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June 28th, 2010

Bad News for Homebuyer Tax Credit’s Closing Extension

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Late last week the Senate failed to secure enough votes to push through a bill that would not only extend unemployment benefits, but would also extend the closing deadline for borrowers looking to take advantage of the homebuyer tax credit.

The way it stands now, this Wednesday (June 30) looks to be the official end of the homebuyer tax credit.

Earlier this month, lawmakers approved an amendment to an existing bill that added a provision that would have extended the closing deadline from June 30 to September 30. There were several reasons why many, including us, believed the bill would end up on the president’s desk before Wednesday:

1) The amendment was quite simple in nature. “All [the measure] does is take the existing law and scratch out June 30 and put in September 30,” said Lucien Salvant, a spokesman for the National Association of Realtors.

2) The tax credit amendment was attached to a much larger unemployment bill. Within the last year or so, lawmakers have tended to act quickly in order to pass bills that support the unemployed.

3) It’s wrong to penalize borrowers. The way we see it, why should a borrower be penalized (by missing out on the tax credit) because of their bank’s inability to get to their loan closed in time?

4) There are no added costs to extending the cutoff date. Borrowers who could take advantage of the extension have already qualified in the first place.

We understand the magnitude of this inaction quite well. Many of you have written in extensively — some of you building, some of you buying — explaining that the June 30 deadline just didn’t provide a realistic amount of time to close.

“Sixty days isn’t really a lot of time to close your deal. Especially if the banks are swamped, or if there’s even a small snag, the process can easily be delayed,” explained HSH.com’s VP Keith Gumbinger.

According to our poll (as of 11:50 a.m., 06/28/10), 74% of respondents said they support the extension because they wouldn’t qualify without it. Another 12% said that while they didn’t need the extension, they still supported it. Eleven percent felt as though borrowers have had long enough.

There’s still time to vote: Do You Support the Extension of the Homebuyer Tax Credit’s Closing Deadline? VOTE NOW

The National Association of Realtors, who began calling for this extension only a few weeks ago, gave their prediction of how many borrowers would miss out on the tax credit if there was no extension:

The National Association of Realtors said that as many as 180,000 contracts that were signed by April 30 might miss the June 30 closing deadline. But it is unclear how many of those sales won’t happen as a result of missing the tax credit.

Be sure to vote on our poll and leave us a comment explaining what you think about the Senate’s lack of action.

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32 Responses to “Bad News for Homebuyer Tax Credit’s Closing Extension”

  1. Tweets that mention Bad News for Homebuyer Tax Credit’s Closing Extension | HSH Financial News Blog -- Topsy.com Says: June 28th, 2010 at 12:55 pm

    [...] This post was mentioned on Twitter by Rane Pollock, HSH Associates and Renae Merle, Renae Merle. Renae Merle said: RT @hshassociates: Bad News 4 Homebuyer Tax Credit’s Closing Extension http://bit.ly/9zlOvF Senate failed 2 pass tax credit closing extension. Wed: last day [...]

  2. Robert Markoff Says: June 28th, 2010 at 2:19 pm

    Our lender was not able to pull through for my family, and rejected our loan on reasons nothing to do with our creditworthiness but because they have too much exposure to the building. we need to go to another bank, and we’re now out $500 appraisal fee in addition to the $8000 tax credit. This tax credit prompted us to search to buy in the first place. It would be grossly unfair to pull the plug on it because the banks are overwhelmed and failed to adequately communicate with us.

  3. Jen Says: June 28th, 2010 at 4:01 pm

    For people in situations like me, this really needs to be extended. I started looking for a home right after the tax credit was introduced and I would not have even looked if it wasn’t for this credit…which was the purpose of the government introducing this incentive. Over a year ago I found a home I wanted to purchase and it happened to be a short sale. To make a long story short, the bank messed up multiple times and has dragged this on, only to come through at the last moment. I will be devastated if I cannot get this credit…especially knowing that I will only miss it by a couple of days if I can’t close by the 30th. I did everything right and the bank is to blame, but because it’s a short sale I cannot go back and ask for money off the price.

