Could Congress’ ambitious second round of home purchase tax credits — especially the $6,500 repeat buyer credit — turn out to be a wimp in terms of economic stimulus clout?
With the April 30 deadline to sign home purchase contracts for both the $8,000 first-time buyer credit and the $6,500 version looming, some real estate and building experts are concerned that fewer consumers may be motivated by the credits this spring than last fall.
The $6,500 credit, in particular, appears to be generating relatively little buzz among shoppers. As Gloria Ruesch, a broker with N.P. Dodge Real Estate in Omaha, Neb., put it, “I don’t think most people have any idea about it, or just don’t understand it. No one’s talking about it.” [more]

The Obama administration plans to use $4.25 billion in economic
stimulus money for the creation of subsidized rental housing units in
cities across the country. The money would pay for both the
construction of new apartment buildings and the refurbishment of
foreclosed homes. An additional $4 billion of the $14 billion that the
Department of Housing and Urban Development received from the federal
stimulus package will go toward repairing the nation’s current public
housing stock. The program marks a drastic shift from former President
George W. Bush’s “ownership society,” the idea that the ultimate goal
for all Americans should be home ownership. But opponents of the Obama
administration’s proposal warn that sometimes rent can be more
expensive than a mortgage. [more]

Some of the money that the Obama administration is spending on the Home
Affordable Modification Program, aimed at homeowners facing
foreclosure, is benefitting corrupt mortgage servicers, an Associated
Press investigation found. Under the program, if a borrower who
received a mortgage modification makes payments on time for three
months, the mortgage servicing company that modified the loan may
receive up to $5,500 for each successful modification. In order to
receive a larger payoff, some companies have turned to illegal
practices. Of the 38 servicers the government is paying to help
distressed homeowners, at least 30 face lawsuits from homeowners and
advocates claiming they charged illegally high fees; 14 have been
accused of misleading customers before the program began; and three
have settled federal predatory collection allegations by pledging to
correct their behavior. The Treasury Department said it has no choice
but to work with all servicers — refusing to work with a
non-reputable firm would deprive homeowners whose mortgages came from
that servicer from getting modifications, said Treasury spokesperson
Jenni Engebretsen. [more]

The largest U.S. banks have had the most trouble keeping up with demand
for mortgage modifications, according to a Treasury Department report
to be released today. Of the 31 companies participating in the Obama
administration’s loan modification program, Bank of America, Citigroup,
JPMorgan Chase and Wells Fargo will probably have struggled to assist
homeowners, compared to smaller banks that will have had more success,
according to analyst David Sisko, head of default management services
at Deloitte and Touche. There have been about 200,000 trial loan
modifications under the program so far, and the Obama administration
hopes to see at least 500,000 started by November 1. [more]

Homeowners with higher-priced mortgages are having a hard time getting
help amid the housing crisis. They do not qualify for the Obama
administration’s mortgage modification plan and are having trouble
selling their homes because prospective buyers are unable to get
financing. Industry professionals say the high-end slowdown is holding
up recovery for the rest of the market because sellers with homes that
are lower-priced have to continue to reduce their prices to compete
with higher-end homes. [more]

In a letter sent Thursday to companies participating in the
government’s mortgage modification program, the Obama administration
urged mortgage servicing companies to work faster to modify mortgages.
The program has offered financial incentives to the 25 companies that
have agreed to participate. So far, more than 270,000 borrowers have
been able to modify their mortgages through the program. But the
administration wants the program to help 4 million homeowners. [more]

Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University and former assistant secretary of the Department of Housing and Urban Planning, said on Bloomberg News not to expect a housing upturn any time soon. Retsinas said that as long as there are foreclosures and job losses, the housing market will continue to decline. While the Obama administration has introduced aggressive loan modification programs to help people pay their mortgages, Retsinas said he is not sure if these programs will withstand increasing job losses and be effective. He said that preventing job losses and foreclosures, not just loan modifications, should be part of the main focus of government initiatives. As long as homes continue to be foreclosed on, the housing market won’t stabilize.

From the April issue: Call it the third rail of the federal tax
system: the politically untouchable cluster of special benefits and
subsidies set aside exclusively for homeowners, including deductions
for mortgage interest, local property taxes and capital gains
exclusions on up to $500,000 in sale profits. Is the Obama
administration serious about beginning to clamp limits on at least some
of these subsidies? The administration isn’t commenting on anything
beyond what was proposed in its first budget, submitted at the end of
February, but housing and banking trade groups are worried that the
initial proposal to cut back on the ability of upper-income families to
write off mortgage interest and other expenses is just the opening move
in a longer-range effort to reform the federal tax code. [more]