Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - June 1, 2009 Tax Credit Guidance for FHA Loans Announced by HUD In his speech at the National Association of REALTORS® Housing Summit on May 12, 2009, US Department of Housing and Urban Development (HUD) Secretary Shaun Donovan announced a program that allows borrowers to use the first-time homebuyer tax credit for a down payment or closing costs on a FHA-insured mortgage. On May 29, 2009, HUD published Mortgage Letter 2009-15 regarding monetization of the First-Time Homebuyer Tax Credits (FTHBTC) for home purchases. The ability to "monetize" the tax credit and apply it to a home purchase will not only help families purchase their first home, Donovan said, but will "present an enormous benefit for communities struggling to deal with an oversupply of housing." The "monetization of the FTHBTC may be accomplished with a loan secured by a second lien or by a lender "purchase" of the FTHBTC. Second Liens. The letter allows state and local government entities to make advance loans to homebuyers using the FTHBTC according to the following limitations:
Credit Purchase. The FTHBTC mortgagee letter also allows all FHA-approved lenders to "purchase the tax credit anticipated by the homebuyer," but the sale of the FTHBTC may not be used towards the FHA 3.5% minimum downpayment. The FTHBTC purchase is subject to the following conditions:
REALTORS® should contact their FHA approved lender and ask them what the bank is doing to implement the new program. The WRA is working with WHEDA on this development. Read the HUD Mortgagee Letter at http://portal.hud.gov/pls/portal/docs/PAGE/FHA_HOME/LENDERS/MORTGAGEE_LETTERS/2009_MORTGAGEE_LETTERS/09-ML-15%20USING%20FIRST-TIME%20HOMEBUYER%20TAX%20CREDITS.PDF The IRS has links to a Q&A and Form 5405, the form used to claim the credit after closing on a home purchase. http://www.irs.gov/newsroom/article/0,,id=204671,00.html. 1.) Offer to Purchase - Financing Contingency QUESTION: The buyer is pursuing FHA financing. If the inspection contingency is removed but the loan commitment is conditioned upon repairs to be made prior to closing, as noted by the FHA appraisal, and the seller is unwilling to make these repairs, would the buyer be able to deliver a notice of financing unavailability? ANSWER: If the seller refuses to make the repairs required by the buyer's lender as a condition of the FHA loan, and this refusal is prior to the buyer's submission of a loan commitment to the seller, then arguably the buyer has not qualified for the specific financing described in the buyer's offer and a letter of unavailability could be delivered by the buyer to the seller. The buyer cannot obtain the FHA financing absent the seller's agreement to make the repairs mandated by the lender as a condition of the loan. 2.) Commissions - Entitlement QUESTION: The broker is a buyer's agent in a transaction. The transaction is closing soon and the listing broker asked for the "Broker Disclosure to Clients" or the "buyer agency agreement." The listing agent said the relocation company seller's accounting department wants it and it is required in order to be paid. The broker does not think this is required and thinks the seller wants to see what is written down on the buyer agency agreement for compensation because they may be trying to reduce the buyer's broker's fee amount (they have 3.0% listed in the MLS and the norm for the area is 2.4%). Must the buyer's broker provide the "Broker Disclosure to Clients" or the buyer agency agreement? ANSWER: The listing broker may ask for copies of the disclosure and the agreement; however, there is no statutory mandate to provide them. The MLS offer of compensation is based on whether the cooperating broker was the procuring cause of the sale. The MLS does not require delivery of disclosure forms or the agency agreement as a requirement for commission. The MLS offer of compensation will stand unless the cooperating broker has agreed to modify the MLS standard of performance or decrease the fee. 3.) Contract Issues & Forms - Approved Forms QUESTION: Which form should the broker use for a listing and an offer to purchase for a property with a rental unit upstairs and vacant space downstairs? The property is zoned commercial. ANSWER: In this particular situation, it would appear that either the residential or commercial forms would be permissible. The broker should use whichever DRL-approved form best matches the transaction with the fewest number of changes or modifications. It is a matter of the licensee's judgment as to what form best fits the individual circumstances. 4.) Fair Housing - Americans with Disabilities Act (ADA) QUESTION: The broker is going to write an offer for a couple who are blind. They have looked at the property twice with their parents. The broker wants to know her responsibility - is there something available in Braille? ANSWER: The WRA is not aware of an existing offer to purchase in Braille. The broker should try to get creative and find a way to make this work while at the same time being extra sure that the buyers understand the WB-11 and the way it is being completed on their behalf. It may be smart to ask the buyers themselves what is the best way to be sure that they understand the offer to purchase. Other ideas include the broker painstakingly reading and explaining the WB-11 and the buyers' options for completion to the buyers, making sure that they have a sighted advisor present when the completed WB-11 is explained to the buyer and signed by them (ideally an attorney), using an attorney approval provision, having the offer translated into Braille, or any other measure that ensures the buyers understand the offer they will end up making on the home.
Debbi Conrad |