Beltway Briefing - Home Buyer Tax Credit Forms and FHA Changes
IRS Releases New Forms, Instructions
The IRS has released IR-2010-006 providing a revised Form 5405 to reflect the changes to the tax credit made in the extension and expansion legislation enacted in November 2009. The release reminds taxpayers that all tax returns claiming the tax credit must be filed manually (i.e., they cannot utilize the IRS E-File automatic system). The revised form includes a section for those repeat buyers who are eligible to claim the $6500 tax credit. The HUD-1 or evidence of the transaction must be filed with all returns claiming the credit (both the $8000 and $6500 credits). Individuals who claim the repeat buyer credit must also provide evidence that they have owned and used the prior residence for 5 consecutive years. The instructions indicate that property tax or homeowners insurance records are sufficient for this purpose.
IRS release, instructions, and forms >
The Home Buyer Tax Credit >
FHA Announces Policy Enhancements to Better Manage Risk
On January 20, 2010, the Federal Housing Administration (FHA) announced major changes to ensure its long-term financial soundness. NAR has met with the FHA Commissioner on several occasions to discuss the state of the housing market and to underscore FHA’s invaluable role. By all accounts the new changes are a victory for home buyers. FHA has carefully balanced the need to make financial reforms with the need to keep FHA available to a large segment of consumers. This is evident by retaining the 3.5 percent minimum down payment requirement and allowing the upfront mortgage insurance premium to be financed.
FHA announced changes in the following areas: 1) The upfront mortgage insurance premium (UFMIP) will increase but may be financed; 2) Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment, however, the minimum down payment will remain at 3.5 percent for all other borrowers; 3) FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent); and 4) Seller concessions will be reduced to 3 percent from 6 percent.
On January 21, 2010, FHA released Mortgagee Letter 2010-02 and 2010-03, which provide details on the UFMIP increase and new procedures for terminating lenders underwriting authority for FHA insured mortgages. The UFMIP increased to 2.25 percent up from 1.75 percent for purchase mortgages and streamline refinances. ML 2010-03 states that HUD will review defaults and claims of approved lenders every 3 months. Lenders will be evaluated based on their default rate within the geographic area served by a HUD office and a default rate that also exceeds the national rate.
NAR Regulatory Issues Brief >
HUD Announcement on Policy Changes to Address Risk and Strengthen Finances >
Mortgagee Letter 2010-02: Increase in Upfront Premium for FHA Mortgage Insurance >
Mortgagee Letter 2010-03: Extended Procedures for Terminating Underwriting Authority >