Adding Value by Dennis O'Hagan

First Time Homebuyer Tax Credit Extended...

The First Time Homebuyer Tax Credit has been extended Into 2010!
Plus…A New Tax Credit for Certain Existing Home Owners!

It's official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

First-Time Homebuyer Tax Credit – Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.

What is a tax credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.

What is the tax credit for first-time homebuyers (FTHBs)?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is eligible for the FTHB tax credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.

• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You do not use the home as your principal residence.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.

Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

If you have any questions that fall outside the situations here, give me a call and if you do not have an accountant to speak with, I can refer you to one.

Decision Time Draws Near for First Time Buyer's Credit

While the economy continues to show signs of improvement and many housing markets are beginning to heat up, scores of would-be buyers are still waiting on the sidelines for further positive housing trends. But for first-time buyers, time is running short on the federal government's $8,000 tax credit.

Though the official expiration date of the credit is December 1, in reality on-the-fence buyers will need to make a decision one way or the other fairly soon. The reason: in order to qualify for the credit, the home purchase must close by December 1st. Merely having loan approval, an accepted offer or a signed contract won't be enough to qualify for the Housing and Economic Recovery Act.

Decision-Making Timeline - While each transaction is unique, closing a real estate deal is no speedy matter. On average, closing takes place 45 to 60 days after the date that the contract is signed. In order to meet the December 1st deadline, this would mean having a signing date in late September or early October. Those who consider the tax credit an important incentive but are still unsure about entering the market will need to make a decision one way or another before many more summer days pass.

To have any chance at finding a home and having an offer accepted by early October, buyers will want to wade into the home buying process right away. The immediate steps include making a final list of desired home attributes, scouting favorite neighborhoods and areas, starting the mortgage pre-approval process and beginning the home search process online.

Potential for Delays - Buying a home is a complicated process, and it is not unusual for purchases involving first-time buyers to take slightly longer than those involving experienced buyers. Some of the delays that first-time buyers may face over the coming months:

Competition with Other Buyers
While homes may be selling at a lower rate than in years past, in many areas changes in inventory have created extremely competitive buying environments. Foreclosures or other homes with greatly lowered asking prices are particularly sought after, and in many cases investors are very active in the marketplace.

Disclosures & Contingencies
The seller is obligated to disclose any material facts about the property, including any property defects or any lawsuits regarding claim to ownership on the property. Disclosures can stall negotiations and delay the contract signing depending on their nature and severity. Contingencies (written clauses in the sales contract that give protection to both the buyer and the seller of a home) can also result in some delay in negotiation, particularly if the contingency requires the seller to make specific repairs.

Appraisal
The lender will arrange for appraisal of the property, which will include a thorough inspection of the home's interior and exterior. The appraiser's report will describe the physical characteristics of the property and comparable property values will be used to determine the value of the property. If the appraisal of the home's value is lower than the agreed upon sales price, the buyer's chance of loan approval can be in jeopardy. In addition, recently added rules for appraisers have been causing some delays based upon anecdotal evidence.

Loan Approval
While interest rates remain advantageous for buyers, lenders are being much more fastidious during the approval process. Obtaining pre-approval can help prevent many delays.

The

Holiday

Season
Buyers who submit an offer in mid-fall may likely run into another roadblock to a pre-December 1st closing date: the approaching holiday season. Closing a real estate sale requires the work and attention of a number of professionals; from real estate agents to attorneys to bankers. Like many Americans, it is not uncommon for individuals in these fields to use up vacation time in the last few weeks of November. Securing a closing date during Thanksgiving week may be something approaching miraculous.

Additional Delays for Short Sales and Foreclosures
Buyers who make an offer on a short sale property or bank-owned foreclosure may find that it takes a significantly longer time to receive a reply than expected. Overall, buying these types of properties is a longer process than buying homes listed on the market by individual owners.

Key Elements of the First-Time Home Buyer Tax Credit:

1.       The tax credit only applies to first-time home buyers. The law defines a "first-time" buyer as any buyer who has not owned a home within the previous three tax years. For married couples, the homeownership history of both individuals must meet this qualification.

2.       The tax credit is only available for homes purchased between Jan. 1, 2009, and Dec. 1, 2009. For the purposes of this credit, the purchase date is the date when closing occurs and the title to the property transfers to the new home owner.