  4. Tim Manni Says: June 28th, 2010 at 4:33 pm

    Robert Markoff,

    Yea, that’s the sentiment: it’s unfair for borrowers who got their contracts signed before April 30 and can’t close in time for reasons beyond their control.

    Thanks,
    Tim

  5. A. Branch Says: June 28th, 2010 at 5:51 pm

    At the least with the flood policy hiatus due to congress’ inaction there should be an automatic extension given until people can BUY flood insurance in order to close.
    Most contract call this, FORCE MAJEURE, and grant a 14 day extension to close if for example ;lack of insurance is an issue?????

    These 180,000 people who will miss out ; well they might seem like a small percentage of the constitutes but as the old commercial went, AND they tell 2 friends AND they tell 2 friends and so on. I am reminding people which people in congress supported bailing out the banks but when it comes to Joe Mr. Police Officer, or Joe Ms. Teacher forget it. Partisan politics as usual.

  6. Kate Says: June 28th, 2010 at 6:19 pm

    With just two days to go I mulling over in my mind if a sane person would close on a house in a declining market without that tax credit. If I dont get to close by the deadline I dont think I should move forward.

  7. Mark Says: June 28th, 2010 at 6:43 pm

    What will happen with this poll?

    Where are the results being sent to ensure that our voices are heard?

  8. G.Campos Says: June 28th, 2010 at 6:44 pm

    I’m in the same boat, I got into contract before the April 30th deadline and now I’m waiting on the bank to finalize the paper work so I can close escrow with June 30th two days away it don’t look like it’s gonna happen. Why should the borrowers be penalized because the banks are overwhelmed with having to process’s 100’s of different loans before the June 30th deadline. It’s not gonna cost anymore money to the government so why not just pass it

  9. Allison Says: June 28th, 2010 at 7:18 pm

    I’m in the same position as so many others…my husband and I were under contract before April 30. This is not a short sale, or building a new home, and we have great credit. We did everything right, and were told repeatedly that we would be able to close on June 25, until last week, when the bank realized the underwriters were so backed up we wouldn’t make it. Still waiting to hear for sure, but last I spoke with my mortgage consultant, the underwriters would probably be done this evening, or maybe tomorrow. We sill have a tiny bit of hope to close on Wednesday, but with the number of people scheduled to close, I’m not holding my breath. We don’t need the $8,000 (but it would be nice), and we were going to buy anyway, but we’ve rushed around so much to get documents into the bank the day we were asked for them, it would have been nice to take an extra day to get each one in, instead of worrying about missing a deadline that we’re going to miss anyway, despite many reassurances from our consultant.

  10. Tim Manni Says: June 28th, 2010 at 7:47 pm

    Kate,

    Here’s something to consider, real estate investors — those looking to profit off of the market — buy when prices are low. Home prices have fallen so much in the last two years that you have to ask yourself. “How much further can or will they fall.” Many will answer that question by saying the steepest of price drops are behind us.

    Thanks,
    Tim

  11. Tim Manni Says: June 28th, 2010 at 7:49 pm

    Mark,

    Thanks for your interest. The poll is for our readers to participate to allow their voices to be heard here. We right another post about the results, and sometimes our polls get picked up by bigger media outlets (our last poll on the tax credit was mentioned in MarketWatch, Balt Sun, and others). We always encourage readers to write or email lawmakers, both local and federal.

    Thanks,
    Tim

  12. zaluptious Says: June 28th, 2010 at 7:59 pm

    i dont understand why they cant extended. we still need the tax credit.and unemployment. i read today that they extended the law for people to bear guns for safety. but we cant get extension for the tax/ unemployment benefits. that is bull. they wonder why there are so many homicides in every state. its totally unfair.

