Las Vegas real estate, mortgage, appraisal blog

April 10th the Foreclosure Prevention Act of 2008 (H.R. 3221) was passed by the Senate. It has been a long battle for this Act to be passed as there is criticism from quite a few different sources.

This Act will give people who buy foreclosed homes a $7000 tax credit. Its aim is to help get people back into foreclosed homes and get home values back up again. The person buying the home would get the tax credit over two years (half the first and half the second) and MUST live in the home as a primary residence for both years.

NuWire Investor explained what some of the negative effects could be as well:

But the foreclosure tax credit has a couple of potential snags. Some experts argue that making foreclosures easier to sell may result in lenders that are quick to foreclose and unwilling to negotiate terms with homeowners in default, according to The Associated Press. If this is the case, such a measure could actually increase the number of foreclosures on the market.

Additionally, “economists say the $7,000 credit could distort the market by making foreclosed homes owned by lenders more attractive to buy than other homes. That has the effect of lowering the value of homes occupied by people who are up to date with their mortgages,” according to The AP. Press.

Further, it is considered by some a method of bailing out lenders, who will be able to offer their foreclosure properties with the tax credit as an incentive.

In a Statement of Administration Policy (SAP), the Bush Administration stated that the president’s senior advisors will recommend he veto H.R. 3221 if it reaches his desk. The Administration opposes the appropriation of $4 billion to assist state and local governments to redevelop abandoned and foreclosed homes, as it believes the program would help lenders and speculators more than individual homeowners, according to the SAP. The Administration also said it opposes modifying bankruptcy codes, stating that such alterations would likely prolong the real estate market’s recovery process.

Now that the Act has passed both House and Senate it will need to go to a committee of both House and Senate members so that they can work out differences between the versions of the bill that were approved by each chamber. It will then go on to President Bush for approval.