President Barack Obama approved the extension as part of a $24 billion economic stimulus bill signed Friday. The bill also includes an extension of unemployment benefits to the longtime jobless and tax credits for some businesses.
The housing tax credit portion of the bill extends the $8,000 tax credit for home buyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to other homeowners who have lived in their current home for at least five years and are seeking to relocate.
Another modification to the original legislation raises the income limits for program participation from $75,000 for a single purchaser to $125,000 and from $125,000 to $225,000 for a couple. There are also credits available on a diminishing basis above those income limits.
The bill was passed by the Senate on Wednesday evening and by the House on Thursday. Both bodies acted in a bipartisan manner which has seldom been seen this year. The Senate passage was unanimous; the House voted 403 to 12 for the bill.
Housing interests as well as the Obama Administration had lobbied heavily for the extension. In a statement released after the House passage of the legislation, Mortgage Bankers Association Chairman Robert E. Story, Jr., said, "At a time when we are finally starting to see some signs of life in the housing and mortgage markets, extending and expanding the homebuyer tax credit is a critical step to keeping the momentum. This has been one of MBA's top single family legislative priorities, and we are very glad to see that policymakers on both sides of the aisle see the importance of this measure.
"The existing credit for first-time homebuyers has helped move a segment of potential homebuyers off the sidelines and into their first homes. By expanding it to qualified existing homeowners, we can help stimulate even more home purchases for qualified buyers. I also want to applaud measures in the bill that will help eliminate fraudulent use of the tax credit."
The Associated Press quoted Rep. Shelley Berkley that the bill "will allow more people to purchase a home in my district and help stop the continued downward spiral in housing prices caused by the foreclosure crisis." Shelly represents Nevada, a state that has been particularly hard-hit by the housing collapse.
Critics of the bill have said that it is merely accelerating purchases that would have occurred anyway and creating yet another artificial housing bubble.
Mortgage News Daily Managing Editor Adam Quinones said, "It is likely that the prior tax credit's Nov.30 expiration has already stolen a portion of housing demand from 2010. On a broader scale, the extent to which the tax credit extension adds new demand is a function of buyer's perception of home prices, liquidity in the secondary mortgage market, and the health of the labor market. Overall, while the home buyer tax credit extension is a net positive for the industry, there are still several structural ineffficiences that must be addressed before housing can gain recovery momentum".
In signing the bill President Obama stressed that the measure is revenue neutral and will not increase the deficit.
From Mortgage News Daily, November 6, 2009
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