Debbi Burright knows just how powerful the first-time homebuyer tax
credit can be. Last November, the Portland, Ore., broker of Keller
Williams Realty Portland Premiere worked with a customer who took
advantage of the credit to buy a house after she introduced the
incentive to him. 

He was the first of three of Burright’s clients to use the credit at
her recommendation—and that was before the federal government improved
the program in February as part of its sweeping economic stimulus

Before the change, the credit was for a maximum of $7,500 and had to
be repaid over 15 years. Today it’s for up to $8,000 and doesn’t have
to be repaid if borrowers own their house for at least three years. The
elimination of the repayment feature is retroactive to the start of
this year, but doesn’t apply to transactions in 2008.

The tax credit is really a phenomenal thing, says Burright, who promoted the credit heavily last year.

The improvements to the credit, heavily backed by NAR, as well as
the restoration of last year’s high-cost conforming and FHA loan limits
of $729,750 (they had dropped to $625,500 at the start of 2009),
promise to be game-changing because they directly address reasons
households have been sitting on the fence, says NAR President Charles

These changes are aimed at giving people the tools they need to buy right now, he says.

Burright agrees and would like to see the federal government go even
further. I’d love to see the elimination of the repayment feature made
retroactive for taxpayers who bought last year, she says.

Sen. Johnny Isakson, R-Ga., the original sponsor of the tax credit
and author of a Senate provision that would have increased it to
$15,000, told The Atlanta Journal-Constitution in February that he hasn’t ruled out additional changes—including making it available to all home buyers.

Broad Real Estate Focus

The $8,000 credit and the higher loan limits could result in
hundreds of thousands of new buyers and move-up buyers coming into the
market this year, says NAR Chief Economist Lawrence Yun.

But these two aspects of the stimulus are just the tip of the
iceberg for real estate. The new law includes tens of billions of
dollars in other assistance through a variety of programs that impact
real estate, such as commercial real estate tax credits and grants for
low-income rental housing.

Foreclosure Prevention Plan

Separate from the stimulus package, President Obama has made up to
$200 billion available to shore up investor confidence in the mortgage
secondary market and up to $75 billion in incentives to encourage
lenders and borrowers to refinance troubled loans. The effort is
critical because of the destabilizing impact of high foreclosures and
distressed sales, says NAR.

When people lose homes to foreclosure, our communities, the housing
market, and our economy all suffer, McMillan says. The plan details

  • Help for home owners making their payments but at risk of default.
    Home owners with a conforming loan could be eligible to refinance as
    long as their mortgage doesn’t exceed 105 percent of the home’s current
    market value.
  • Help for home owners already in default and in need of loan
    modification. For lenders that voluntarily agree to lower a borrower’s
    payment so that it makes up no more than 38 percent of the borrower’s
    income, the government would share the cost of lowering the mortgage
    burden further.
  • Doubled resources to Fannie Mae and Freddie Mac. To encourage
    investors to buy the secondary market companies’ mortgage-backed
    securities, the government promises to back them to up to $400 billion,
    twice the current amount.

Guidelines for the program could be out before April 1. If you’re
working with borrowers who are having trouble keeping up on their
mortgage, tell them to call their mortgage servicer or a HUD-approved
nonprofit housing counseling agency.

The stimulus package and foreclosure plan are a good start to
solving the nation’s economic woes, says NAR 2009 President-elect Vicki
Cox Golder. By helping good people caught in bad mortgages, we’re
keeping inventory from being added to a market already under stress.

Mortgage Interest Deduction at Risk

There’s one item in the Obama administration’s budget proposal that
has NAR leaders calling foul. The proposal, unveiled in late February,
would cut itemized deductions for high-income households. That would
severely impact the mortgage interest deduction and cause a ripple
effect throughout housing markets at all price levels. Read NAR Chief
Economist Lawrence Yun’s take on the proposal and what NAR is doing
about it on page 14.