3.       As long as the property is purchased by a qualified buyer for use as a principal residence, any type of home, including single-family detached homes, townhouses, condominiums and manufactured homes can qualify for the credit.

4.       The tax credit does not have to be repaid provided that the buyers use the home as their principal residence for at least three years.

5.       The full tax credit is only available for individuals with an adjusted gross income of up to $75,000 and for married couples with a combined adjusted gross income of up to $150,000. The tax credit phases out for anyone above those income thresholds.

6.       The tax credit applies for up to 10 percent of the home's purchase price, with a maximum of $8,000. For example, a first-time buyer of a $50,000 home would be eligible for a tax credit of $5,000 while a buyer of a $150,000 home could receive a tax credit of a maximum of $8,000.

 

New law offers protections to tenants of foreclosed properties

A new federal law attempts to shed some light on the issue of how to handle a tenant occupying a property that has been foreclosed upon. The Helping Families Save Their Homes Act of 2009 (S 896) includes provisions that offer protection to tenants of foreclosed properties. These tenants will be able to stay in the home for a minimum of 90 days after foreclosure. Further, tenants with lease terms that extend beyond 90 days must be allowed to remain in the property for the duration of their lease unless the new owner plans to occupy the property as a primary residence. In any event, a tenant must be allowed to remain in the home for 90 days after foreclosure if they continue to abide by the existing lease terms (including payment of rent).

NAR has put together more information on this law on Realtor.org.

Home Buyer's Down Payment FAQs

With today's combination of lower home prices, some of the lowest interest rates the industry has ever offered, and the $8000 tax incentive for first-time buyers, buying a home has never been so attractive. The only real hurdle left for many Americans is coming up with a down payment. With this in mind, we've put together some of the most frequently asked questions we get about down payments in today's market.

Q. Are there any no-down payment programs left?

Yes. While it's true that most of the popular no-down payment programs disappeared in the wake of the subprime mortgage collapse, there are still two longstanding government-backed programs that offer mortgages with no down payment: the USDA Rural Development Program and the VA Loan Program.

A USDA Guaranteed Loan is a government-insured, 100% purchase loan. This means there is no down payment required if you – and the house you intend to buy – qualify for the program. Not all areas qualify, but you'd be surprised at how many neighborhoods in your area do. There are income and other limitations, but if coming up with a down payment is challenging, you might want to consider this program.

If you or your spouse is a military veteran, you may qualify for a 100% financed loan from the US Department of Veterans Affairs. More than 29 million veterans and service personnel qualify for this service benefit. Give us a call to find out if you're one of them.

Q. Are there any other government-insured programs that can help someone struggling with a down payment?

Yes. In 1965, the federal government created the FHA loan programs to encourage homeownership throughout the country. FHA-insured mortgages offer many benefits, including a minimum down payment of 3.5%. FHA-insured loans have grown in popularity recently due to the seller's ability to pay closing costs up to 6% and a temporary increase in loan limits up to $729,750 in certain high-cost areas, which allows more potential buyers to utilize this program.

Q. May I use a gift from family members as part of my down payment?

Yes. In many cases, immediate family can provide monetary gifts to be used as a down payment. There are restrictions of course, and strict documentation will be required, but we will gladly walk you through the finer details of this process. Be sure to mention this option when you're filling out an application with us.

Q. May I use funds from my IRA for my down payment?

Yes. First-time home buyers can use funds from an IRA under certain circumstances for a down payment. The rules regarding this option, however, can be complicated, especially with a Roth IRA, and it's important to understand any and all tax implications before tapping into these accounts. Please talk to your tax professional before making any decisions. If you don't have one, we'll gladly refer you to one we work with on a regular basis.

Q. May I use the $8,000 tax credit as my down payment?

No. At the time of the writing of this article, qualified first-time home buyers do not have direct access to the $8,000 credit to use as a down payment. In May, HUD officials made an announcement to the contrary, but statements backing the announcement were quickly withdrawn from the HUD website. This doesn't mean that HUD and lawmakers will not allow this in the future. We're following this issue closely and will let you know if anything changes. Just keep reading our newsletters and other materials we send to you or give us a call and we'll let you know if any progress has been made.

