ARRA tax credit monetization and neighborhood stabilization programs

Monetization of the $8000 first-time home buyer tax credit found in the American Recovery and Reinvestment Act of 2009 is a hot topic these days. The FHA we’ve learned has issued a mortgagee letter (2009-15) regarding monetization of the credit.  Roxanne Campanella a Senior Customer Liaison working out of the Sacramento HUD office talked about some of the difficulties in monetizing the tax credit as well as some of the incentives for doing so. She reiterated that regardless of whether the credit is monetized and used in the purchase transaction FHA rules still require a 3.5% down payment and the monetized tax credit could be layered on top of but not be used instead of the 3.5% down payment.

Exactly who and how the tax credit could be monetized is still being figured out, but essentially it would take the form of an unsecured bridge loan at a relatively low rate which is likely to keep some big potential players on the sidelines.

We also learned of the Workforce Initiative Subsidy for Homeownership Program through the Federal Home Loan Bank of San Francisco. This assistance program offers a 3 to 1 match of up to $15,000 for certain qualified first-time home buyers. Neighborhood Stabilization is hot these days as well with the Sacramento Housing and Redevelopment Agency and the City of Elk Grove offering current programs.

SHRA is utilizing a $30M CDBG grant to positively affect areas severely impacted by foreclosures that are not readily able to recover without assistance. The City of Elk Grove has a plan in place to use $2.4M of CDBG money by August 2010 for down payment assistance and some acquisition and rehabilitation of homes within that city’s limits. There is apparently enough funds to assist between 10-20 first-time homebuyers with silent seconds of between $30-60K up to 20% of the acquisition price.

Folks with an interest in Real Estate Finance are paying attention to a few recently enacted laws. SB1461 requires the disclosure of one’s DRE license number on all “solicitation materials intended to be the first point of contact with consumers.” This law takes effect July 1, 2009. AB2949 took effect January 1, 2009 and requires anyone who discovers an abandoned animal in or about a vacant property to contact animal control for the purpose of retrieval and care of the animal. AB180 amends existing California law by extending the cancellation period for a foreclosure consultation contract, requires foreclosure consultants to register with the California Department of Justice and prohibits the consultant from taking any power of attorney from an owner for any purpose.

The Real Estate Finance Forum meets at 9:00 am on the first Thursday of each month in the SAR Mack Powell Auditorium. There will be no July meeting. The next meeting will be August 6, 2009 at 9:00 am.