With the recent announcement that consumers can now “monetize” their new home buyer tax credit, many people in California are wondering what the costs will be to do so. The good news is that HUD addressed the issue of costs in not one, but two different places in the official Mortgagee Letter outlining the program.
According to the Official Mortgagee Letter (2009-15):
“Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer. In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive. (Example: $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)”
HUD then addresses how they are going to track the costs that people are paying and indicates what will happen if they find organizations violating the rules that have been established:
In order to track the tax credit monetization activities, FHA will require FHA-approved mortgagees to input into FHA Connection the following data:
- Name and EIN of the party who purchased the tax credit,
- The amount of the anticipated credit, and
- The amount the homebuyer paid for the monetization services.
The lender must also collect and maintain in the FHA case file the documentation that validates all of the tax credit monetization data submitted via FHA Connection.
FHA will monitor the purchase of tax credit transactions closely. Charging of excessive fees or costs in the purchase of the tax credit or increasing other fees or charges in the transaction without FHA approval may result in referral to the Mortgagee Review Board, and particularly with respect to entities that are not FHA-approved mortgagees, referral to the Federal Trade Commission, or referral to the appropriate State Attorney General office, as may be applicable.
HUD has done an excellent job of laying out the rules of exactly how you can take advantage of the new home buyer tax credit and how much it should cost to do so.
