Friday, Nov. 6
Written 10:15 a.m. EDT
TAX CREDIT: Both houses of Congress have approved an extension and expansion of the first-time homebuyer tax credit, and President Obama is expected to sign it soon.
The measure defines a new category of first-time homebuyers. Now that definition includes people who have owned the current homes for at least five years. You have to have lived in it as your primary residence for five consecutive years in the last eight years.
If you're a current homeowner who fits the above definition, you can claim a tax credit of up to $6,500 when you buy and move into another primary home. This tax credit will go into effect when the president signs the measure, or possibly the day after. There had been previous reports that this "step-up homebuyer" tax credit would go into effect beginning Dec. 1, but that appears to be untrue.
The other type of first-time homebuyer -- the kind who hasn't owned a home in the last three years -- continues to get a tax credit of up to $8,000.
Both tax credits expire next spring. To qualify, the purchase contact must be signed on or before April 30, and the deal has to be closed on or before June 30. You'll read reports that the tax credit expires July 1. I suppose that's technically correct, but it's unclear. Everything has to be finished on or before June 30.
If you buy a house for more than $800,000, you can't claim either tax credit. That will disappoint buyers in California and other high-cost places; on the other hand, a tax credit of less than 1 percent of the sales price is no bigger than a mere rounding error.
Congress raised the income limits. Now the tax break phases out for filers with a modified adjusted gross income between $125,000 and $145,000 ($225,000 and $245,000 for joint filers).
FANNIE RENTALS: If you lose your home to foreclosure, and the mortgage is owned by Fannie Mae, you may be allowed to stay in the house and rent it for up to a year.
Fannie adopted the "deed for lease" plan yesterday.
There are all sorts of restrictions, one of them being that you had to have asked for a mortgage modification, and been turned down. The mortgage payment had to have been unaffordable, but market-rate rent has to be affordable. This restriction will benefit people in areas where rents have plunged most -- places where vacant but habitable dwellings are rampant.
The program will keep some money flowing into Fannie. On top of that, the foreclosed homes will be occupied, which means they'll be better maintained and easier to sell.
JOBS: The October employment report was bad, with the unemployment rate rising to 10.2 percent, the highest since 1983. Nonfarm employment shrank by 190,000 jobs.
There wasn't much of a reaction in mortgage markets, even though the unemployment rate was worse than expected. Oftentimes you would expect mortgage rates to fall in reaction to grim employment news. Didn't happen this morning.