MORTGAGEE LETTER 2009-15

TO:  ALL APPROVED MORTGAGEES

SUBJECT:  Using First-Time Homebuyer Tax Credits for the Downpayment 

The American Recovery and Reinvestment Act of 2009 (Recovery Act) provides for as much as an $8000 tax credit to qualified first-time homebuyers.  FHA supports this important Administration initiative to promote homeownership.  This mortgagee letter provides:

• Basic information on the first-time homebuyer credit obtained from the Internal Revenue Service (IRS) website.  Complete information on how the first time homebuyer tax credit works, including the eligibility requirements for the tax credit, the amount of the tax credit that a first-time homebuyer may be eligible to receive, and how a homebuyer may claim the tax credit is available on the IRS website at irs.gov/newsroom/article/0,,id=204671,00.html?portlet7.
• Guidance on how Federal, state, and local government agencies, nonprofits instrumentalities of government and FHA-approved nonprofits may assist homebuyers that are eligible for the tax credit.

I.  About the First-Time Homebuyer Tax Credit (from the IRS website)
(Please check the IRS website to ensure you have up-to-date information)

Amount of the tax credit:

Generally, the credit is the smaller of:

• $8000 or
• 10% of the purchase price of the home
• A phase-out of the credit begins when the taxpayer’s modified adjusted income exceeds $75,000 or $150,000 if married filing jointly, and is eliminated completely at $95,000 or $170,000 if married filing jointly.
• As a “refundable” tax credit, taxes owed by or refunds due to the taxpayer are factored into the calculation.

Claiming the tax credit:

Filing form IRS 5405 [available at irs.gov/pub/irs-pdf/f5405.pdf ], “First-Time Homebuyer Credit” along with filing:

• The 2008 tax return (if not yet filed)
• An amended 2008 tax return (if already filed)
• The 2009 tax return

Eligibility for the tax credit

• First-time homebuyers, defined by IRS as those not having had any ownership, including that with a spouse if married, during the three-year period ending on the date of purchase.
• Owner-occupants who purchase a principal residence and close on the mortgage before December 1, 2009.
• First-time homebuyers must purchase the property from a source unrelated to them, i.e., they cannot purchase the house from a spouse, parent, grandparent, child, or acquire the property by gift or inheritance and obtain the tax credit.

II. FHA Guidance

The Tax Credit:  Secondary Financing: 

Entities that can offer tax credit advances with second liens.

• Federal, state, and local governmental agencies and nonprofit instrumentalities of government.
• FHA-approved nonprofits.

Additional information about these entities:

• Government agencies and instrumentalities of government are described in handbook HUD-4155.1 REV-5, paragraphs 1-13 A and B.
• FHA-approved nonprofits can be found, per each Homeownership Center jurisdiction, at: hud.gov/offices/hsg/sfh/np/np_hoc.cfm

How the secondary financing works:

• The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower.  The second lien may not exceed the total needed for the downpayment, closing costs and prepaid expenses.
• The tax credit advance must provide that if the borrower does not repay the amount borrowed by the designated deadline, that principal and interest payments begin automatically.
• If payments on the tax credit advance are required, they must be included in qualifying the borrower and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.
• If payments on the tax credit are deferred, the deferment must be for a minimum of 36 months in order for the payment to not be included in the qualifying ratios.
• The tax credit advance second mortgage must not provide for a balloon payment before ten years.

The Tax Credit: Short-Term Loan: 

Entities that can offer the tax credit advance with short-term loans:

• Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or “bridge loans” secured only by the anticipated tax credit due the homebuyer as collateral.

How the short-term tax credit advance loan works:

• The amount that may be borrowed in this manner may not exceed the anticipated tax credit due the homebuyer based on the computations of form IRS 5405.
• Fees and charges for the tax credit advance loan are not to exceed a nominal amount necessary for preparing and administering the loan.

If you have any questions regarding this mortgagee letter, please call FHA’s Resource Center at 1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

Sincerely,
Brian D. Montgomery
Assistant Secretary for Housing-
Federal Housing Commissioner

I am a realtor and recently wrote a contract on a listing that was a short sale but the seller’s son entered into an option contract with him to sell the property. The counter offer on the purchase agreement came back with not the seller’s signature but the land trust signature. They are now asking for a deposit of $5,000-$1500 of which they say is non-refundable and the remainder will be non-refundable unless the bank can’t close- What do you think?

Lise (more…)

Please help. Our mortgage officer made it look like we are commiting fraud and our loan was denied. This is long winded, but detail is important here. I was renting the basement from my now husband in a 55 or older condo that he was grandfathered into.

Last year he decided to buy a home and sell the condo because his mother is ill, he wanted to take care of his parents as well as me and my children. The condo does not allow kids. He began looking for a new home and put the condo on the market.

