Detailed guidance on the federal government's plan to provide short-term loans to borrowers using the First-Time Homebuyer Tax Credit is expected to be out shortly, but a spokesperson from the U.S. Department of Housing and Urban Development, which is writing the guidance, couldn't give a firm release date. HUD policy staff are "still working out the details on it," HUD spokesperson Lamar Wooley told REALTOR® Magazine today. "So we expect it to be published shortly."
The short-term loan program, which would effectively monetize the first-time homebuyer tax credit by permitting eligible lenders to make bridge loans collateralized by the borrower's expected tax credit, was announced by HUD Secretary Shaun Donovan at the Real Estate Summit NAR hosted on the opening day of its 2009 Midyear Legislative Meetings in Washington last week. At the summit, Donovan said the loans would enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash could be used as a downpayment.
"FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to 'monetize' the tax credit through short-term bridge loans," Donovan said. "We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly."
It's unclear at this point what shape the guidance will take and whether authorization for the loans will be available across the board or only in states in which the state housing finance agency already has a tax credit bridge-loan program in place. There are 10 states today that have such a loan program, according to the National Council of State Housing Agencies: Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee. (Of course, California isn't there yet.)
When it's released, the guidance is expected to be issued as a HUD Mortgagee Letter and will likely discuss which federal, state, and local governmental agencies and nonprofit organizations will be permitted to make the loans, and whether lenders such as FHA-approved mortgagees will be permitted to make the loans. The guidance could also cover how loan amounts will be limited, what happens if repayment problems occur, and what repayment terms would look like.
Wednesday, May 20, 2009
Thursday, May 14, 2009
Tax credit can be used as down payment on FHA Loans !!
The government today gave the green light to the financing of bridge loans of up to $8,000 to first time home buyers who qualify for tax credits under the Obama Administration’s economic stimulus plan. The new mortgagee letter stipulates that government agencies, non-profits and FHA-approved lenders can give advances on the tax credits. Housing secretary Shaun Donovan told a national Realtor group Tuesday that, “We want to enable FHA consumers to access the tax credit funds when they close on their home loans so that cash can be used as a down payment.
WASHINGTON, May 12, 2009
Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a down payment. 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 hat 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.”
WASHINGTON, May 12, 2009
Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a down payment. 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 hat 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.”
Tuesday, May 12, 2009
Big U.S. banks selling stock to repay government
NEW YORK (Reuters) - Four big U.S. banks on Monday said they would sell $6.55 billion of common stock and repay funds from the government's bank bailout program, after federal stress tests showed they can weather a deep recession without new capital.
U.S. Bancorp plans to sell $2.5 billion of stock, and sold $1 billion of five-year notes. Capital One Financial Corp sold $1.55 billion of stock, BB&T Corp said it will sell $1.5 billion, and Bank of New York Mellon Corp said it will sell $1 billion.
BB&T also cut its quarterly dividend 68 percent to 15 cents per share to save $725 million a year, after 37 straight years of higher payouts. Chief Executive Kelly King in an interview said the decision marks "the worst day in my 37-year career."
Separately, KeyCorp said it would sell $750 million of stock to help plug what regulators called a $1.8 billion capital shortfall. KeyCorp said it may take other actions, including converting other securities to common stock.
The offerings were announced three days after Wells Fargo & Co and Morgan Stanley sold a combined $12.6 billion of stock. Morgan Stanley also sold $4 billion of debt.
These banks were among 19 lenders to undergo government tests of their ability to weather a deep economic downturn. Regulators last week ordered 10 lenders, including Wells Fargo and Morgan Stanley, to raise a combined $74.6 billion.
Banks are raising capital after improved investor sentiment caused shares in the sector to more than double from their lows in early March, despite worsening credit conditions in housing, commercial loans and credit cards.
"They're trying to get while the getting is good," said Walter Todd, who helps invest $650 million at Greenwood Capital Associates LLC in Greenwood, South Carolina. "Fundamentals of banks appear not as bad they were, but they are still not good given the underlying conditions in the economy."
U.S. Bancorp is based in Minneapolis; Capital One in McLean, Virginia; BB&T in Winston-Salem, North Carolina; Bank of New York Mellon in New York, and KeyCorp in Cleveland.
