This update from Mortgagee Letter 2009-15 establishes guidelines for use of the first-time home buyer tax credit as settlement funds.Here are the 10 things you need to know about these guides:
1.The IRS tax credit refund can be made only to the taxpayer and not a third party.
2. Government agencies may offer tax credit advances with second liens.
3. The buyer cannot get cash back through the tax credit advance.
4. The 2nd lien may not exceed the downpayment, closing costs, and prepaid expenses.
5. The 2nd lien may be "soft" or require payments.
6. Payments on 2nd liens must be included in ratios unless deferred for at least 36 months.
7. Balloon payments on 2nd liens may not be before 10 years.
8. FHA approved lenders and FHA approved non-profits may purchase the tax credit.
9. Tax credit purchaser may not charge more than 2.5% of the tax credit as a fee.
10. IRS may deduct from the tax credit: unpaid student loans, tax liens and garnishments.
If you’re an FHA lender that has the resources and are quick to implement new programs, then take advantage of this change to help boost your purchase volume. This program can form the foundation of your homebuyer marketing for the rest of the year. You only have till December 1st, so take action.
I suggest going to city adminstrators and informing them about this program. Cities throughout the country have been allotted millions through the ARRA funds to help them create home ownership and this would be a way you can help them make those funds go farther, which is music to any city adminsitrator’s ears. Position yourself as an FHA expert and offer to do a community seminar about this program.
To read this update in its entiretyclick here
For the IRS tax credit form 5405click here
For IRS tax credit summaryclick here
Carlos Samaniego,CMPS
Certified Mortgage Planning Specialist
