Senate bill amended to extend, expand credit

By Inman News, Monday, November 2, 2009.

Congress has approved a one-year extension of higher loan limits for mortgages backed by the Federal Housing Administration, Fannie Mae or Freddie Mac, and an amendment that would extend the first-time homebuyer tax credit has been incorporated into a Senate bill to prolong unemployment benefits.

A procedural vote on the unemployment benefit legislation, HR 3548, is expected today, Congressional Quarterly reported, with final passage by the end of the week.

An amendment to the bill, introduced Thursday by majority leader Sen. Harry Reid, D-Nev., would extend the tax credit to apply to homes under contract by May 1. Homebuyers would have to close by July 1 to claim a credit equal to 10 percent of the home’s purchase price, up to $8,000.

That’s the same limit in currently in place for first-time homebuyers claiming a tax credit that’s scheduled to expire Nov. 30.

But Reid’s amendment would also expand the tax credit to allow longtime residents of the same principal residence to claim a tax credit of up to $6,500. Homebuyers would have to have owned and used their principal residence for any five-consecutive-year period during the past eight years to claim the exception for longtime residents.

The amendment would also expand income limits from $75,000 to $125,000 for individuals and from $125,000 to $250,000 for couples, but the credit could not be claimed on purchases of homes exceeding $800,000. The amendment would also set a minimum age requirement of 18 to claim the credit.

The extension is supported by the Obama administration, which also urged Congress last week to approve a one-year extension of the temporary $729,750 loan limit in high-cost housing markets for mortgages backed by FHA, Fannie Mae or Freddie Mac.

The House and Senate passed a resolution Thursday to extend the limits through 2010, which the Obama administration was expected to sign on Friday or Saturday, the National Association of Realtors said in welcoming the move by lawmakers.

FHA, Fannie and Freddie will continue to be authorized to guarantee loans of up to 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost areas. The floor for FHA in normal markets will remain $271,050, and $417,000 for Fannie Mae and Freddie Mac.

In a statement, NAR President Charles McMillan said the higher limits will help motivate qualified buyers to purchase homes in the middle-income and higher brackets, which have not shown the same improvement in recent months as homes at the lower end of the price spectrum.

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