How does the current Tax Credit work?

The current legislation grants a one-time credit of 10 percent of the home’s purchase price up to a maximum of $8000 to first time homebuyers or those buyers who have not owned a house in the last three years.  Homebuyers can chose to claim the credit either retroactively on their 2008 return or on their 2009 obligation.  If the buyer does not owe enough taxes to cover the credit the balance will be refunded to them in cash.

How would the new Tax Credit work?

The new legislation is currently in front of the House Ways and Means Committee, the current First Time Home Buyer Tax Credit is very popular and could be extended beyond its current expiration date and greatly expanded. Congressman Coble’s is introducing the new legislation which would remove both the income restriction and the requirement that the home be a first-time purchase.

Around 13% of U.S. households with mortgages was in foreclosure or behind on its home loan payment during the second quarter of 2009, which puts added pressure on federal programs aimed at preventing foreclosures. However, foreclosures have slowed on the subprime loans that initially ignited the mortgage and banking crisis, loans extended to borrowers with good credit are deteriorating at a faster rate as falling home prices and mounting job losses effect more American households.

How can the situation to improve for the financial and real estate markets? There has been little reform of the housing finance system in this country. Fannie, Freddie, and the FHA still provide almost all finance for housing. Mortgage originators, the ones who make the borrower-by-borrower lending decisions, still retain absolutely no risk on the mortgages they originate. They still originate to sell, instead of selling to private investors, they sell to the government. The answer is in legislation.

“We’re making this commitment: If someone buys a home and then loses their job because of the economic downturn, we will make payments on their home for three months,” said Kevin Clayton, president and CEO. “It won’t cost the buyer a dime.”

“We hope no Clayton homeowner ever needs this help, but we know by offering this benefit we can help ease some concerns and help more families become homeowners,” Clayton said.

The article reports that this program seems to have been manufactured with potential first-time home buyers in mind, who can also take advantage of the $8,000 tax credit passed as part of the Economic Recovery Act.

“Similar programs to help home buyers have given them a tax deduction, in effect reducing their taxable income,” said Clayton. “This program actually reduces the taxes they owe dollar for dollar over a three-year period. That’s a huge difference.”

The Daily Times reports that “Clayton’s Payment Protection Program, which will continue for 24 months, is applicable for new homes purchased between now and the end of June. If the monthly mortgage payment includes homeowners insurance and property taxes, Clayton absorbs those costs as well.

Chris Nicely, vice president of marketing, said the Clayton Homes program differs from some others that suspend payments after a job loss but add the missed payments to the back end of the loan.”

“The big difference is there is no cost to the consumer,” Nicely said. “If you happen to lose your job, even for a week, we will make three mortgage payments to help you get back on your feet.”

“ According to RealtyTrac, a whopping one in 54 homes received a foreclosure notice last year. That’s 3.1 million foreclosure filings.

Scared yet? An ever-increasing pool of foreclosure rescue scammers are drooling at the prospect of capitalizing off your panic. And so far, they’re doing pretty well. From forgery to title transfer, these scamsters–some of them former real estate professionals–are making an art form of the foreclosure scam.

So far, a few pervasive scams have popped up enough times in the media to be dubbed endemic. Here they are, in no particular order. Do yourself a favor and avoid these five nasty foreclosure rescue scams:

1. The Pay Me First Scam

Some foreclosure rescue scammers ask customers to pay them fees in exchange for delaying a foreclosure. It’s actually illegal for foreclosure rescue companies to collect fees before performing a service. They should be paid after negotiating new loans or monthly payments.

Unfortunately, some homeowners find out the hard way that paying companies before they perform a service leaves them without money or a home. The Star-Telegram reports on one San Francisco-area mortgage broker advertised foreclosure avoidance workshops on Craigslist. For a $2,500 upfront fee plus a $2,000 monthly payment, Freedom Financial Solutions claimed it would halt foreclosures by finding legal violations in homeowners’ mortgage agreements.