The above article was provided to us by Richard Stefanek from Primary Residential Mortgage.  If you have any questions please contact him directly at:

Richard Stefanek
Senior Loan Officer
Primary Residential Mortgage, Inc.
Phone: (469) 234-5456
Fax: (469) 234-5476
Rick.Stefanek@homeloanusa.com

Uniform Process for Short Sales Will Help Struggling Homeowners, Say Realtors®

WASHINGTON, May 14, 2009

Help is on the way for many homeowners who are facing foreclosure, thanks to new details under the Making Home Affordable Program announced today by the U.S. Treasury and the U.S. Department of Housing and Urban Development.

The Making Home Affordable Program is designed to help homeowners obtain modifications to their loan so they can afford to stay in their home. Where a modification is not possible, new incentives encourage the “quick private sale or voluntary transfer of property, which will save homeowners money and protect their financial future,” according to U.S. Treasury Secretary Timothy Geithner. The National Association of Realtors® expects that a uniform process for handling short sales and financial incentives will facilitate this process.

“NAR is pleased that the government is stepping in to help prevent foreclosures by streamlining the short-sale and deeds-in-lieu process,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “NAR has been calling for uniform short sales procedures and other initiatives that will help today’s homeowners in challenging economy.”

Short sales occur when a bank agrees to let homeowners who have fallen behind on their mortgage to sell their home for less than they owe on their mortgage. Visit www.treasury.gov for detailed information on the program changes.

“Many families are finding themselves with a mortgage that is higher than their current home value, and they are struggling,” said McMillan. “As Secretary Geithner noted, and as NAR has been advocating for many months, stemming the foreclosure crisis and stabilizing the housing market are critical to our economic recovery.”

“We have heard from Realtors® that the extensive delay in the short sale process had caused many buyers to go elsewhere and have left many would-be sellers with no option but foreclosure. We are all pleased that the government has stepped in to help homeowners and those wishing to buy a home,” McMillan said.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Further details about the $8000 First Time Homebuyer Tax Credit (Economic Stimulus Package)

By now you have probably read something about the $8000 First Time Homebuyer Tax Credit (Economic Stimulus Package).  I wanted to take some time to provide some common questions and answers about this Tax Credit.  The below Q&A pertains to any new home buyer regardless of whether you live in Texas or anywhere else within the United States.

First, the basics about the program that you may have read before:

• 1st-Time Homebuyers that purchased between 1/1/09 and 11/30/09
• The Tax Credit is equal to 10% of the purchase price, not to exceed $8,000
• Principal Residence only (includes SFR, Condos, Co-ops, and Townhomes)
• Refundable Credit which means any unused credit will be issued to you in a check.
• Annual Income not to exceed $75K (single) or $150K (couple).
• No Repayment due for the $8,000 - True Tax Credit (as long as home is kept for at least 3 years. If home is sold within 3 years, repayment for tax credit is required)

Now for the things you may not have read about:

What defines a First-Time Homeowner?  Buyers who purchase any home which is utilized as their primary residence (new or resale) between January 1st and November 30th.  As defined, the Frist-Time Homeowner could not have owned a primary residence within the last 3 years.  For married couples, if one of the spouses has owned property within the last 3 years, they are both disqualified.  Ownership of a vacation home or rental property not used a Principal Residence does not disqualify a buyer as a first-time homeowner.

Income Clarification:  What is the Income Limitation to claim the Tax Credit?  The homeowners annual income can not exceed $75,000 to receive the full tax credit or $150,000 per couple to receive the full tax credit.  Are you automatically disqualified because your income is above these limits mentioned?  You are still qualified for the reduced refund if your MAGI (modified adjusted gross income) is above $75,000 (single) or $150,000 (married), but not above $95,000 (single) or $170,000 (married).  If your income is above $95,000 (single) or $170,000 (married) then you no longer qualify.  What is MAGI?  This term is defined by the IRS and is not your Adjusted Gross Income (AGI).  It's a calculation of your AGI and personalized deductions.  It is best to seek an accountant for a clear understanding.

How is this tax credit different from the tax credit originally passed in July 2008?  The biggest difference is that this is a true tax CREDIT, not a deduction.  It is also no longer a loan, which means you will not need to pay it back over a period of time.  The only exception for this credit is that you must keep your home for at least 3 years.  If you sell your home before your third year, the refund would need to be paid back.

