New Homebuyer’s Tax Credit Extends to HECM For Purchase Program

December 15th, 2009 | by Reva Published in FHA, News, Reverse Mortgage | 2 Comments

When the new homebuyer’s tax credit was extended last month, the HECM for Purchase Program benefited too. HUD confirmed via an email to RMD that as long as the senior borrower qualifies for both programs, the new homebuyer’s tax credit will still apply to a HECM for Purchase.

Last month, Congress extended the new homebuyer’s tax credit through April 2010. At the same time, the eligibility requirements to receive the $8,000 tax credit were reduced.

While the previous tax credit only applied to first-time homebuyers with salaries of up to $75,000/year for individuals and $150,000/year for couples, the extension raises that requirement. The tax credit will now apply to first-time homebuyers with salaries of up to $125,000/year for individuals and $225,000/year for couples. These changes make the vast majority of the US population eligible for the tax credit.

In addition, a new $6,500 tax credit has been added for those wishing to move out of their current homes into more expensive ones. This tax credit can also be used in conjunction with the HECM for Purchase Program.

The application of the tax credit should be a tool reverse mortgage lenders can use to promote the HECM for Purchase program and help seniors seeking to buy a new home or upgrade to a nicer home.

For more information on the Move-Up/Repeat Home Buyer Tax Credit, prospective borrowers can look at the National Association of Home Builder’s FAQs: For more information on the New Home Buyer’s Tax Credit, visit here.

Write to Reva Minkoff

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James_E_Veale_CPA_MBT

It is my hope that officials at HUD read this comment.

HUD should never be giving tax advice, period. It is not the Department of the Treasury. HUD has given bad tax advice before. HUD should never be giving tax advice unless it is in a joint communiqué with the IRS, period. Reporting any income tax advice given by HUD is about as credible as reporting an opinion from the Securities and Exchange Commission on whether a new medicine is fit for human consumption. Don’t trust either one.

(For readers who are not familiar with government affiliations, the IRS is a part of the U.S. Treasury in the same way that FHA is part of HUD.)

Having said that, it is clear from reading the law, there is no prohibition or restriction about the type of mortgage used in purchasing the home. HECMs are neither approved nor rejected; they are simply ignored.

BUT

This credit ends at the end on April 30, 2010 unless extended by Congress. Time is of the essence.

The credit for the homes purchased in the sixteen month period that started on January 1, 2009, is much different than its predecessor. It is a true income tax credit. It is not a tax-free loan; however, it is subject to repayment if the home is sold or is no longer the principal residence of the taxpayer within the first 36 months after the home is purchased.

Should you market the “heck” out of this tax benefit? Well, that is a decision for your compliance team but if I was in an officers’ meeting at Security One Lending, I would be pounding the conference table loudly proclaiming a resounding “YES as long as it is stipulated that any marketing be provided with the caveat that the credit does not apply to any purchase of a home which is completed after April 30, 2010 and that because of its complexities, possible limitations, and possible repayment, the advice of a competent tax advisor should be obtained.”

It is now mid December, be careful because HECMs for purchase usually take a longer time to complete so unless you have adequate caveats, your inability to close the sale before May1, 2010 could result in a lawsuit. Time is of the essence.
Anonymous

It is my hope that officials at HUD read this comment. rnrnHUD should never be giving tax advice, period. It is not the Department of the Treasury. HUD has given bad tax advice before. HUD should never be giving tax advice unless it is in a joint communiquu00e9 with the IRS, period. Reporting any income tax advice given by HUD is about as credible as reporting an opinion from the Securities and Exchange Commission on whether a new medicine is fit for human consumption. Donu2019t trust either one.rnrn(For readers who are not familiar with government affiliations, the IRS is a part of the U.S. Treasury in the same way that FHA is part of HUD.) rnrnHaving said that, it is clear from reading the law, there is no prohibition or restriction about the type of mortgage used in purchasing the home. HECMs are neither approved nor rejected; they are simply ignored.rnrnBUT…rnrnThis credit ends on April 30, 2010 unless extended by Congress. Time is of the essence.rnrnThe credit for the homes purchased in the sixteen month period that started on January 1, 2009, is much different than its predecessor. It is a true income tax credit. It is not a tax-free loan; however, it is subject to repayment if the home is sold or is no longer the principal residence of the taxpayer within the first 36 months after the home is purchased.rnrnShould you market the u201checku201d out of this tax benefit? Well, that is a decision for your compliance team but if I was in an officersu2019 meeting at Security One Lending, I would be loudly proclaiming a resounding u201cYES as long as it is stipulated that any marketing be provided with the caveat that the credit does not apply to any purchase of a home which is completed after April 30, 2010 and that because of its complexities, possible limitations, and possible repayment, the advice of a competent tax advisor should be obtained.u201drnrnIt is now mid December, be careful because HECMs for purchase usually take a longer time to complete so unless you have adequate caveats, your inability to close the sale before May1, 2010 could result in a lawsuit. Time is of the essence. rn

New Homebuyer’s Tax Credit Extends to HECM For Purchase Program

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