Fannie Mae: New Affordable Housing Options
Fannie Mae announced Tuesday that it has launched several initiatives designed to stabilize neighborhoods and promote purchases by owner occupants and low-income buyers.
Fannie Mae’s “First Look” initiative offers buyers who intend to live in the home, particularly low-income buyers, an opportunity to make an offer during the first 15 days the property is on the market. Investors can only make an offer after the first 15 days have passed.
Other programs aimed at stabilizing neighborhoods include:
- Deposit Waivers. Fannie Mae will waive the earnest money/deposit requirement for public entities using public funds to purchase a Fannie Mae-owned property. Individual home buyers who have qualified for public funds and want to purchase a Fannie Mae-owned property do not have to meet the usual earnest money/deposit requirement either. Deposits for these buyers can be as low as $500.
- Reserved Contract Period. Upon receipt of an acceptable offer, buyers have the ability to renegotiate their offer after obtaining an appraisal.
- Extra Time for Closing. Buyers receive up to 45 days to close – 15 days more than is usually permitted for purchases of Fannie Mae-owned properties.
Source: Fannie Mae (11/24/2009)
First Time Homebuyers Tax Credit Extension/Expansion is Approved
- Last week, the U.S. Senate and House passed legislation that included an extension and expansion of the tax credit for homebuyers. President Obama signed the bill into law at the end of the week.
- The $8,000 first-time homebuyer tax credit will continue until April 30, 2010, and the income limits have been increased to $125,000 for single filers and $225,000 for join filers.
- Additionally, current homeowners who have lived in their home for five of the previous eight years are eligible for a $6,500 tax credit.
- There is a purchase price limit of $800,000 for the home, and it must be maintained as the purchaser’s primary residence for three years or the tax credit will be due back to the IRS.
- Unlike the current tax credit program, the extended program allows any purchaser who has a binding contract in place by April 30, 2010 to close by June 30, 2010 and still qualify.
Economists Predict Housing Recovery
Economic forecasters predict that 2010 will be the first year since 2005 for housing to contribute to the growth of the U.S. economy, according to a survey released by the National Association for Business Economics.
Home prices are expected to rise 2 percent next year, but forecasters don’t believe the increase in prices will discourage homebuyers.
More than 80 percent of economists surveyed by the NABE think the recession is over and recovery has begun, but they expect the expansion to be slow because unemployment persists.
Bank of America Struggles With Loan Modifications
Bank of America could collect about $6 billion if it meets the deadline set by the federal government to help struggling borrowers for the Making Home Affordable program.
But the Treasury Department released a report last week that showed that only 11 percent, about 95,000, of Bank of America’s delinquent borrowers who are potentially eligible for the program have been given a loan modification. That puts Bank of America at the bottom of the list of major banks involved in the program.
“We’re sure working hard,” said Ken Scheller, senior vice president for home retention at Bank of America, when asked about his company’s low success rate. “We don’t want to be down there.”
There appear to be multiple problems, not the least of which is that many of the employees handling the modifications are completely new to the business. Angry investors complicate the issue, with 15 percent of them demanding that the bank get their approval for every single case.
A Historic Time to Buy
Young people just starting to invest and buying their first homes are potentially the winners in this recession.
First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®
“This is a historic time,” says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. “It’s a great opportunity to make some great gains in the future.”
A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.
“We need to be shouting from the rooftops that this is not the time to get out of the market if you’re young,” says Christine Fahlund, a senior financial planner with T. Rowe Price. “This is the time to be in the market.”