What does it mean that the tax credit is 'refundable'?  Plain and simple, this is a credit and not a loan nor a deduction.  Any unused portion from your 2008 or 2009 taxes will be refunded to you in the form of a check or wire.  For example, if you owe the IRS $5000 in taxes, and your expected tax credit is $8000 then your net difference of $3000 will be refunded to you.  If you owe $10,000 in taxes, then the $8000 will be applied so that you only have to pay the IRS $2000.  And finally, if you are to receive a credit from your taxes of $3000, then the $8000 will be added to it for a total credit of $11,000.

What type of home qualifies?  Any home used as a primary residence.  This obviously includes single-family residence, but also includes attached homes like townhomes, condo's, manufactured homes, and even houseboats.

I am building a home. Would I still qualify for the credit?  If you purchase the home from a home builder, then the 'settlement' date on the contract must be between 1/1/09 and 11/30/09.  If you have hired a contractor to build your home, then the tax code defines the purchase date as the 1st date the homebuyer occupies the home.  This date must be between 1/1/09 and 11/30/09.

My home was purchase in 2008, would I still qualify for this tax credit?  Not if your home was purchased prior to 12/31/08.  However, if you purchased between 4/9/08 and 12/31/08 then you would possibly qualify for the $7500 tax credit which was approved during the Bush Administration.

How do I claim the $8000 first-time homebuyer tax credit?  The claim is made on your federal income tax return.  The first step is to complete form 5406 which helps determine the amount of your credit.  The amount is then placed on line 69 of the 1040 form.  No other approval is necessary, however, you will want to be sure you qualify based on the First Time Home Buyer guidelines and Income limitations.

What if I already filed my 2008 taxes and claimed the $7500 tax credit?  Home buyers need to file an amended return on a 1040X form.  It's always best to consult an accountant prior to filing your return.

Do I have to claim the tax credit in 2009 or can I claim it in 2008?  The law was written in a way that homebuyers could claim this credit in either year.  Someone with an adjustable income may 'elect' to claim the credit in 2008 because they know their current MAGI for 2008 where as in 2009 the MAGI may be above allowable limits.  If the 2008 tax returns have been filed, see an accountant for further assistance and suggestions.

Does a homeowner have to wait to file their 2009 tax returns in order to utilize their tax credit?  Yes.  There is not a current program which allows you to utilize this credit prior to filing your tax returns.  Some homeowners may choose to drop their deductions within their paychecks weekly knowing a credit will be received.  My suggestion is to wait for the full return at the end of the year or file an amended 2008 tax return.  Should you choose to adjust your deductions, consultant an accountant.

There are a few more items that could disqualify a First-Time Homebuyer from this tax credit:

• Income exceeds the MAGI of $95,000 (single) and $170,000 (married)
• Homebuyer stop using the home as a primary residence
• Non-resident alien (see the definition in the IRS Publication 519)
• If you have utilized any state or city bond program
• If the homeowner sells the home before the completion of the third year.
• Homebuyer purchase the home from a close relative which including but not limited to: parent, spouse, grandparent, child, or grandchild (arms length transaction)

Should you have any additional questions about this program, feel free to contact me directly by phone or email.  I'll be happy to answer any questions you may have.

First-Time Home Buyer Tax Credit

BIG THANKS to Belinda Alford from Legacy Texas Mortgage for providing us with the details on the "First-Time Home Buyer Tax Credit".

 

Belinda Alford

Your Personal Mortgage Loan Consultant...for life!