I filled out a rental agreement last year. In that year oops we fell in love and ran off and got married. His mothers health declined even more and his parents moved into the condo with us. The condo said I had to leave… no kids.

We found the perfect house that will house his parents in the basement but they would stay in the condo until it sold. The loan officer first asked me to sign another rental agreement saying that one was out of date, so I did. His debt ratio was not good  but his credit is near perfect so we added his parents to the loan. We kept my name off because my credit is horrible.

Our loan was denied stating fraud because I filled out a rental agreement and I am his wife. The rental agreement should have been pulled prior to turning it in to the underwriter because with his parents on the loan we qualified without.

Now we do not know what to do at this point.  We have four working adults in the house, perfect credit, and a denial because of a loan agreement that was neglected. Any advice would be helpful.

Dina (more…)

I landlord, my aunt, is trying to sell her property with the help of a loss mitigation company. They finally found an end buyer but they will be using FHA financing. They have an option contract on the property but apparently they have a 90 day seasoning issue in order to have their loss mitigation fee paid out. Will they need get filed under land trust then close in 90 days or will a separate form to option contract suffice?

Alex (more…)

Dear Paul,

My husband Gary and I are both Christian’s and while I was trying to research the question I am about to petition you concerning, I came across your site and realized you are a man of GOD and that this must not be a chance encounter.

My husband had worked for his former employer for over twenty years when another company took interest in him several states away. Long story short, my husband accepted this position and with him took his 401k account.

With the 401k we purchased our new home for our family. The company had taken a hefty amount out which we had expected, as we had heard this would happen.

Well, when it came time for tax season we learned that they had only taken half for some reason, and that we still owed the other half. So we ended up taking out a home equity line of credit against our home to pay for this.

Over the last three years we have also ran up other debt and had to use our credit cards to help with property taxes.

It has been a cycle of trying to get out of the toilet with the credit cards, and never having enough to get out from under, yet my husband works for a major company and is a Senior Industrial Engineer.

We are faithful to tithe our first ten percent and seed beyond that even. Sure, some of your readers might say that this is where we are messing up, but we know that is not true. We have seen GOD show up when we are faithful and trust HIM like this, not when we trust the dollar.

There is another answer to how to figure another way through this and I am praying you can help us with some solution. My poor husband has called banks and credit card companies.

If we take out the loans some are offering, we would be paying more than we are now for several years to come. We just want to find a way to consolidate our debt into one payment.

The debt we have is the current loan mentioned which is at 50,000 currently, and the debt to add which is 35,000. The tax office estimates our home valued at 191,000. Also we live in a city that has not be affected much by the fall of the housing market. Ours is holding steady. in fact, our city is listed by Forbes to be one of the leading in the top economic cities to live in.

Is there any way we might obtain a home owners loan that does not come due in five years, but maybe gives us a longer homeowners option? It seems banks would be looking for borrowers like us who are not looking to borrow a substantial amount of money towards their home.

Can we get a homeowners loan towards a home we already own? We are prepared to consolidate all the debt and pay one payment a month. We really would like to begin saving again and banking the money we are throwing away every month.

We never seen this coming. Never before did we have this problem and enough is enough. Please help us with any suggestions you might have.

GOD bless you!
 
Sherry (more…)

And you have a short sale…

Then why not let me buy & negotiate your short sale?

 

My husband and I purchased a house in 1999, last year he was hurt and could not work, we tried to pay the mortgage but without his income could not keep up, We decided to let the mortgage company take the house, Its been about a year now since we have made any payment, they still have not foreclosed and today I received a letter from a law office saying that we could be awarded the original amount of the loan from the original lender (the mortgage has been sold several times over the years)for our “paid in full but unsatisfied loan”; the letter asks us to sign and a return a document allowing them to “research the title, appraise us of any PIF but unsatisfied mortgages, confirm with us that the mortgages identified are PIF, send a statutorily complaint notice to the lender or lenders demanding that any PIF mortgages be satisfied, and if the lenders fail to cooperate, prosecute them,” the law office will front all the monies for this and they will keep one third of the profit if successful. This mortgage is NOT paid in full, so whats the story?

Do you know why they would send this and what it means?

Thanks for you’re help!

Sue (more…)

We have a home in punta gorda florida that we were going to move to, but we had to shut down our business over there and stay on the east coast as there is no more demand. 

We have a first and second with wells fargo.  Current for now on both, mortgage is in my name only. 

Will they negotiate a deed in lieu of foreclosure or will I still have a deficiency. 

First is 200k and 2nd is 148k.  Value is around 200-225 – nothing in area is selling. 

Should we get an attorney, not sure how to proceed.

Deb (more…)