Can anyone tell me if they know of any entity or investors that is currently or would purchase the FTHB tax credit for the purpose of borrowers to use towards a purchase.

This process was described in the new ML 2009-15 that was sent out on 5-29-09 under the second heading, II.Tax Credit Guidance.

It also clearly states that the proceeds from the sale of these tax credits cannot be used towards the 3.5% down payment.

If anyone has any additional information that they would like to share on this I would appreciate it. Thanks!

Purchase of Tax Credit

FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local governmental agencies and instrumentalities thereof may purchase the tax credit anticipated by the homebuyer.  

Conditions:

·        The proceeds of the sale of the tax credit may not exceed the anticipated tax credit due the homebuyer based on the computations of form IRS 5405;

·        The borrower must submit a signed certification that the tax credit is not subject to offset due to other indebtedness.

·        A copy of the borrower’s tax refund and/or the IRS 5405 must be collected and retained in the FHA case binder. 

·        Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer.  In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive.  (Example:  $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)

·        Pursuant to 12 U.S.C. 1709(b)(9), the homebuyer’s downpayment required for eligibility for FHA insurance may not consist of any funds (including funds derived from a sale of the homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction (or by any third party or entity that is reimbursed, directly or indirectly, by the financially benefiting person or entity).  Accordingly, the proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefiting person or entity), may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs.

Due Diligence

FHA expects that entities purchasing tax credit assets will employ appropriate due diligence measures including, but not limited to:

·        Require the homebuyer to draft and provide the IRS form 5405 “First-Time Homebuyer Credit.”

·        Contact the borrower’s employer and review pay stubs to confirm there are no outstanding garnishments.

·        Review the homebuyer’s credit report to ensure there are no unpaid student loans, or other obligations that could be offset against the credit.

·        Validate that all of the eligibility requirements for the tax credit are fulfilled

·        Review previous tax returns and IRS tax assessment letters, if any, to determine that the borrower does not have unsettled obligations to the IRS

III.  Monitoring

In order to track the tax credit monetization activities, FHA will require FHA-approved mortgagees to input into FHA Connection the following data:

·        Name and EIN of the party who purchased the tax credit,

·        The amount of the anticipated credit, and

·        The amount the homebuyer paid for the monetization services.

The lender must also collect and maintain in the FHA case file the documentation that validates all of the tax credit monetization data submitted via FHA Connection. 

FHA will monitor the purchase of tax credit transactions closely.  Charging of excessive fees or costs in the purchase of the tax credit or increasing other fees or charges in the transaction without FHA approval may result in referral to the Mortgagee Review Board, and particularly with respect to entities that are not FHA-approved mortgagees, referral to the Federal Trade Commission, or referral to the appropriate State Attorney General office, as may be applicable.

The lender that I work for will have an official announcement about the FTHB tax-credit program next week.

If they cannot use it for downpyment then they need to pay off a bill or anything but use it for the loan, The Realtors need to stop telling people to lower the price of their homes and offer more incentives like paying all allowable closing costs and a home warranty, Lower the cost of the home is just going to hurt everybody in the long run