In Monday trading, shares of U.S. Bancorp fell 9.9 percent to $18.50; Capital One fell 13.5 percent to $27.10; BB&T fell 7.6 percent to $24.34; Bank of New York Mellon fell 8.1 percent to $29.55, and KeyCorp fell 9.9 percent to $6.28.
Bank of New York Mellon announced its offering after markets closed. The 24-member KBW Bank Index, which includes all five banks, fell 7.1 percent. Capital One's close was below the $27.75 per share price of its stock offering.
BB&T CEO CRITICIZES TARP
U.S. Bancorp took $6.6 billion from the government's Troubled Asset Relief Program, while Capital One took $3.55 billion, BB&T $3.1 billion and KeyCorp $2.5 billion.
Hundreds of lenders took money from TARP, which was designed to spur lending and improve the economy.
Yet many now view TARP as an albatross that imposes too many restrictions, including on executive pay, and suggests that recipients are desperate for capital.
"Rational, objective lending is one of the most important purposes of the banking system, and when you inject Congress and the administration into it, it effectively politicizes the process, which is not healthy," BB&T's King said.
King also said the stress tests unnecessarily created "huge levels of anxiety and concern" among investors. "Regulators have always had the ability to assess the capital of institutions, and require more if they chose," he said.
At least one dozen lenders have repaid or gotten permission to repay TARP, and Goldman Sachs Group Inc and JPMorgan Chase & Co have said they want to do so as well.
Goldman Sachs & Co and Morgan Stanley are arranging the offerings for U.S. Bancorp and Bank of New York Mellon. Barclays Capital arranged the Capital One offering. Goldman Sachs, JPMorgan and Morgan Stanley are arranging the BB&T offering. Morgan Stanley is arranging the KeyCorp offering.
U.S. Bancorp plans to sell $2.5 billion of stock, and sold $1 billion of five-year notes. Capital One Financial Corp sold $1.55 billion of stock, BB&T Corp said it will sell $1.5 billion, and Bank of New York Mellon Corp said it will sell $1 billion.
BB&T also cut its quarterly dividend 68 percent to 15 cents per share to save $725 million a year, after 37 straight years of higher payouts. Chief Executive Kelly King in an interview said the decision marks "the worst day in my 37-year career."
Separately, KeyCorp said it would sell $750 million of stock to help plug what regulators called a $1.8 billion capital shortfall. KeyCorp said it may take other actions, including converting other securities to common stock.
The offerings were announced three days after Wells Fargo & Co and Morgan Stanley sold a combined $12.6 billion of stock. Morgan Stanley also sold $4 billion of debt.
These banks were among 19 lenders to undergo government tests of their ability to weather a deep economic downturn. Regulators last week ordered 10 lenders, including Wells Fargo and Morgan Stanley, to raise a combined $74.6 billion.
Banks are raising capital after improved investor sentiment caused shares in the sector to more than double from their lows in early March, despite worsening credit conditions in housing, commercial loans and credit cards.
"They're trying to get while the getting is good," said Walter Todd, who helps invest $650 million at Greenwood Capital Associates LLC in Greenwood, South Carolina. "Fundamentals of banks appear not as bad they were, but they are still not good given the underlying conditions in the economy."
U.S. Bancorp is based in Minneapolis; Capital One in McLean, Virginia; BB&T in Winston-Salem, North Carolina; Bank of New York Mellon in New York, and KeyCorp in Cleveland.
In Monday trading, shares of U.S. Bancorp fell 9.9 percent to $18.50; Capital One fell 13.5 percent to $27.10; BB&T fell 7.6 percent to $24.34; Bank of New York Mellon fell 8.1 percent to $29.55, and KeyCorp fell 9.9 percent to $6.28.
Bank of New York Mellon announced its offering after markets closed. The 24-member KBW Bank Index, which includes all five banks, fell 7.1 percent. Capital One's close was below the $27.75 per share price of its stock offering.
BB&T CEO CRITICIZES TARP
U.S. Bancorp took $6.6 billion from the government's Troubled Asset Relief Program, while Capital One took $3.55 billion, BB&T $3.1 billion and KeyCorp $2.5 billion.
Hundreds of lenders took money from TARP, which was designed to spur lending and improve the economy.
Yet many now view TARP as an albatross that imposes too many restrictions, including on executive pay, and suggests that recipients are desperate for capital.
"Rational, objective lending is one of the most important purposes of the banking system, and when you inject Congress and the administration into it, it effectively politicizes the process, which is not healthy," BB&T's King said.
