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FHA Plans to Offer $8,000 Upfront to First-Time Buyers

Nick Timiraos 5-13-09

One of the problems during the housing boom was that many people were able to buy a home with little or no money down, giving them little financial incentive to work hard to hold on when times got rough.

Now U.S. housing officials are working on a plan that would essentially allow some first-time buyers to purchase homes by paying little money upfront. Rather, they would be able to put an $8,000 income tax credit for first-time buyers towards their down payment on loans backed by the Federal Housing Administration. The idea is to allow home buyers to “monetize” the tax credit. Right now, home buyers must wait until they file their taxes to receive the credit.

Why Didn’t the Housing Bubble Mess With Texas?

4-30-09

Dallas’s Case-Shiller numbers have stayed flat since 2000. See the map.

Why didn’t Texas, unlike other Sunbelt states, see a housing bubble?

In Dallas, home prices have stayed flat since 2000 and they fell just 4.5% in February from a year ago, according to the Standard & Poor’s/Case-Shiller index figures released Tuesday. That compares with an 18.6% decline nationwide over the same period. Foreclosure rates in the state have remained low.

The Rortybomb blog argues that the state’s strict lending laws had something to do with it. Texas has a ban on prepayment penalties, it also doesn’t allow balloon loans or negative amortizing loans where the loan payment is less than the interest on the loan.

Industry Pushes to Extend Home-Buyer Tax Credit

By NICK TIMIRAOS 6-09-09

Worried that rising mortgage rates could damp the prospects for a housing recovery, a business group is making a new push for Congress to boost and extend a home-buyer tax credit.

In February, Congress approved a 10% tax credit for first-time home purchases, up to a maximum of $8,000. The credit, which expires Dec. 1, phases out for buyers with incomes above $170,000 for married couples and $95,000 for individuals.

The National Association of Home Builders and other industry groups have long argued that the credit isn't large enough to help reinvigorate the housing sector. Now the groups are being joined in their efforts by the Business Roundtable, an association of chief executives.

The Business Roundtable is calling on Congress to increase the credit to $15,000 and extend it to all home buyers. "What is being billed as a recovery is not showing up in the cash register yet," says Richard A. Smith, chief executive of Realogy Corp. and a member of the Business Roundtable. Realogy is the parent of real-estate brokers Century 21 and Coldwell Banker.

Why Do Borrowers Default?

Hint, it’s Not Because of High Mortgage Payments

Nick Timiroas 05-28-09

Why do borrowers default? Many have assumed it’s because mortgage payments are too high. But a new paper from the Federal Reserve Bank of Atlanta argues that unaffordable loans—with high mortgage payments relative to income from the time they’re originated—are “unlikely to be the main reason that borrowers decide to default.” Instead, unemployment and future home price declines are likely to play a bigger role. (The paper looks at loans that are unaffordable from the time they’re originated, and not at loans that may start with low “teaser” rates before jumping higher.)

The Fed paper estimates that a 1-percentage-point increase in the unemployment rate boosts the chance of a 90-day delinquency by 10%-20%, and a 10-percentage point fall in house prices raises the probability of a default by more than half. A 10-percentage-point jump in the debt-to-income ratio, meanwhile, increases the chance of a 90-day delinquency by 7%-11%.