Tax rebate closing extension

Thu, 01 Jul 2010 09:25:15 -0600

July 1, 2010 - Last night, Congress passed an extension of the closing deadline for the Homebuyer Tax Credit, the Homebuyer Assistance and Improvement Act (H.R. 5623). The extension applies only to transactions that have ratified contracts in place as of April 30, 2010, that have not yet closed. The legislation is designed to create a seamless extension; the new closing deadline for eligible transactions is now September 30, 2010. There will be no gap between June 30 and the date the President signs the bill into law. Extending the tax credit closing deadline will help provide additional stability to real estate markets across the nation.
Our Government Affairs team worked closely with Congressional leaders on both sides of the aisle to enact this important legislation.
NAR is still working on restoring the 502 single-family rural housing loan guarantee program. Language is included in H.R. 4899, the Emergency Supplemental Appropriations bill, that is currently in conference between the House and Senate. We expect the House to pass that bill shortly and are hopeful the Senate will do the same when they return the week of July 12. When that bill passes, the program will be restored through the end of the fiscal year.

Additionally, the Senate passed the National Flood Insurance Program Extension Act of 2010 (H.R. 5569), an extension of the National Flood Insurance Program until September 30, 2010. This will allow transactions to move forward. The bill is retroactive and covers the lapse period from June 1, 2010, to the date of enactment of the extension. The National Association of REALTORS (NAR) members sent more than 250,000 letters to Members of Congress encouraging them to extend the program.

For additional information on the tax credit extension, the flood insurance program and rural housing, please visit

www.realtor.org/government_affairs

100% financing RD/USDA loans

Thu, 20 May 2010 01:49:34 -0600

Rural Development Loans

Are these loans still available? What is all the fuss about?

Rural Development guaranteed loans are a staple here at Neighborhood Mortgage Group, and for a majority of our buyers. Other than VA financing, there just simply isn't another "No Money Down" loan available in today's traditional mortgage lending world.

What is all the recent fuss about RD running out of money all about? Let me try to explain...

First of all, it's important to understand that RD does not fund these loans. Which means that RD is not writing the check to your seller for you to purchase the home. They are simply "guaranteeing" the loan's performance for the mortgage lender. Should unfortunate events occur that force a homeowner into foreclosure, RD will step in financially to relieve the mortgage lender carrying their defaulted note.

Where does all that money come from? Two parts:

1. Each year the federal government appropriates a certain amount of money to the Rural Development program ($13 billion for 2010.) This money is provided in order to offset mortgage lender's claims, and to operate the general parameters of the program for the next calendar year.

2. RD (in the past) has charged each buyer a "Funding Fee" in the amount of 2% o their loan amount. These funding fees went into a large pool of reserved money, combined with the federal funding monies.

The problem is that this pool of money has historically been insufficient to cover the cost of operating the program.

Picture your bank's overdraft protection program: Your bank knows that you will be getting a paycheck soon, therefore it allows you to overdraw your bank account from time to time because they know that you will be "good for it." This isn't an exact analogy of the RD program but it's a good place to start.

RD funds (your checking account balance, in our analogy) are historically depleted by September of each year. In October the federal government decides exactly how much funding it will reappropriate to the RD program for the next calendar year (your next "paycheck" amount has been committed to you by your employer along with the date that the paycheck will arrive.) Once that reappropriation figure is announced (typically September of each year), RD, despite not technically having the funds available, will continue to issue Conditional Commitments (commonly referred to as loan approvals or loan commitments) with the condition that their commitments are "subject to availability of funds..." Because all parties involved (the feds, RD, and the mortgage lenders) are familiar with the process and are confident that funds will become available very soon, business continues as normal (your bills and debits continue to clear your checking account, despite the negative balance.) Make sense?

Now... Why the big fuss recently over this program? Quite simply stated: RD is already out of money for fiscal year 2010, which only began in October of 2009. (Keep in mind that they always run out of money, just not nearly this early in the year.) And our federal government, as we all hear about on the news each night, is not exactly in an ideal position to start writing big fat checks that weren't in their budget for another 8 months.

So what to do? Well, the House of Representatives had an idea. If RD would simply raise the buyer's funding fee from 2%&nsp;to 3.5% te program would then become self-funding, increasing the annual available funds to nearly $30 billion each year. That's more than double the amount provided in 2010!

Things were looking great last Tuesday when RD sent out an email to mortgage lenders stating that lenders would continue to receive those "subject to availability of funds..." commitments without interruption.

But less than 24 hours later, a second email was sent out from RD stating that they were recalling and voiding the previous announcement. This second announcement stated that a third announcement would be made available in 24-48 hours. It's been a week.... Still waiting on that third announcement...

Rumors are flying around in all directions, as you can imagine. Initial speculations were that while RD did approve the general content of the email, there was some concern on how the 3.5% fnding fee increase was phrased. Although, one might assume that there is more to the story, given that it shouldn't take a week to rephrase a sentence or two in what was a very brief email notification.

So where does that leave the RD program? In limbo, quite frankly, at least until September/October 2010 which is when the 2011 funds will become available. We at Neighborhood Mortgage Group are restructuring all of our current RD loans into FHA or Section 184 Indian loans as a back up plan. If RD funds become available before a particular buyer's closing date, then great! Otherwise, we will at least have a back up loan application working simultaneously in the wings.

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Tax rebate closing extension

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