Homebuyer Tax Credit Expiring - Updated HAMP Just In Time

First-time and repeat homebuyers profited from the tax credit offered as part of the Federal Recovery and Reinvestment Act initiative designed to help jumpstart the economy. That package helped sustain the residential real estate market through 2008 to date. It has been particularly helpful to first-time home buyers, many of whom felt left out during the protracted increases home prices up to 2007 (at least in our neck of the woods - New Mexico).

The initaial  tax credit for first-time homebuyers expired in 2009 and was extended and expanded to include repeat home buyers who met certain criteria. As we approach the expiration of the extended/expanded period, not only industry insiders but savvy consumers have been doubting the feasibility of another extension. The million-dollar question was what next could be done to help a still-ailing housing market.
The evidence of a market still in ill health is all around us, even in New Mexico, a state that seemingly weathered the downturn better than most others, according to national trend reports.

The evidence, from talking with clients, is that mortgage payments for many are sometimes significantly higher than the value of their homes. To alleviate the burden, some approach lending institutions to seek restructuring or modification of their loans only to receive no response or responses that in their perception, make their situation more difficult. In cases, these homeowner are facing reduction in earnings because of job loss or other financial setbacks.  Unable to reach agreement with lenders for restructuring or modification, many simply choose to walk away to homelessness or rental at rates more affordable than their mortgage. 

Others try to sell but are unable to sell at a price high enough to pay off the mortgage balance and do not have the resources to pay the difference. A portion of this latter  group seek agreement for a short sale (the lender agrees to accept an amount short of what is actually owed) a long process with uncertain outcome. If and when the short sale is executed, beleaguered homeowners may face additional challenges. They may be required to sign a promissory note for the difference between the amount owed and the amount of the sale or a tax liability for the amount forgiven by the lender.

The long and short of the situation is that vacant homes with delinquent mortgages persist. Many homes are occupied with residents who are barely managing to pay mortgages, may be one month away from defaulting or are several months behind, waiting for the axe to fall. That is why the news of President Obama's latest initiative one month before the expiration of the homebuyer tax credit is welcome news. The President has chosen to tweak the previously agreed upon Home Affordable Assistance Program (HAMP) with

the inclusion of considerations for principal reduction. The revised FHA- HAMP program is expected to provide relief for homebuyers where it is needed most. It is also expected to fill the assistance gap the expiration of the tax credit will leave and continue support for the residential real estate industry whose recovery has serious implications for overall economic well being. - Eloise Gift, REALTOR, CRS, GRI, e-PRO