LegacyTexas Mortgage

ph: 972-588-8456

cell ph: 817-821-6717

fax: 1-866-284-0087

First-Time HomeBuyer Tax Credit As Modified in the American Recovery and Reinvestment Act Major Modifications Italicized February 2009
Feature	Credit As Created July 2008 Applies to All Qualified Purchases ON or AFTER April 9, 2008	Revised Credit – Effective for Purchases ON or AFTER January 1, 2009 and BEFORE December 1, 2009
Amount of Credit	Lesser of 10% of cost of home or $7,500	Maximum credit amount increased to $8,000
Eligible Property	Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence.	No Change All principal residences eligible.
Refundable	Yes.  Reduces (or can eliminate) income tax liability for the year of purchase.  Any unused amount of tax credit refunded to purchaser.	No Change Purchasers will continue to receive refund for unused amount when tax return is filed.
Income Limit	Yes.  Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return).  Phases out above those caps           ($95,000-$170,000).	No Change Same income limits continue to apply.
First-Time HomeBuyers Only	Yes.  Purchaser (and purchaser’s spouse) may not have owned a principal residence in the 3 previous years prior to purchase.	No Change Still available to First-Time purchasers only. 3 year rule continues to apply.
Revenue Bond Financing	No credit allowed if home financed with state/local bond funding.	Purchasers who utilize revenue bond financing can use credit.
Repayment	Yes.  Portion (6.67% pf credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.	No repayment for purchases ON or AFTER January 1, 2009 and before December 1, 2009.
Recapture	If home sold before 15 year repayment period ends, then outstanding balance of repayment amount recaptured on sale.	If home is sold within 3 years of purchase, entire amount of credit is recaptured on sale.  Applies only to homes purchased in 2009.
Termination	July 1, 2009 (but note program changes for 2009)	December 1, 2009
Effective Date	Purchases on or after April 9, 2008 and before January 1, 2009.  Repayment to begin for 2010 tax year.	All revisions are effective as of January 1, 2009.

$8,000 tax credit for First Time Homebuyers

Good news!

The new economic stimulus plan includes an $8,000 tax credit for First Time Homebuyers.

Now there is even more money than before for First Time Homebuyers who close before 11/30/09 and it does NOT have to be re-paid as in the previous plan, unless the home is sold within 3 years.

Stimulus bill restores Fannie, Freddie, FHA limits

By Inman_News - (http://www.inman.com)

Created 2009-02-13 15:12

Congress today approved a $790 billion economic stimulus bill that includes a modest expansion of a first-time homebuyer tax credit and restores to $729,750 the upper loan limit in high-cost areas for Fannie Mae, Freddie Mac and FHA loan guarantee programs.

The compromise bill  increases the $7,500 limit on an existing tax credit for first-time homebuyers to $8,000, extends its sunset from July 1 to Dec. 1, and eliminates a requirement to repay the credit (unless a home is resold within three years).

The loan limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs, which were bumped back down to $625,500 in high-cost areas on Jan. 1, were restored to the temporary $729,750 approved by Congress a year ago in the Economic Stimulus Act of 2008.

Fannie and Freddie's conforming loan limits -- which began 2008 at $417,000 -- were allowed to stretch to 125 percent of the median home price in high-priced housing markets for much of last year. That was intended to be a temporary measure to address the high cost of non-conforming "jumbo" loans after the collapse of the private-label secondary mortgage market in August 2007.

The $729,750 limit expired on Jan. 1, and Fannie, Freddie and FHA are currently permitted to guarantee loans of up to 115 percent of the median home price in high-cost markets, with a cap of $625,500 (that's 150 percent of the $417,000 conforming loan limit). HR 1 will restore the limit to 125 percent of median home price in high cost markets, up to $729,750, for the remainder of 2009.

FHA began 2008 with a $200,160 "floor" loan limit in normal markets and a maximum loan limit of $362,790 in high-cost markets. As part of the Economic Stimulus Act, Congress increased FHA's floor limit to $271,050 in normal markets and the upper limit in high cost areas to $729,750. That move helped increase the Federal Housing Administration's share of purchase mortgage originations [4] from less than 4 percent in 2006 to 21 percent in September.

The compromise bill also provides $200 million for the U.S. Department of Agriculture's Rural Housing Insurance Fund. Although that funding will support $11.5 billion in single-family housing loans, it's less than half the $500 million proposed in the earlier House version of the bill.

The USDA Rural Housing Service provides loan guarantees and a smaller number of direct loans with down payments as low as zero percent to homeowners in rural areas who do not exceed the program's income requirements [5].

In negotiations between House and Senate leaders, the $5.2 billion the House had earmarked for community development block grants and a neighborhood stabilization program was also slashed to $3 billion. Of that, $2 billion is earmarked for the neighborhood stabilization program, which helps states, local governments, and nonprofits purchase and rehabilitate foreclosed, vacant properties.

The bill will also allocate $1.5 billion for a homelessness prevention fund that will provide short-term rental assistance, housing relocation, and services for families who may become homeless due to the economic crisis.

