Stimulating Stability

The passing of the most recent stimulus package is greatly anticipated. The legislation addresses housing from a variety of angles. Most notably it looks to increase home retention by assisting homeowners is distress, avoid foreclosure and offers incentives such as tax credits to help entice prospective first time buyers to purchase a home.
- The tax credit is an integral part of the 2009 American Recovery and Reinvestment Act and has four rules or guidelines according to Bankrate.com:

- Does not have to be repaid unless the home is sold within three years.

- Applies only to first-time homebuyers, defined as those who have not owned a home within the previous three tax years.

- Available only for homes purchased between Jan. 1, 2009, and Dec. 1, 2009.

- Restricted by income; phases out for individuals with an adjusted gross income of $75,000 or above and for married couples with a combined adjusted gross income of $150,000 or above.

Tax credit is for up to 10 percent of the purchase price, up to a maximum of $8,000. For example, a buyer of a $150,000 home could receive a tax credit of a maximum of $8,000, while a first-time buyer of a $70,000 home would be eligible for a tax credit of $7,000.

The credit can be taken on 2008 taxes even when the purchase is made in 2009. One of the preferable benefits of the package allows for buyers of homes in 2009 to receive a credit on their 2008 tax filings - this acts as an immediate stimulus. For those considering this option, it can be achieved typically in one of three ways. Buyers can purchase their own prior to filing on April 15th, they can apply for a tax extension and purchase their home before they file or simply file an amended tax return.

As mentioned previously, another significant portion of the legislation focuses on the prevailing issue of home retention via the ‘Making Home Affordable’ program. This program looks to suspend many foreclosures until March 31st. Additionally, it includes a Home Affordable Refinance and Home Affordable Modification initiative.

The Home Affordable Refinance program is designed for homeowners that have been struggling but have made timely mortgage payments but can not refinance due to a decreased value in their home. The mortgages must be backed typically by either FannieMae or FreddieMac.
For many homeowners, a rate increase in their adjustable mortgage or a job loss has been a catalyst for economic crisis. For those, there is the Home Affordable Modification program which will allow homeowners to restructure their loan to a more affordable payment for the government backed mortgage.

For more information visit the U.S. Treasury Web site, www.financialstability.gov. Additionally, seek the consul of a reputable; HUD certified counseling agency or your mortgage servicer. Have bank statements, recent pay stubs, monthly bills, homeowner’s insurance policy, letters or communication with your lender and other documents readily available. Most importantly, is seeking help quickly before the situation festers and becomes inevitable.

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