Donne Knudsen

Earlier this week, there was an announcement by Housing Secretary Shaun Donovan regarding FHA allowing first time buyers being able to use the $8,000 tax credit as a down payment for a home (HUD Secretary Announces Monetization of $8,000 Tax Credit).

The announcement made quite a stir because although HUD issued the statement in Mortgagee Letter 2009-15, the fact that they didn't explain how this would be implemented left the public as well as many in the morgage industry wondering just how this all was going to happen.

The very next day, Mortgagee Letter 2009-15 was rescinded. After some checking around, I found out one way that the state of California plans to still implement a program to allow first time home buyers to use the first time buyer tax credit towards buying a home.

The Independent Cities Lease Finance Authority (ICLFA) is working on a program to utilize the Federal First Time Homebuyer Tax Credit as a source for down payment assistance. This program might only be available to cities who are members of the Independent Cities Finance Authority. Further details of the program are not available at this time.

The $8,000 tax credit is available for eligible first time homebuyer purchasing their home prior to December 1, 2009. Under the CA Tax Credit Advance program, these funds may be offered to the borrower as down payment assistance. Once the borrower files their taxes, or amends an existing tax return, the $8,000 will come back to the lender to pay off the DPA loan. This program will be best utilized with an FHA loan or Conventional with some other local DPA program.

The ICLFA and participating lenders are working to hopefully have this program available sometime in June.

The following counties are current members of the ICLFA:

San Bernardino County San Diego County San Mateo County

The following cities are current members of the ICLFA:

Alhambra Azusa Baldwin Park Barstow Bell Bellflower Brea Carson

Chino Claremont Colton Commerce Compton Covina Downey Duarte

El Monte Fontana Fresno Gardena Garden Grove Glendale Glendora

Hawaiian Gardens Hawthorne Hermosa Beach Huntington Park Indio Inglewood

La Habra La Puente Lakewood Lancaster Lawndale Long Beach Los Angeles

Lynwood Monrovia Montebello Monterey Park Morgan Hill Norwalk Palmdale

Paramount Pico Rivera Pomona Rancho Cucamonga Rialto Riverside Rohnert Park

San Fernando San Juan Capistrano Santa Clarita Santa Rosa Signal Hill South Gate

Vernon Vista West Covina Whittier Yucaipa

U.S. housing officials are working on a plan that would essentially allow some first-time buyers to purchase homes. They would be able to put the $8,000 income tax credit for first time buyers towards their down payment on loans backed by the Federal Housing Administration.

The FHA is finalizing a program that would allow approved lenders, non-profits, and state and local governments to fund short-term loans that could be used as down payments to be repaid once the borrower received their tax credit. Once they received their tax credit, they would pay off the short-term loan and put equity into their home.

Several states have already instituted similar programs. Housing Secretary Shaun Donovan outlined the plan Tuesday during a speech to the National Association of Realtors. Secretary Donovan said that important changes, which the National Association of Realtors^® has been calling for, will help consumers purchase a home. "We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment," Donovan said.

According to Donovan, the FHA's approved lenders will be permitted to "monetize" the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

Donovan said the Obama administration plans to further stabilize the housing market. "I do think we have some early signs that the market overall is stabilizing," said Donovan. "Since January we've seen both home sales moving up and down around a relatively stable number and we are seeing the first signs that the rapid decline in home prices is starting to abate."

California is still working on developing a program to assist the states first time buyers in utilizing their tax credit towards the down payment of a home. I have contacted many of my FHA lending sources to find out more about how they will be rolling this program out and what kind of products they will be offering for this plan. As soon as I know more, I will make sure I get the info out to the public.

* UPDATE - As of May 14, 2009, Mortgagee Letter 2009-15, which is about using the $8,000 first time buyer tax credit for a down-payment, has now been rescinded. In other words, there is no program or loan product allowing first time buyers to use their $8,000 tax credit as their down payment.

However, an FHA approved lender may grant eligible borrowers a bridge loan using your anticipated $8,000 tax credit as collateral for payment of the bridge loan. I have made several calls to many of my FHA lending sources and so far, I have not found one lending source that has any immediate plans to offer this option to FHA first time buyers. I am still checking with some other FHA lending sources and if/when I find one, I will post it.

In the meantime, here are two other posts that go into details about this matter:

FALSE Info Flying Around About First Time Tax Credit as Down Payment - by Ken Cook

Using First-Time Homebuyer Tax Credits for the Downpayment - It's GONE !!!! - The story of the $8,000 tax credit - by Jeff Belonger

The Los Angeles Times reported recently that here in Los Angeles County it is no longer a buyer's market. DUH! It doesn't take a mental giant to figure that one out.

For those of us in the real estate and mortgage industry here in L.A. County we already knew that and we've been telling our clients and buyers so for months regardless of what the media has been telling them or what they're reading on the internet.

While all of us (Realtors & mortgage professionals) know that real estate is hyper local and no two markets are the same, it can be really challenging trying to get that point across to our clients, especially when we're up against the media screaming about all the sellers who are so desperate to sell and all those friends and family members bragging about the "great deals" they just got. You know those people, the ones who know everything there is to know about real estate and mortgage loans and definitely knows more than any of us even though they have never worked in either the real estate or the mortgage industry and we have years and years of experience in the industry.

According to the Los Angeles Times, even here in Los Angeles County, no two markets are the same. Just because your cousin Joey bought a 4bd, 2.5ba, 2,100 sq. ft. pool home out in Palmdale for 200k with no competition doesn't mean you're going to get that comparable size home here in Sherman Oaks for the same price. NOT A CHANCE IN THE WORLD!

