Tax Credit Extensions Helps Homebuyers Seal The Deal

On June 30, the U.S. Senate passed a bill that would extend the deadline for people looking to receive the federal homebuyers’ tax credit from June 30 to September 30 to give lenders more time to complete the paperwork. The bill, if it is signed by President Barack Obama, will help 180,000 homebuyers who otherwise would not have received the tax credit because overwhelmed lenders were unable to meet the June 30 deadline.

The Homebuyer Assistance and Improvement Act of 2010, sponsored by U.S. Congresswoman Kathleen A. Dahlkemper of Pennsylvania, would extend the eligibility for the first-time homebuyer tax credit until the end of September for those who entered into a binding contract to purchase a home before May 1. The House of Representatives passed the bill on June 29 by a vote of 409-5, and the Senate unanimously approved the bill the following day.

According to CNNMoney, some lawmakers in the Senate expressed concern about the economic impact of the bill when it was attached to the jobless benefits bill. Dahlkemper’s bill was removed from the jobless benefits bill and voted on as a standalone bill. In her bill, Dahlkemper cited data from the Congressional Budget Office that the immediate economic impact would be a 19% net increase in the federal deficit for 2010, but a 20% net decrease over the next five years.

When the original deadline for the federal tax credit was extended from November 30, 2009 to June 30, 2010, many homebuyers rushed to take advantage. However, the buying frenzy caused a backlog in paperwork and lenders were unable to complete the sale before the end of June.

The National Association of Realtors supported the extension because the organization feared that the homeowners would be denied the tax credits they deserved. Most of the transactions were short sales, which are more complex and take longer to close. The NAR has worked with congressional leaders in supporting passage of the legislation, saying the bill would provide more stability to the residential real estate market.