Mortgage Rate News

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The first time home buyer tax credit has been extended — and expanded. The $8,000 credit has been extended by six months, and there has been an expansion to include current home owners who want to buy. Current home owners can get a $6,500 tax credit when they look for a new home. This is along the lines of the tentative agreement reached last week. Bible Money Matters offers a great summary of the main points for the new $6,500 tax credit:

• The credit is available for homes that go under contract by April 30, 2010 and close by June 30th, 2010.
• Current homeowners can claim a $6,500 credit as long as the property they are vacating has been their primary residence for at least five consecutive years out of the last eight years.
• Income limits: $125,000 a year for individuals, $225,000 a year for married couples. (these are higher limits than before)
• Homes that cost more than $800,000 aren’t eligible for the credit.
• $6500 tax credit is not retroactive.  (from the language of the bill: “shall apply to residences purchased after the date of the enactment of this Act.”)

Sadly, I don’t qualify. Which is okay, I suppose. We weren’t planning on moving any time soon, so it’s not like we would use it anyway. But it would still be nice to know that if we wanted to take advantage of such a great deal, we could. It’s not $15,000, but it’ll do. It’s better than nothing.

However, the tax credit extension is also expected to help keep home prices higher. The Wall Street Journal reports on the first time home buyer tax credit and its results:

Goldman Sachs estimates that the credit resulted in 200,000 sales this year, but that many of those sales were front-loaded—driven by a surge in sales shortly after the tax credit took effect. The simple extension “should result in fewer incremental first time purchases than the first round of the credit did,” writes Goldman economist Alec Phillips.

While the tax credit won’t reduce excess inventory, the incentives could keep prices up because “potential sellers are likely to incorporate a fraction of the credit amount in their sale price—with the knowledge that the majority of buyers will qualify for either the first time or move-up credit,” writes Mr. Phillips.

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It looks like the recession is over — at least technically. With Quarter 3 GDP numbers being reported today, it looks like the U.S. economy has moved from a period of loss into one of expansion. Economic data today was generally good, reports MarketWatch:

Along with improvements in key monthly figures on output and sales, the rise in real gross domestic product means the Great Recession is likely over in a technical sense, even as further job losses occur. A formal call on the end of the recession isn’t expected for months. …

“I anticipate that this is the turnaround, and that the numbers from here on out will be positive,” said Council of Economic Advisers Chairwoman Christina Romer in a televised interview.

Some are crediting economic stimulus measures for helping with the turnaround. It is important to note, though, that recovery is likely to be slow, and that for many individuals, a personal recession may continue for a while, since this economy is likely to see a “jobless recovery.”

Improving economy and buying a home

It also means that there is less of a chance of a double dip recession, or a return to another housing market dip. If this is the case, than it is quite likely that the housing bottom has already passed. If you have been waiting on buying  a home, it might be time to reconsider. It might be a good time to buy, while home prices are still low, mortgage rates are near record lows, and buyers have the upper hand.

In the end, an improving economy is likely to mean that some of the great opportunities and bargains that we are familiar with may not be available for much longer. It is true that the first time home buyer tax credit may be extended, but other than that, it is unlikely that all the great prices being seen right now will last.

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California is ready to enact tough laws aimed at restricting predatory lending practices. While over-reaching consumers certainly deserve some of the blame for the foreclosure crisis, some of the things mortgage lenders and brokers did in order to close deals were not above board. Many took advantage of their positions of trust to encourage borrowers to agree to mortgages that were not in their best interest. And while due diligence should be expected from borrowers, the fact of the matter is that there is a lot of paperwork, fine print and legalese to wade through. Even the best efforts can come up short.

In order to provide a little more protection to consumers, California Governor Arnold Schwarzenegger signed eight different laws. The Modesto Bee reports on some of the provisions in the laws:

• Loan modification firms cannot collect fees up front.
• Mortgage lenders must adhere to standardized licensing requirements.
• Reverse mortgages will have new consumer protections built in.
• Fraud in connection with a home mortgage loan application will be considered a felony.
• Mortgage documents must be available in other languages besides English.
• Buyers who purchase foreclosed homes will be able to choose their escrow and title companies.

Hopefully, the laws will discourage some of the deceptive practices that helped contribute to the foreclosure crisis. The new regulations should also hopefully cut down on scams perpetrated by loan modification and foreclosure prevention companies that take upfront fees and then do nothing. Additionally, it should give buyers a little more freedom and help as they choose companies of their choosing.

In the end, there needs to be a good balance between consumer protection and consumer responsibility. At first glance, it appears these laws should do that, providing consumer protections while at the same time not putting everything on mortgage lenders and brokers. It will be interesting to see if other states follow suit, adopting harsher laws aimed at curbing predatory lending practices.