HOT TOPICS - Buyer Incentives

$15,000 for Foreclosed Homes

The Indiana Housing and Community Development Authority (IHCDA) announced that Hoosiers may be eligible for up to $25,000 in zero-interest, non-amortizing loans for Hoosiers to purchase foreclosed homes.

Hoosiers who buy foreclosed homes to use as their primary residence can qualify for a $15,000 loan from IHCDA’s Market Stabilization Fund.

The Federal Home Loan Bank of Indianapolis has committed to supply matching grants of up to $10,000.

“When Hoosiers open the door to their new home, they open several windows of opportunity,” Lt. Governor Skillman said. “This is a unique use of federal dollars that will encourage homeownership while revitalizing communities.”

The money comes from HUD’s Neighborhood Stabilization Program (NSP), which allocated $84 million to IHCDA. The state will use $33 million of that allocation for the Market Stabilization Fund. Assistance from this fund will be made available to income-qualified individuals and families who choose to purchase foreclosed homes in areas of the state in greatest need of assistance.

Areas of greatest need are identified, with the assistance of the Indiana University Center for Urban Policy and the Environment, using a combination of HUD-provided data and proprietary data. Indiana is the only state using NSP money in a statewide program to help people buy foreclosed homes.

How the Market Stabilization Program (MSP) Works:

IHCDA will offer up to $15,000 (not to exceed 20% of purchase price) to assist home buyers with the acquisition and/or rehabilitation of a foreclosed residential property located within an area of greatest need.

These funds may be used in conjunction with the IHCDA First Home product, FHA, VA, USDA, or prime fixed rate product. No adjustable rate or subprime mortgage products will be allowed for the purchase of these homes.

Home buyers may use these funds for closing costs and down payment assistance related to the purchase of a foreclosed home or residential property that will be used as the primary residence.
To be eligible for rehab funds a residential structure must not meet local building code and therefore is unable to be purchased in its present condition.

Buyers may use both acquisition and rehabilitation assistance in the purchase of a home, but the combined assistance may not exceed $15,000.

These funds will be in the form of a zero-interest, non-amortizing, second mortgage loan. These funds do not have to be repaid as long as home buyers use the home as a principal residence for at least ten years. If the home buyer sells the home within the first five years, the subsidy is repayable to IHCDA on a shared net proceeds basis. If the home buyer refinances within the first five years, the entire subsidy is repayable to IHCDA.

After year 5 and through year 10, the home buyer will retain 20% in equity of the award amount per year.

This funding will be available to home buyers that are at or below 120% of area median income and who intend to occupy the home themselves.
To determine income qualification, compare household income and family size to the income guidelines listed below.

To use the current income limits for MSP as a second mortgage only: MSP Stand-Alone Limits.

To use the current income limits for MSP in conjunction with a Municipal Revenue Bond (MRB) or Mortgage Credit Certificate (MCC): MSP Income Limits with Bond or MCC.

Home buyers will be required to participate in 8 hours of pre-purchase education provided by an IHCDA certified counselor.

IHCDA will be coordinating with lenders/servicers, Fannie Mae, Freddie Mac and HUD to list foreclosed properties on a centralized Web site. Visit www.indianahousingnow.org and click on the Market Stabilization Program link to determine if a foreclosed property is in an eligible neighborhood. Lenders will be required to sell the properties listed on the site at a discount that meets or exceeds NSP guidelines.

MSP Brochure and Detailed Information:

The following link is a consumer friendly brochure on the MSP program: Consumer Brochure.

To view a PowerPoint with detailed MSP information click here: NSP PowerPoint.

If you would like more information on all of IHCDA’s programs, please visit their Web si
te at www.in.gov/ihcda.

Federal Home Loan Bank of Indianapolis's Program:

The Federal Home Loan Bank of Indianapolis’s (FHLBI) Neighborhood Stabilization Assistance (NSA) program is offering matching grants of up to $10,000. The main qualification for the NSA program is that the home buyer must have already secured IHCDA funds. Once IHCDA funding is secured, proceed by contacting an FHLBI member financial institution. Find a list of member institutions, program guidelines and other information by clicking here.

View a step-by-step guide from the Indiana Association of REALTORS® here.

$8000 First-Time Home Buyer Tax Credit

The home buyer tax credit is one of 10 key provisions of the American Recovery and Reinvestment Act signed by President Obama into law on Feb. 17, 2009.

The bill provides for an $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.

The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

Tax Credit Bridge-Loan Information

HUD Secretary Shaun Donovan recently announced a program that would allow borrowers to use the first-time homebuyer tax credit for a down payment or closing costs on an FHA insured mortgage to scores of REALTORS® at the 2009 NAR Mid-Year Conference.

Under the guidelines of the program, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent. However, according to senior HUD officials, loans cannot be used to cover the minimum 3.5 percent requirement. Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge-loan to significantly bring down the upfront costs of buying a home, but would still have to come up with the minimum 3.5 percent down-payment.

Secretary Donovan said “We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit.”

Read the detailed guidelines in HUD Mortgagee Letter 2009-15.

Although this program has been formally announced, details on how Indiana will implement the program are not yet available. The Indiana Association of REALTORS® is currently working with the Indiana Housing and Community Development Authority (IHCDA) on details for the state. Watch future editions of Fast Track for additional information as is becomes available. If you have further questions, contact MIBOR’s Government Affairs department at 317/956-1912.

The links below are provided by the National Association of REALTORS® (NAR):

Chart Highlighting the Major Modifications to the First-Time Homebuyer Tax Credit
NAR's Presentation: The 2009 First-Time Homebuyer Tax Credit
Download the IRS First-Time Homebuyer Tax Credit Form 5405
IRS Filing Guidance on First Time Homebuyer Tax Credit
Frequently Asked Questions

For more information please visit NAR’s Home Buyer Tax Credit Web page by clicking here.

For information about purchasing a home through these programs contact:

Tony Wilson
317-354-7410
tonywilson@callcarpenter.com