FHA Toughens Down Payment Rules
The Federal Housing Administration will raise the minimum down payment for its least credit-worthy borrowers, the agency announced Tuesday. The change is among a number of major changes the FHA is making to ensure its long-term financial soundness.
Borrowers with credit-rating scores below 580 will be required to put down at least 10 percent. Those with a credit score above 580 will be able to continue to put down only 3.5 percent. The changes are intended to shore up the agency’s finances.
The FHA also will increase its upfront mortgage insurance premium from 1.75 percent to 2.25 percent. The agency is expected to seek congressional approval to raise annual mortgage insurance premiums, paid by borrowers over the life of the loan, above the current 0.55 percent maximum. The amount it will seek has yet to be announced.
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.
IRS Cracking Down on False Tax Credit Claims
The IRS is cracking down on people who don’t qualify for the first-time homebuyer tax credit but try to claim it anyway.
The IRS says it is investigating 24 cases of people who falsely claimed the first-time homebuyer credit on their federal income tax returns. Getting caught making a false claim carries a penalty of up to three years in jail and a fine of as much as $250,000.
The First-Time Homebuyer Credit, enacted in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser must be someone who has not owned a primary residence in the previous three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse.
The home purchase must close before Dec. 1, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home.
Feds Scold Bank of America, Wells Fargo on Loan Modifications
The Treasury Department on Tuesday announced that only 9 percent of eligible home owners had been helped by the federal program to modify home loans and prevent foreclosure.
It scolded banking giants Bank of America and Wells Fargo, both of which received federal bailout money, pointing out that these banks have been among the least willing to assist troubled borrowers.
Bank of American modified 4 percent of eligible loans, and Wells Fargo modified 6 percent.
Big banks that did better included JPMorgan Chase & Co., which modified 20 percent of eligible loans, and Citigroup Inc., which modified 15 percent.
The bank with the best results was Saxon Mortgage Services Inc., which helped about 25 percent of its eligible borrowers.
Source: The Associated Press, Alan Zibel (08/04/2009)
FHA Loans Set Record
ShareFHA Loans Set Record
The Federal Housing Administration guaranteed 186,000 mortgages in June, a record number in its 75-year history.
FHA loans are popular because they are one of the few sources of low downpayment mortgages. In the last year, they have accounted for about 46 percent of all mortgage applications.
Along with increasing numbers of FHA activity comes a rising number of delinquent loans, with the level of FHA mortgages in some stage of foreclosure reaching 7.4 percent in May.
