Friday, June 18, 2010

The Tax Credit Extension Passed the Senate

On June 16, the Senate passed the first time homebuyer tax credit extension as an amendment to an extension of unemployment benefits. As you know, the first time homebuyer tax credit ended on April 30, but buyers with executed contracts on April 30 had until June 30 to close on those contracts.

Locally, I have been getting emails from title companies promising to stay open until midnight on June 28, 29, and 30 so that buyers will be able to close and fund on their loans. Having attended more closings than I can count, I cannot personally imagine a more potentially stressful experience that trying to close a purchase loan at 10:00 P.M.!

Fortunately, everyone is going to get a reprieve. The Senate extension means that the tax credit still extends only to home buyers who had executed contracts no later than April 30, but those borrowers will now have until September 30 to close. Apparently, enforcing the June 30 deadline would have deprived about 180,000 borrowers of the opportunity to receive the tax credit, as well as depriving thousands of loan officers and escrow officers of a good night's sleep.

With so many new regulations, closing and funding take longer than in the past because the new HUD forms have to be compared to the GFE and the process of HUD approval can take up to 72 hours. That, coupled with the fact that the drop in interest rates at the end of May brought in a glut of refinances which are backing up many underwriters more than 10 business days, means that this extension really is necessary. And when we look at the fact that new purchase contracts have dropped off since April 30, closing these buyers is very important to everyone's bottom line.

But now it looks as though, on this issue at least, we can all rest easy--just in time for the weekend!

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