$15,000 Housing Tax Credit Cut From Stimulus Bill

2009 Housing Stimulus AmendmentsIn an effort to get the Republican support needed to pass the Stimulus Bill, the size of the bill had to be reduced to under $800 billion.  One of the victims of this reduction was the $15,000 tax credit introduced by GA Senator Johnny Isakson.

The revised bill still includes an $8,000 tax credit (up from the $7,500 credit currently in place) and also removes the payback requirement.  However, the tax credit is now only available to first-time homebuyers which includes anyone who has not owned a home in the last three years.  The credit will be available until the end of November 2009.

Some good news is that it appears that the high loan limits for Fannie Mae and Freddie Mac are still included as well as FHA loan guarantee programs.  The higher loan limits will raise the ceiling on what is considered a “jumbo” loan and allow people in higher priced areas to not be penalized with a higher interest rate or limited loan availability.

By revising the $15,000 tax credit amendment, the Congressional Budget Office estimates the cost will be reduced from $35.5 billion to $6.6 billion.

While not everything that the industry was hoping for, the National Association of Realtors nevertheless welcomed the more limited expansion of the tax credit.  Eliminating the repayment provision on the first-time homebuyer tax credit could drive more than 200,000 additional home sales, NAR President Charles McMillan said in a statement, which will help stabilize home values. The National Association of Home Builders had estimated a $15,000 tax break for all homebuyers would have generated nearly 500,000 home sales.

McMillan said the compromise bill will also reinstate the $729,750 loan limit in high-cost areas for Fannie Mae, Freddie Mac and FHA loan guarantee programs that was in place throughout much of 2008, which he said would help reduce inventory and improve liquidity in the overall mortgage market.

The Obama administration is also planning to launch a program to subsidize mortgage payments for troubled borrowers who can pass a standardized re-appraisal and affordability test.  Reuters reported that the Obama administration has shelved a plan for the government to stand behind low-cost mortgages with rates between 4 percent and 4.5 percent.