Update: The Arizona Republic reported on this on May 19th. On May 24th, four days after we posted here, our own San Diego Union Tribune ran this article announcing the exciting new down payment source and citing the previous May 12th announcement. I sense they may have an opening for a fact checker.
Update to the update: Heather says it well.
Earlier this week, Twitter was abuzz with the news that HUD would be allowing the $8000 first-time home buyer tax credit to be used toward a buyer’s down payment. Not so fast. Within hours, retractions were flying.
The email I received this morning reminded me I should probably share the latest with our three readers, just in case they missed the excitement. From Michelle Morris, PHH Home Loans:
As you know HUD made an announcement on May 12 that they were going to allow homeowners to use the $8000 tax credit as down payment monies by empowering state agencies, non profits and HUD approved Mortgagees to lend the monies to home buyers. HUD drafted HUD Mortgage Letter (2009-15), however, the letter was never officially released. HUD has since reversed their position on allowing the monetization of the tax credit over concerns that the proposal too closely resembles the now illegal practice of seller funded down payment assistance programs. IRS officials were also concerned that the proposal could create income tax issues.
The government may continue to seek other alternatives associated with boosting affordability and circumventing the 3.5% down payment requirement, but until further notice they have apparently killed this initiative.
So, there. Back to saving box tops.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
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I got a memo yesterday too from a lender saying that HUD had pulled the plug. After reading on a few blogs about this plan to use short-term tax credit loans all I could think about was pay-day loans… and we all know that the terms are a bit sketchy. Glad they had second thoughts.
My thoughts… http://dougfrancishomes.com/category/blog/
-doug
Aloha Kris,
I dropped by your blog, today, so that makes four readers. I admit, I don’t think much about HUD. But, I do hope that you and Steve are doing well. If you are closing at least some of the “lots of escrows” you are opening, that should do the trick.
Hey, Smithers! Thanks for stopping by. Four readers! If we keep this up, we could find ourselves on page 28 of Google. I am preparing my acceptance speech.
Yep – It is pretty busy in these parts. I have to believe it isn’t an isolate storm. August will be telling, though. Then we will know if it means something or it was a temporary market condition.
Doug – Payday loans is a great analogy.
Hey Smithers. Great to hear from you. Hope all is well with you, too.
Personally, I’m glad this particular “stimulus” item was pulled. One of the many key things that was missing during the free money years was skin in the game. Now, the free market is doing it’s thing in a big way here in SoCal (and apparently in Las Vegas, Phoenix, Florida, etc.), with and/or without gov’t assistance. I’m not knocking the intervention which I do believe was/is necessary, to a point. But watching the market forces adjust on their own (i.e., affordability index soaring) , while painful for many, is a case study you just can’t appreciate by reading a college textbook. Talk about an education…
Steve, since wages aren’t growing, by “affordability index soaring” I assume you mean “purchase prices plumeting”? First the lower end. Now stand back and watch out for the higher end.
Yes, skin in said game is essential for stability.
I’ll try to drop the blog by more often.
My older son just came home for the summer from his first year of college. I believe your older daughter will be doing same (unless she managed a summer gig away from home?). Enjoying a “full” house, again.
Smithers – Yes we have one of “those” college students back on board. She has two local interning gigs, so we only see her when she is breezing by en route to something more interesting than Real Estate Central.
Enjoy the summer with him. I am told by the survivor parents this is the last.
Smithers – Of course you are correct. The improvement in the affordability index is a result of prices that are coming back down to earth. This is resulting in increased sales (a lot of latent demand) and price stability. The next step to recovery will need to be improvements to the economy, which as I’m sure you know, is a ways off. Once employment picks up, hopefully next year, we may start to see a recovery in the housing market.
here’s the way I’m looking at it: if you need that $8000 for a down payment, you really shouldn’t be buying that house.
I’m glad there’s been a retraction on this. just when I thought the government is pulling the “let’s get anyone with a pulse to become a homeowner” stunt again.
p.s. glad to see you guys doing well. we did ok ourselves, we bought few months back, near 5,000 sqft for $800k in 92131
Well that has to totally suck. I was kind of looking forward to using my qualification for the First Time Homebuyers’ Tax Credit as downpayment for this apartment I had my eye on!
Five! Count me as your 5th (avid) reader.
“Skin in the game” is so crucial and was very pleased to see HUDs pullback on this issue.
But we also need a change in national mindset: homes are not investment vehicles or get-rich-quick schemes, they are places to live in and love for the looooong term.
Surely the housing & economic slumps will have some silver linings after all, as they force homeowners to abandon the notion of home as ATM.
So HUD has gone for it again in a new memo… but they are specific that FHA buyers need to put 3.5% down and the “advance” can be used to pay closing costs. My thoughts are in a new post on my blog (link above)
Hello writers and readers. I’m somewhat new to the San Diego real estate arena and I’m seeking advice.
Numerous vacant, foreclosed homes are being put into ruins by graffiti, vandalism, and theft. Some of these homes have so much damage done to them that they cannot be sold. However an occupied home is more attractive and easier to sell.
I’m currently a full time student and I’m looking for a job opportunity as a caretaker/house sitter for vacant homes. What is the best way to gain access to these opportunities? Thanks!