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Tax Credit for First-Time Homebuyers Approved Today!

May 29th, 2009 10:40 PM

DONOVAN ANNOUNCES RECOVERY ACT'S HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME

FHA plan will stimulate new home sales and help stabilize housing market

WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA's new mortgagee letter, visit HUD's website.

"We believe this is a real win for everyone," said Donovan. "Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation's housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today's announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today's action permits the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit.

Posted by Michael Tadros on May 29th, 2009 10:40 PMPost a Comment (0)

Market Update

November 12th, 2008 11:45 PM

Wednesday, November 12, 2008 11:07am ET

Current Trend Direction: Battling Overhead Resistance

Current Price of FNMA 6% Bond: $101.25, +25bp

Mortgage Bonds are trading higher, in reaction to continued weakness in the Stock market. Adding to this morning's negative sentiment in Stocks was Best Buy releasing their earnings outlook. The electronics retailer said that there has been a "rapid, seismic" slowdown in consumer spending and has lowered their earnings guidance for the year, citing "uncertainty in consumer spending"...what an understatement. This is right on the heels of Circuit City closing 150 stores.

And piling onto the bad news is lower earnings from retailer Macy's. This holiday season looks to be a disaster. And of interesting note, shares of General Motors fell yesterday below $3 for the first time since April 13, 1943. The automaker was not even making cars at that time but producing only military equipment for WWII.

There are no economic reports set for release today, but at 1pm ET the Treasury is set to auction off $20B in 10-Year Notes - and if this auction is not well received, it could temper the current rally in Bonds.

At the moment, Bond prices are pressing against both the 50 and 200-day Moving Averages and these levels may serve as a ceiling of resistance. Much will depend on the direction of Stocks, as well as the appetite for the aforementioned Treasury auction. Should Bond prices bust above this ceiling, it will be a bullish sign - however, there is a Falling Trendline viewable on the Bond Page that will be another hurdle for Bonds to overcome.

In the event that prices are pushed back below the ceiling of resistance, we will need to take a Locking stance, as much ground can be lost before a floor of support would be reached. We can afford to Float for now, and watch how the battle unfolds.

Posted by on November 12th, 2008 11:45 PMPost a Comment (0)

Another Roller Coaster

August 6th, 2008 9:06 PM

Market Wrap: Both the stock and bond markets got off to a rough start today after Freddie Mac reported 2nd Qtr. losses that were over three times higher than expected. Our benchmark FNMA 6.0% bond ended the session 25bp lower to close at $99.50 but had traded down by as much as 63bp before rallying off of its intraday low. Better than expected results from a $17 billion 10-yr Treasury note auction allowed the bond to bounce back. A prior new auction of 10-yr notes saw a foreign participation level of 28.4% while today's had a better level of 34%. Meanwhile, stocks rebounded from their session lows following the Energy Information Administration's (EIA) weekly report on petroleum inventories. The EIA report showed crude oil inventory rising by 1.7 million barrels vs. expectations of a 1.2 million barrel increase while distillate fuel inventories rose by 2.8 million barrels vs. expectations of 2.3 million barrels. The higher inventory levels prompted a retreat in oil prices to about $118/barrel and this provided a boost for the stock market with the major indices trading modestly higher. The Dow ended 40 points higher to close at 11,656 while the NASDAQ Composite Index gained 28 points to close at 2,378. The broader S&P 500 Index gained 4 points to close at 1,289.

Posted by on August 6th, 2008 9:06 PMPost a Comment (0)

More Inflation Concerns

August 5th, 2008 9:45 PM

Market Wrap: After trading without much conviction for most of the session, our benchmark FNMA 6.0% bond fell 25bp to close at $99.75 in the aftermath of the Fed's interest rate decision and policy statement. A sharp rally in the stock market stemming from the Fed's decision to keep interest rates on hold at 2% along with oil prices falling below $119/barrel helped pull money away from the bond market and into stocks. A key phrase in policy statement was 'the inflation outlook remains highly uncertain' and it appears the Fed is willing to keep interest rates on hold for now in favor of economic growth over fighting inflation. It was surprising to see Philly Fed President and known inflation hawk Charles Plosser vote with the majority to keep interest rates on hold while another hawk, Dallas Fed President Richard Fisher, voted for a rate hike. Regardless, the stock market was pleased with the outcome while the bond market was hit with a wave of late session selling. The major indices rocketed higher with the Dow gaining 331 points to close at 11,615 while the NASDAQ Composite Index jumped 64 points to close at 2,349. The broader S&P 500 Index shot 35 points higher to close at 1,284.

Posted by on August 5th, 2008 9:45 PMPost a Comment (0)

Inflation News Increases Rates Today

August 4th, 2008 9:31 PM

Market Wrap: The latest inflation data from the Personal Income and Spending Report for June was UGLY with overall PCE inflation jumping by 0.8% for the month and 4.1% over the past year, the worst jolt in 27 years. The Core PCE inflation rate matched expectations at 0.3% leaving the year-over-year rate at 2.3% and above the Fed's target rate between 1-2%. To make matters a little worse, Personal Income was above forecasts at 0.1% vs. -0.1% while Personal Spending also came in a little high at 0.6% vs. a 0.5% consensus. Bonds sold off hard on the hot inflation news with our benchmark FNMA 6.0% bond plunging 44bp for a close at $100.00. The stock market didn't fare much better as energy, commodities, and materials stocks were sold on a sizeable drop in crude oil futures from a reduced threat to oil infrastructure in the Gulf of Mexico from Tropical Storm Edouard. Even if there is storm damage to refineries and oil platforms the oil market believes there will be less demand for oil and the price will continue to drop. The major indices again ended in negative territory with the Dow losing 42 points to close at 11,284 while the NASDAQ Composite Index lost 25 points to close at 2,285. The broader S&P 500 Index dropped 11 points to close at 1,249.

Posted by on August 4th, 2008 9:31 PMPost a Comment (0)