The $8K Homeowner Tax Provision

By Les Christie

There's a nice windfall for some homebuyers in the economic stimulus bill awaiting President Obama's signature on Tuesday. First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.

A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:

"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"

Not exactly. Billings won't get $8,000 on top of his current refund, but he would turn that small refund into a much larger one. If his total tax liability came to $6,000, but he had $7,000 withheld from his payroll, he would normally receive a $1,000 refund. With this credit, his refund would total $8,000. If the credit were non-refundable, as was originally proposed in the Senate version of the stimulus package, he would have only received $6,000, or the total amount he paid in.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit

The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.

"[The Senate version] would have done a lot more to turn around the housing market," said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). "We have a lot of reports of people who would be coming off the fence because of it."

Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.

The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. "I think there are many homeowners who would be trading-up but they have had no buyers for their own homes," Yun said.

Who won't benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.

Instead, many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.

And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home - a lawnmower, a rug, a sofa - and, in that way, help stimulate the economy.

Courtesy: CNN Money

*Brokerlady's Take*

The tax provision should make it much easier for first-time homebuyers to afford to buy a home and stay in it.

What does this mean for you?

If you are in the market to make that step into homeownership, this tax provision is designed for you. Combined with the tax provision passed last July designed to create low-interest loans and this newest tax break, in addition to this being a buyer's market, first-time homebuyers are now in prime position to receive a great deal on their dream home.

Local Officials Present IE Recovery Plan in Washington D.C.

February 16, 2009By Joe A

Members of a recently formed public benefit corporation visited legislators and policy makers in Washington, D.C. this week to educate them about their efforts to tackle the Inland Empire's foreclosure and economic woes.

"The timing of us being here is incredibly important," said San Bernardino County Second District Supervisor Paul Biane, who proposed the creation of the Inland Empire Economic Recovery Corporation (IEERC) and serves as Chairman of the agency's Board of Directors. "Things are changing by the minute, by the hour, by the day as to what the stimulus package is going to look like."

The IEERC will purchase foreclosure properties in the Inland Empire using a mix of public and private dollars. It will then contract with local businesses such as painters, plumbers, real estate agents, mortgage brokers, property managers, etc. to rehabilitate and sell foreclosure properties. Profits generated through the sale of homes will be recycled into the Corporation to purchase and rehab additional foreclosure properties.

The Corporation will ensure foreclosure properties are purchased for primary residences, and it will also help prevent speculative buying by out-of-town investors, who would likely turn homes into rentals or, worse, board them up until the housing market returns.

Supervisor Biane and two other members of the IEERC Board of Directors - San Bernardino County First District Supervisor Brad Mitzelfelt and Arrowhead Credit Union President Larry Sharp - visited each member of the Inland Empire's Congressional delegation including Congressman Jerry Lewis, Congressman Ken Calvert, Congressman Buck McKeon, Congressman David Dreier, Congressman Joe Baca, and Congressman Gary Miller during their two-day trip. The officials also met with officials from the U.S. Department of Treasury, the Department of Housing and Urban Development (HUD), and the Republican Housing Subcommittee.

"We talked about the need for TARP (Troubled Asset Relief Program) funding for the Inland Empire Economic Recovery Corporation and about the need to shape regulations so that regional public agencies like IEERC are the preferred buyers of local assets owned by the Federal Government," Mitzelfelt said.

"I applaud San Bernardino County's efforts in taking the innovative approach of a public-private partnership to help solve the region's housing crisis," Congressman Miller said. "Regional public-private partnerships like this can help retain the value of real estate assets and stabilize communities." IEERC officials also talked to law and policymakers about the Corporation's other efforts to tackle the region's growing foreclosure crisis.

"They were very receptive to our efforts and ideas, but they also agreed with us that buying and reselling foreclosures is just part of the solution," Biane said. "We also need to work with and educate homeowners so they can avoid foreclosure in the first place."

The Corporation's efforts include hosting home foreclosure prevention seminars throughout the region to give struggling homeowners an opportunity to speak directly with their lenders and agencies such as HUD that may be able to provide assistance. The first such seminar is scheduled to take place on March 28 at the Jessie Turner Community Center in the City of Fontana.

This week, San Bernardino Associated Governments - which represents all of the County's 24 cities as well as the County of San Bernardino - approved a work plan that will provide $50,000 to help IEERC and HUD host the home foreclosure prevention seminars.

Courtesy: Chinohills.com

*Brokerlady's Take*

These measures taken by local officials to tackle the housing slump in the Inland Empire shows that the area is not standing pat and waiting for a miracle to happen. While the recovery won't be swift, it will be effective and the effects of the IEERC could be seen in the foreseeable future.

What does this mean for you?

Your neighborhood will soon be targeted by the IEERC to help clean up the foreclosure mess. This will have a positive effect on the market values of surrounding homes by taking these homes off of the foreclosure lists and putting families back into them. As the stimulus package and upcoming homeowner bill pass through Congress, credit lines will open and allow those families to occupy these homes, improve IE's neighborhoods, and help get the local economy back on track.

President Obama's Plan for Homeowners with the $787B Stimulus

By BIANNA GOLODRYGA, MIKE VON FREMD and NICOLE YOUNG

Feb. 16, 2009

After signing the $787 billion economic stimulus bill in Denver, President Obama is scheduled to head to Phoenix Wednesday to unveil his housing plan.

The president is expected to propose anywhere from $50 billion to $100 billion to help stem the tide of home foreclosures.

One component of the plan would lower the average homeowner's mortgage payment, which can easily take up 38 percent of a family's income. The goal of the plan is to lower most homeowners' mortgages to 31 percent of their income.

A family with a household income of $50,000 will, on average, put $19,000 toward their mortgage. Under the president's plan they'd pay $15,500 toward their mortgage for a savings of $3,500.

Lenders would also be required to write down a mortgage principal rather than interest rates, with the goal of helping to reduce the chances of default.

The plan would also allow bankruptcy judges to modify mortgages, but only mortgages closed before the law is enacted are eligible.

Homeowners would also need to inform their lender or loan servicer in advance of their intention to file for bankruptcy protection.

Courtesy: ABC News

*Brokerlady's Take*

This stimulus package is a very ambitious plan to tackle all phases of the American economy. The provisions outlined in the package for homeowners are just the start of the plan to re-open the credit markets, make lending easier to access for America's middle-class, as well as help to keep families in their homes and off the foreclosure list.