This may not exactly be new news (in fact, it’s about a week old), but it’s worth posting here because some Realtors in Arkansas haven’t heard it yet – the Arkansas Development Finance Authority (ADFA) will not issue bridge loans against the $8,000 first time homebuyer tax credit.

In May, the Federal Housing Administration (FHA) announced it had put rules in place allowing first time homebuyers to take out loans against the $8,000 tax credit. Those loans are to be used to cover down payment amounts and closing costs above and beyond the 3.5 percent already required of people taking out loans backed by the FHA.

The FHA also announced that nonprofit groups and state housing authorities could “monetize” the tax credit by advancing loans against it. If the credit is so monetized, then a first time homebuyer is able to use that loan as a down payment on an FHA loan. In other words, people able to get one of those loans could conceivably use the tax credit as a down payment and not come with the 3.5 percent down required by the FHA.

Mortgage bankers, Realtors and other groups looked to the logical group in Arkansas to advance those loans – the ADFA. At the end of June, the ADFA’s Murray Harding forwarded the following email to the Arkansas Realtors Association:

The ADFA Board of Directors and Management has decided not to establish a second mortgage loan program to “monetize” the $8,000 First Time Homebuyer Tax Credit.

The following is the text of a letter that was sent to various individuals and organizations that have contacted our agency about this issue:

Thank you for taking time to meet with representatives of the Governor’s Office, Representative Fred Allen, ADFA, and others concerning the referenced program. ADFA has carefully researched the suggestion of creating an Advance Loan Program in Arkansas.

As set forth in ADFA’s enabling legislation, A.C.A. §15-5-101 et.seq. ADFA is statutorily charged with creating and administering Housing programs “to eliminate the shortage of decent, safe, sanitary, and affordable residential housing for elderly persons and families of low and moderate income in the state.” Because the First-Time Homebuyer Tax Credit Program is available to individuals and families with incomes of up to $75,000 and $150,000, respectively, ADFA does not feel establishing an Advance Loan Program would be in keeping with its legislative purpose.

Additionally, ADFA already has two (2) forms of downpayment assistance for low-to-moderate income Arkansans: (1) a repayable 2nd mortgage loan; and (2) an ADDI forgivable loan for qualifying homebuyers. It is ADFA’s position that those forms of assistance provide sound financial opportunities to income-eligible homebuyers. By using these programs, the homebuyer is provided down payment and closing costs and can still keep the $8,000 tax credit.

I realize that approximately ten (10) states have implemented a Tax Credit Monetization Program. We know that some of those states do not offer downpayment assistance programs like ours. Others receive state funding or have different legislative authority.

In conclusion, ADFA believes our present downpayment assistance programs meet the needs of the low-to-moderate income homebuyers and families we serve.

Should you have any questions regarding this information, please contact ADFA at 501-682-5900.

At the first of June, Harding said one of the major hurdles to implementing a loan program monetizing the tax credit has to do with the amount of time it takes to put a program in place. If the ADFA decided to immediately set up a loan program, it couldn’t be put in place until a 45 day public comment period had run.

The ADFA, then, wouldn’t have much time at all to advance loans against a tax credit that expires on Nov. 30.

Harding said the ADFA will certainly take up the issue again if the tax credit is extended, thus giving the group more time to issue loans. Whether Congress authorizes an extension, of course, is anyone’s guess.

For those not familiar with the tax credit, here’s how it works. First time homebuyers purchasing their primary residences between Jan. 1 and Nov. 30 can claim 10 percent of the purchase price of a home or $8,000 — whichever amount is lower — on their 2009 income taxes. That tax credit comes in the form of cash to the filer and does not have to be paid back so long as the homeowner stays in his home for at least three years.

Of course, there are some restrictions. A first time homebuyer is anyone who hasn’t owned or had an interest in his primary residence for the past three years. Also, the tax credit starts to phase out for individuals with household incomes over $75,000 and is gone completely at $95,000. For couples, the credit starts to phase out for filers with household incomes over $150,000 and expires at $190,000.

Retweet this post