Monday, October 05, 2009

NATION’S HOME BUYERS NEED A BIGGER STIMULUS PACKAGE FROM UNCLE SAM

To help spark a sustained economic recovery, the nation’s beleaguered housing market needs Uncle Sam to create a bigger stimulus package designed for all types of American home buyers, industry experts say.

“With the $8,000 first-time home buyer tax credit set to expire at the end of November, prospects for being able to purchase a newly built home and have that transaction completed in time to take advantage of the credit has dimmed considerably,” said Joe Robson, chairman of the National Association of Home Builders (NAHB).

“Congress must take immediate action to extend the tax credit if the positive momentum in home sales is to continue so that a sustained housing and economic recovery can take hold,” Robson said.

The NAHB is calling on Congress to extend the first-time buyer tax credit for another year and to offer it to all income-eligible buyers of primary residences.

A major boost to housing also has come through the Federal Housing Administration (FHA), analysts say. According to some estimates, 25 percent of homes purchased this year in the United States will use FHA-insured mortgages, up from a meager 2 percent just three years ago. The percentage of FHA loans issued in the metro Chicago condo market could be even higher.

Through the first eight months of 2009, approximately 15,000 attached homes, primarily condominiums of various types, were sold in the Chicago area, according to Midwest Real Estate Data, LLC, the regional multiple-listing service.

Lisa Campobasso, an agent at RE/MAX Vision 212 in Chicago, said: “About half the transactions I’ve closed this year involved FHA-backed mortgages, and most of those folks were first-time buyers purchasing a condo.”

Campobasso explained that many first-time buyers are short on cash and turn to FHA-insured financing because it allows them to put down as little as 3.5 percent, in contrast to the 10 percent down payment required for most conventional loans.

Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network, noted that new FHA rules scheduled to take effect on November 2 are designed to improve the lending process, but they could cause some short-term delays in completing loans and closing purchases.

The prime reason the new regulations may slow down the purchasing process when they become effective is that they eliminate what are known as spot approvals of individual condominium units. Instead, the entire condominium property will need to be approved before an FHA-insured loan can be used.

Even those condo complexes that now have FHA approval will need to be recertified after November 2 if their approval was completed more than two years ago. However, it may be possible to expedite that certification process by seeking a loan from a mortgage broker that is also an FHA Direct Endorsement Lender.

The new FHA regulations also contain other restrictions that could make life more complicated for condo buyers, including the following changes:

• At least 50 percent of units in the project must be owner occupied or under contract to owners who intend to occupy them.

• For new construction condominiums, at least 50 percent of the total number of units planned must be sold or under contract before an FHA insured mortgage can be closed.

• No more than 25 percent of the total floor area of a condo property can be used for commercial purposes.

• No more than 15 percent of the units can be more than 30 days past due on their assessment payments to the condominium association.

There is, however, some good news for borrowers in the new FHA regulations.

For example, they eliminate the long-time prohibition against FHA financing for units in condominiums where the homeowners association retains a right of first refusal, Merrion reported.