal for a tax credit for the purchase of a home. Unlike the Senate bill, the Committee version will not restrict the types of property that would qualify for the credit. The credit would be available for first-time homebuyers. The amount of the credit will likely be somewhere in the range of $7500 - $9000. It will likely include income limits on prospective purchasers in a range between $70,000 to $75,000 on a single return or $110,000 to $150,000 on a joint return. No matter what the income limit, it will have a phase out so that individuals who earn a dollar (or more) than the designated amount will receive some portion of the credit, but not the full amount.
The Senate bill is being considered as an “emergency” and so is being debated under procedures that do not require that the tax benefits be “paid for.” The Ways and Means bill will be “paid for,” but the contemplated revenue raisers do not relate in any way to real estate.
HUD Requiring Two Appraisals for Some New Jumbo Loans
On April 1, 2008, the US Department of Housing and Urban Development (HUD) released mortgage letter 2008-09 announcing that mortgages that exceed the January 1, 2008, conforming loan limit of $417,000 may require two appraisals. A second appraisal is required for these loans if the loan-to-value ratio (excluding MIP) equals or exceeds 95 percent AND if the property is in a declining market. A declining market is determined by the appraiser or by the lender.
The letter also limits the loan-to-value for cash-out refinances. The loan-to-value may not exceed 85 percent of the appraiser’s estimate of value if the homeowner pursues a cash-out refinance and the loan balance, excluding the FHA mortgage insurance premium, exceeds $417,000.
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