King also said the stress tests unnecessarily created "huge levels of anxiety and concern" among investors. "Regulators have always had the ability to assess the capital of institutions, and require more if they chose," he said.
At least one dozen lenders have repaid or gotten permission to repay TARP, and Goldman Sachs Group Inc and JPMorgan Chase & Co have said they want to do so as well.
Goldman Sachs & Co and Morgan Stanley are arranging the offerings for U.S. Bancorp and Bank of New York Mellon. Barclays Capital arranged the Capital One offering. Goldman Sachs, JPMorgan and Morgan Stanley are arranging the BB&T offering. Morgan Stanley is arranging the KeyCorp offering.
Monday, May 11, 2009
U.S. threatens to rescind stimulus money over wage cuts
The Obama administration threatens to rescind billions in stimulus money if Gov. Schwarzenegger and lawmakers do not restore wage cuts to unionized home healthcare workers.
Reporting from Sacramento -- The Obama administration is threatening to rescind billions of dollars in federal stimulus money if Gov. Arnold Schwarzenegger and state lawmakers do not restore wage cuts to unionized home healthcare workers approved in February as part of the budget.
Schwarzenegger's office was advised this week by federal health officials that the wage reduction, which will save California $74 million, violates provisions of the American Recovery and Reinvestment Act. Failure to revoke the scheduled wage cut before it takes effect July 1 could cost California $6.8 billion in stimulus money, according to state officials.
The news comes as state lawmakers are already facing a severe cash crisis, with the state at risk of running out of money in July.
The wages at issue involve workers who care for some 440,000 low-income disabled and elderly Californians. The workers, who collectively contribute millions of dollars in dues each month to the influential Service Employees International Union and the United Domestic Workers, will see the state's contribution to their wages cut from a maximum of $12.10 per hour to a maximum of $10.10.
The SEIU said in a statement that it had asked the Obama administration for the ruling.
The cut was highly contentious during last winter's budget talks. Republican lawmakers insisted that the rapidly growing, multibillion-dollar state program, In Home Supportive Services, be scaled back significantly.
Democrats fought major reductions in the program, which they say is a cost-effective alternative to nursing-home care, but ultimately compromised.
Reversing the wage cut would require a two-thirds vote of the Legislature, meaning Republican support would be needed.
Schwarzenegger on Wednesday sent U.S. Secretary of Health and Human Services Kathleen Sebelius a letter urging the federal government to reconsider.
"Neither the Legislature nor I make decisions to reduce wages or benefits lightly, but only as a last resort in response to an unprecedented fiscal crisis," Schwarzenegger wrote.
Reporting from Sacramento -- The Obama administration is threatening to rescind billions of dollars in federal stimulus money if Gov. Arnold Schwarzenegger and state lawmakers do not restore wage cuts to unionized home healthcare workers approved in February as part of the budget.
Schwarzenegger's office was advised this week by federal health officials that the wage reduction, which will save California $74 million, violates provisions of the American Recovery and Reinvestment Act. Failure to revoke the scheduled wage cut before it takes effect July 1 could cost California $6.8 billion in stimulus money, according to state officials.
The news comes as state lawmakers are already facing a severe cash crisis, with the state at risk of running out of money in July.
The wages at issue involve workers who care for some 440,000 low-income disabled and elderly Californians. The workers, who collectively contribute millions of dollars in dues each month to the influential Service Employees International Union and the United Domestic Workers, will see the state's contribution to their wages cut from a maximum of $12.10 per hour to a maximum of $10.10.
The SEIU said in a statement that it had asked the Obama administration for the ruling.
The cut was highly contentious during last winter's budget talks. Republican lawmakers insisted that the rapidly growing, multibillion-dollar state program, In Home Supportive Services, be scaled back significantly.
Democrats fought major reductions in the program, which they say is a cost-effective alternative to nursing-home care, but ultimately compromised.
Reversing the wage cut would require a two-thirds vote of the Legislature, meaning Republican support would be needed.
Schwarzenegger on Wednesday sent U.S. Secretary of Health and Human Services Kathleen Sebelius a letter urging the federal government to reconsider.
"Neither the Legislature nor I make decisions to reduce wages or benefits lightly, but only as a last resort in response to an unprecedented fiscal crisis," Schwarzenegger wrote.
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