While the stimulus bill may have fallen short of the expectations of some housing industry groups, the Obama administration is promising more foreclosure-prevention efforts as part of an ongoing financial stability plan for banks. The White House announced today that it will provide more details next week about a comprehensive housing plan to help borrowers avoid foreclosure.

Treasury Secretary Timothy Geithner this week said the program will provide $50 billion for foreclosure prevention from the $700 billion Troubled Asset Relief Program (TARP), and left open the possibility of expanding an existing $600 billion Federal Reserve program to drive down mortgage rates through the purchase of mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae .  The White House said President Obama will discuss the administration's housing plan at a speech Wednesday in Phoenix.

Citi, JPMorgan temporarily halt foreclosures

Banks announce weeks-long moratoria on foreclosures as the government works out a rescue plan for homeowners.

By Ben Rooney, CNNMoney.com staff writer

Last Updated: February 13, 2009: 6:14 PM ET

NEW YORK

(CNNMoney.com) -- JPMorgan Chase and Citigroup Inc. announced plans Friday to temporarily halt foreclosures as the government works to finalize the details of a financial rescue package that could include billions of dollars in aid for struggling homeowners.

The announcements come as regulators and lawmakers have stepped up pressure on financial institutions to suspend foreclosures until the plan comes out.

Vikram Pandit, Citi's (C, Fortune 500) chief executive, and Jamie Dimon, JPMorgan's (JPM, Fortune 500) CEO, both indicated their willingness to suspend foreclosures during testimony before Congress Wednesday.

Citi said the moratorium is effective Feb. 12 and will remain in place until March 12, or until the Obama Administration finalizes the details of its loan modification program, whichever comes first, the bank said.

The suspension will apply to home loans on a borrower's principal residence and to loans serviced by Citi in cases where an understanding has been reached with the investor.

In a letter to Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee, Dimon said JPMorgan has initiated a foreclosure moratorium through March 6, which would extend a program the bank announced last year.

"We believe three weeks is adequate time for the Treasury to announce - and for us to implement - a new plan," Dimon said.

Treasury Secretary Tim Geithner on Tuesday outlined the Administration's priorities for the second half of the $700 billion allocated under the Troubled Asset Relief Program, which includes spending $50 billion on foreclosure relief.

However, the details of that plan have yet to be worked out.  Geithner and Housing Secretary Shaun Donovan have been meeting with banks, housing advocates and trade organizations this week to listen to their foreclosure prevention proposals.

Among the proposals being discussed: requiring homeowners to take an affordability test and undergo a re-appraisal to see if they are eligible for a government subsidy. Regulators are also looking into more efficient ways to modify loans for borrowers already in default.

President Obama will elaborate on the Administration's foreclosure plan Wednesday, when he delivers a speech in Phoenix, White Hose Press Secretary Robert Gibbs told reporters Friday.

"We stand ready to work with you [Frank] to put the appropriate processes in place, including a national modification standard, to reduce the incidence of foreclosure and to encourage long-term, sustainable home mortgages," Dimon wrote.

In November, Citi announced a Homeownership Assistance Program, which was aimed at helping 500,000 Citi borrowers with mortgages worth about $20 billion stay in their homes.

Under that plan, borrowers needed to have "sufficient income" and be "making a good-faith effort" to repay their loans to qualify for assistance, said Steve Silverman, a Citi spokesman. The current moratorium lifts those restrictions, he said.

Separately, mortgage giant Fannie Mae said it will suspend all foreclosure sales and evictions of occupied properties through March 6 in anticipation of the government's mortgage assistance plan.

The company also said it has adopted a national Real Estate Owned Rental Policy that allows renters in Fannie Mae-owned foreclosed properties to remain in their homes or receive financial assistance if they choose to seek new housing.

The company had previously frozen foreclosure sales through January and had ceased evictions through the end of February.

Fannie Mae (FNM, Fortune 500)and fellow government-sponsored lenderFreddie Mac (FRE, Fortune 500) are the largest sources of funding for the U.S. housing market, with mortgage portfolios worth $1.7 trillion.

Both companies have suffered major losses as delinquencies rise amid the turmoil in the housing market. In September, Fannie and Freddie were placed into conservatorship by the federal government and have received billions of dollars in federal aid.  

First Published: February 13, 2009: 1:40 PM ET