Tax Credit!

Think There's Lots of Time for Tax Credit? Think Again
Chicago Tribune, By Mary Ellen Podmolik

July 10, 2009

Do you hear that clock ticking?

It's the sound of time creeping up on the expiration of the $8,000 tax credit for first-time home buyers.

Yes, it's only July and the credit doesn't expire until Dec. 1. And yes, it's definitely in the best interests of real estate agents and lenders to instill a sense of urgency in buyers right now, particularly because August is typically a ho-hum month.

But unless the federal government decides to extend or expand the credit -- as the housing industry has campaigned for -- it may be time for potential first-time buyers to reset their watches.

That's because it's not that a contract must be signed before Dec. 1 or a loan approved. It's that the sale has to close before Dec. 1.

"There's not as much sand in the hourglass as we may think," said Jim Merrion, regional director at Re/Max Northern Illinois.

Buyers, many advise, should have a purchase contract signed by early October so they've got 45 to 60 days to safely close the deal. Buyers who want to be in a new home by Thanksgiving need a contract by late September.

Buying a home is a complicated process, particularly after the fun of looking at potential homes descends into financial minutia.

"Any time you're dealing with first-time home buyers there's little issues that come up," said Peter Thompson, a senior loan officer at Wintrust Mortgage. "They've never been through it and they don't understand the process."

That process has become more laborious. New appraisal rules have kicked in and the lending environment remains challenging. Also, it can take significantly longer to get an answer back on an offer for a distressed property than a traditional one.

"These days, everything is dragging out," said Scott Gerami, broker of Real Time Realty in Naperville . "It seems like every transaction I've had in the past three to four months hasn't closed on time."

It's a different scenario for new home construction.

Cambridge Homes, for instance, started construction on some spec homes in anticipation of increased demand because of the tax credit. Buying one of those homes, and participating in some of the decision-making, requires the process to be started in short order.

"This is not going to be like Christmas shopping," said Cambridge vice president Dave Smith. "The night before is not going to work. The month before is not going to work."

Troubling Numbers

Two new reports paint a clear picture of how troubled the housing market was this spring.

The first, issued this week by First American CoreLogic, showed that the portion of Chicago-area mortgages that were 90 or more days delinquent rose to 7.4 percent in May, compared with 4.2 percent in May 2008. That's higher than the 6.5 percent delinquency rate for Illinois and for the nation. The Chicago area's foreclosure rate also was higher than that of the state and nation.

Report No. 2 comes from the Office of the Comptroller of the Currency and the Office of Thrift Supervision. It concluded that loan modifications were on the increase even before the Obama administration's Making Home Affordable program got rolling, but so were the number of foreclosures. The report also provided fresh evidence that the foreclosure crisis continues to extend into the prime borrowing market, defined in this report as those borrowers who have credit scores of 660 or above.

Almost 3 percent of prime mortgages were 60 days or more past due in the year's first quarter, double the percentage of seriously delinquent loans in 2008's first three months.

Meanwhile, the number of foreclosures in process rose 72.6 percent from the year-ago period, to 844,389 cases nationally. Not all will become bank-owned properties because of mitigation efforts.

The report's bright spot centers on efforts to help consumers keep their homes. New loan modifications surpassed 185,000 during the quarter, a 55 percent increase from 2008's fourth quarter and up more than 170 percent from a year ago.

But not all of those modifications stuck. The report also found that nine months after a modification was made, about half of Fannie Mae- and Freddie Mac-backed loans had re-defaulted and were 60 days or more past due.



Debra Noguera
Home Mortgage Consultant
Wells Fargo Home Mortgage
MAC MACT5442-011
1209 S. White Chapel Blvd., Suite 100
Southlake , TX 76092
817.481.0005 x 11 Tel
817.722.1912 Cell
866.931.0346 eFax
debra.noguera@wellsfargo.com
http://www.wfhm.com/debra-noguera


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