  13. raeleen Says: June 28th, 2010 at 9:34 pm

    I’m in the same boat. Looks like we won’t close for 3 more weeks. I wrote my senators and HOR, I don’t know if it will help. Maybe they will pull through…

  14. Tim Manni Says: June 29th, 2010 at 9:29 am

    Jen,

    Just a reminder, we have told readers before that if you’re properly situated, this tax credit, or the lack their of, shouldn’t make or break your decision. To really be prepared for homeownership, and all of the surprise costs that come with it, you need to be financially positioned so the absence of a tax credit won’t kill the whole deal.

    Best of luck, keep us posted,
    Tim

  15. Tim Manni Says: June 29th, 2010 at 9:30 am

    A. Branch,

    I hear you, I really don’t hope this failed b/c 180,000 weren’t enough in Congress’ mind.

    Thanks for commenting,
    Tim

  16. Tim Manni Says: June 29th, 2010 at 9:35 am

    G. Campos,

    That what we said about the costs, the borrowers are already into the system…at first I though adding it as a provision to an existing bill would work to its advantage…but that bill didn’t get passed.

    Thanks for your comment,
    Tim

  17. Tim Manni Says: June 29th, 2010 at 9:38 am

    Allison,

    Well you have proved that this is happening to all types of borrowers, not just those involved in a SS or building new. Please keep us posted, especially if you close in time. Good luck!

    Thanks,
    Tim

  18. Tim Manni Says: June 29th, 2010 at 9:47 am

    Zaluptious,

    I hear you. I think the fact that lawmakers extended unemployment benefits several times is one of the reasons they voted down the bill. But that doesn’t sit well with anyone. Borrowers are fed up b/c they saw the amount of money that went to Wall Street and they want the same commitment.

    Thanks for commenting,
    Tim

  19. Tim Manni Says: June 29th, 2010 at 9:53 am

    Raeleen,

    We always encourage readers to write to their lawmakers, well done.

    Tim

  20. Leeann Says: June 29th, 2010 at 10:06 am

    I am just waiting on the appraisal so I can close. I have done everything on time and as quickly as possible. A big reason I started looking for a house was because of the tax credit. It would really be nice. I don’t know if I would have looked for a house if it hadn’t been for the tax credit. Government needs to step up and keep the promise they made at the beginning.

  21. Tim Manni Says: June 29th, 2010 at 10:20 am

    Hey Leeann,

    Thanks for commenting, hope you had a chance to vote on our poll!

    Thanks,
    Tim

  22. Ben Says: June 29th, 2010 at 12:58 pm

    Whether borrowers need the 8grand is entirely irrelevant to the issue here. I am getting a VA loan and do not need the credit to qualify. The tax credit is a political tool intended to convince stupid people that our incompetent, elected officials are actually doing something to get us out of the mess that they have created for us. I am against it in general because it does nothing other than keep home prices $8,000 higher than they otherwise would be. However, I have had a purchase on contract since mid April. I entered into the contract because I came across a good opportunity, and was able to get a good deal. The deal becomes far less good if I loose 8 grand though. Without it, the whole deal becomes a bait-and-switch. If I had waited two more weeks to get my contract, I would have just offered 8grand less for the place, and the seller would have had to take it because that is the way markets work. When Barack the Money Fairy’s magic dust wears off, POOF…home prices drop by the exact amount of the magical credit. I do not blame banks or even the silly idiots that were in a rush to claim the tax credit for this problem. The problem was caused by our elected officials and their relentless manipulations of our markets for political ends.

  23. Amy S Says: June 29th, 2010 at 6:34 pm

    I’m in the same boat as many; signed well before the deadline (3/28/10), and the house went into full foreclosure – with no warning from the bank (to my Realtor) – on 6/14/10. The Sheriff’s auction was May 6th (I found out much later), so that should have extended the foreclosure process until November (6 month right of redemption period in MN), but for some unknown reason the bank accelerated the process to just under 6 weeks. I’m out the inspection fee ($400), the appraisal fee ($500), and because I had no other offers out there, I’m now out the tax credit and can’t buy anything at all. (Mom “gifted” me the down payment with the understanding I’d pay her back with the tax credit.) But hey – on the bright side, the bank got their money! It was HUD acquired.

