The HR1 “American Recovery and Reinvestment Act of 2009” has increased the home buyer tax credit to $8000, drops the repayment features, reinstates last year’s 2008 loan limits for FHA, Freddie Mac and Fannie Mae loans, and provides $2 billion in additional funding for states and localities to be used to purchase, manage, repair and resell foreclosed and abandoned properties.
Homebuyer Tax Credit – The bill provides for a $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 for buyers who hold onto their property for at least three years. 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.
NAR has sought removal of the repayment requirement because it discourages buyers from taking advantage of the tax credit. The three-year minimum holding period is a safeguard against speculators’ use of the credit. The legislation also extends the effective date of the credit to December 1 from June 30, and extends eligibility to borrowers who buy their home with the help of state or localized financial assistance that comes from the proceeds or tax-exempt mortgage revenue bonds.
FHA and conforming loan limits. Tentatively, reports indicate that the 2008 limits have been reinstated for 2009 except in those communities where the 2009 limits are higher. Additional increases in individual communities might be available at the discretion of the secretary of HUD.
Foreclosure mitigation and neighborhood stabilization. Funding for states and localities to be used for neighborhood stabilization activities for the redevelopment of abandoned and foreclosed homes are authorized.
Rental assistance. Up to $1.5 billion to provide short-term rental assistance and other aid for families during the economic crises.
Transportation infrastructure. Up to $29 billion for highway construction projects, $8 billion for rail projects.
Rural housing development. Increased funding for the Rural Housing Service direct and guaranteed loan programs.
Low-income housing grants. Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations.
Tax-exempt housing bonds. Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds.
Energy efficient housing. Grants for energy retrofits for federally assisted housing (Section B), funding got energy efficiency and conservation block grants to states, increases in the residential tax credit through 2010 for certain energy efficient upgrades and $5 billion to weatherize low-income homes.