For starters, that Sherman Oaks home is going to cost you more than twice as much and you are probably going to have to compete with somewhere around, oh probably, a couple dozen other offers. While prices are not as high as they were at the market's peak, they are also not as low as the media has been spewing.

For those prospective buyers who think they're going to get that fabulous looking house in Valley Village for 20% less than list price. NOT IN THIS CENTURY! With an offer of at least 100k above list, you just might have a shot of at least getting your offer even looked at and considered. For many of my frustrated and fed-up buyers, I'm not sure what irritates them more, listing agents who intentionally list property low simply to generate bidding wars or the national media's talking bobble heads who don't have a clue what is happening here in Los Angeles County.

The L.A. Times relays a story of a 1950's, 1,600 sq. ft., fixer-upper in La Crescenta listed for 299k. On the morning the property was listed, there were 40+ people at the home viewing it. Shortly thereafter, 80 offers were received on the property, 15 were at more than 400k. The home sold for 480k.

The L.A. Times also predicts that banks are keeping prices artificially high! OH MY MY! WHAT A SHOCKER! PULLLEEEAAASSS! They know exactly what they're doing. By not glutting the market with all the foreclosures that they're sitting on, they can prevent prices from dropping anymore and can actually drive the prices up.

It has been all to disheartening for those that thought they could enter the market and in a matter of weeks find this fantastic home at a rock bottom price and realize several months later that it's all an illusion and their situation is absolutely hopeless. So what is the hopelessly anxious and ever optimistic prospective buyer supposed to do in a market like this?

Listen to your buyer's agent when they run the comps for the area and suggest that you make a fair market price for that really low priced, less than dumpy and not too dated property not too far out from that really nice neighborhood that you like.

When your agent tells you that the property is dubiously priced too low (around here listing prices are simply suggested prices), that means that it is not going to sell for list price and you will need to offer more than list price to even get your offer considered. When they tell you to offer 100k more because the comps warrant that kind of price, just do it! If they've done their homework, they know what they're talking about.

When they tell you that a property that you would like just came on the market, make every effort possible to see the property as soon as you can. If you like the house, make an offer now!

Don't wait a week to think about, don't wait another week to go and see it again just to make sure and don't wait until you talk to everyone you know about what you should offer. If you do, you will be too late because dozens of other smarter and more motivated buyers will have already beaten you to it.

Around here, it's this type of aggressive tactics and strategy that will get you into a home sooner rather than later. If you are a first time buyer who wants to take advantage of the $8,000 tax credit before November 30, 2009, then quit screwing around making foolish low ball offers on half way decent properties just because you want to try and get a "GREAT DEAL"! With that particular line of strategy, the great deals will end up being for the other person who made a better offer than yours and got the house instead of you. The "GREAT DEAL" will be the house you get now and not next year because you screwed around to long and missed out on all the great deals everyone else got.

Did you know that under federal law, you are entitled to an "investigation" of any dispute you make on a credit card charge but according Chi Chi Wu, a staff attorney at the National Consumer Law Center, you are not entitled to a "result" or explanation of how the dispute will be negotiated with the merchant?

Some of the details of the process:

• You have 60 days to file a "billing dispute"
• There is no time limit for an "unauthorized use" dispute
• The credit card company has 90 days (or 2 billings cycles) to "respond" the dispute
• The credit card company has 270 days (about 9 months) to "resolve" the dispute

According to Wu, the Fair Credit Billing Act gives you the right to dispute a credit card charge (or withhold payment) only under certain circumstances.

1. Disputes must be in writing for goods/services $50 or more and the transaction must have occurred in your home state or within a 100 mile radius of your address. If you purchased online or by phone, it meets the 100-mile rule and they are considered bonafide charges.
2. If you dispute a charge, you do not have to pay the contested amount and the credit card company cannot charge you interest. However, if you lose the dispute, they can charge you the "back" interest.
3. When you dispute a charge, you will need receipts or a copy of a contract for what services were supposed to be provided.

Credit card companies classify disputes into about 24 categories-like "merchandise not received" or "cancelled re-occurring transaction" but there is one category where you get the greatest amount of protection, by law. It's called "Unauthorized User". Unlike other dispute categories, you can report an unauthorized user over the phone and there is no requirement to do so within 60 days.

If all else fails, don't give up. Your state's Attorney General may have additional laws to protect you when you dispute certain charges on your credit card!

The California Housing Finance Agency (CalHFA) issued a press release last night stating that due to the successful sale of mortgage revenue bonds in California, money for CalHFA's down payment assistance program, CHDAP, should be released towards the end May.

CHDAP is a deferred payment, simple interest rate, junior loan of 3% of the sales price or appraised value, whichever is less. CHDAP may be combined with a CalHFA conventional loan program or a government first mortgage loan program like FHA or VA. CHDAP can be used for down payment assistance and/or closing costs.

I do not know any details yet (rate, loan amount, guidelines, etc.) but will forward them as soon as I know anything. Hopefully, it will still be a 3% down payment assistance (DPA) loan program where the payments are deferred for the life of the loan.

If this is the case, eligible borrowers will be able to pair this loan program with an FHA loan program for a combined loan to value (CLTV) of 95.5%. Eligible borrowers will then only need to come up with .5% for their share of the down payment. Be on the lookout for my announcement.