  24. Sue Says: June 29th, 2010 at 11:19 pm

    In reply to Ben, not everyone can get a loan as easily as a VA and I think you show a lack of concern for your fellow man, just the typical “I am all right Jack” attitude that got us all in the mess we are in now – pure selfish greed. What is wrong with younger people maybe getting a chance to get into the housing market for the first time – my daughter has worked hard for her Masters degree and is in the same spot as the other 180,000 people – is she any less worthwhile to be a homeowner than you? Yes – she does want and need the 8K

  25. Leigh Says: June 30th, 2010 at 9:26 am

    Looks like most of us are in the same boat. I signed a contract well before the deadline-(the beginning of April). I am ready to close and have been-but thanks to Congress and the mess they are in, I CAN NOT close because of the flood insurance hiatus. Its been thirty days since the lapse and still nothing—-

  26. Tim Manni Says: June 30th, 2010 at 11:09 am

    Ben,

    First off, classifying borrowers who took action on the home front because of the credit as “stupid” and “idiots” just isn’t fair and frankly disrespectful. I find it ironic that you disagree with the credit and talk down to others who took advantage of the credit, yet you classify your own deal as “far less good” without it. Furthermore, the tax credit doesn’t have as direct of an impact on home prices as you’re claiming. Prices would not be $8,000 less without it. The tax credit (and other factors like low mortgage rates) fosters demand which pushes prices upward, but not to the exact degree you’re suggesting.

    All that said, you are right in the sense that these programs, credits, whatever, do manipulate the market. This is an election year, so lawmakers are doing all they can to keep favor in the eyes of voters.

    Thanks,
    Tim

  27. Tim Manni Says: June 30th, 2010 at 11:12 am

    Amy S,

    I’m a little confused, you’re home was in default yet you were able to get a contract signed to buy a new house?

    -Tim

  28. Tim Manni Says: June 30th, 2010 at 11:17 am

    Sue,

    There’s nothing wrong with younger people getting a chance to get into the housing market for the first time, and this tax credit is a good incentive.”incentive” is the key word. While some marginally-qualified borrowers have decided to jump in just b/c the credit, others (perhaps like your daughter) have not. We’ve warned borrowers before not to let something like this tax credit make or break your decision — you should be qualified enough to make your payments on time without some credit to your taxes that you won’t even get for another year or so.

    Best of luck to your daughter, thanks for commenting,
    Tim

  29. Tim Manni Says: June 30th, 2010 at 11:23 am

    Leigh,

    What part of the country are you in? Lawmakers are debating the extension once again today:

    http://blog.hsh.com/index.php/2010/06/lawmakers-move-to-extend-tax-credit-closing-deadline/

    Thanks for commenting,
    Tim

  30. Rachel Says: July 2nd, 2010 at 11:57 am

    While it is unfortunate that the Senate was unable to extend the unemployment benefits (that seem to have a real effect on people’s lives), I don’t think the tax credit was the best option for first time home buyers.
    Might I suggest Ilyce Glink’s article about better options (including the so-called Coldwell Banker Buyer Bonus): http://bit.ly/b5CvpU

  31. Tim Manni Says: July 2nd, 2010 at 12:53 pm

    Rachel,

    Turns out lawmakers did pass the extension and the president just signed it this morning. However, Ilyce’s article is a good one for those who missed out.

    Thanks for your comments and sharing those articles,
    Tim

  32. Visionary Realty News » A Week Full of Tax Credit Information for Buyers Says: July 6th, 2010 at 2:45 am

    [...] given us a taste of just how bad the falloff from the tax credit has been and will be. Monday: “Bad News for Homebuyer Tax Credit’s Closing Extension“: Late last week the Senate failed to secure enough votes to push through a bill that would not [...]

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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