Obama administration officials have called on Congress to approve several measures meant to support the housing market, including an extension of the high-profile first-time home buyer tax credit.
In a statement issued Thursday, Treasury Secretary Tim Geithner and Department of Housing and Urban Development (HUD) Secretary Shaun Donovan urged Congress to take swift action on the tax credit, which is set to expire Dec. 1. Various media reports suggest a vote on the tax-credit extension could come as early as this week.
Geithner and Donovan additionally endorsed a one-year extension of higher loan limits on conforming loans and reaffirmed the administration's goal of funding the Housing Trust Fund, which was created in the Housing and Economic Recovery Act of 2008.
‘In extending the [first-time home buyer tax] credit, we urge Congress to include strict measures to combat tax fraud and protect responsible homeowners," the statement says.
Last week, Donovan said the Obama administration needed more time to evaluate the costs of extending the tax credit. His comments came on the heels of congressional testimony from the Treasury's inspector general for tax administration, Russell George, who told lawmakers that his office had identified approximately 90,000 cases where the tax credit has been abused and claimed by ineligible borrowers. In total, ineligible or suspicious claims accounted for more than $600 million if credits claimed.
The administration's push for a limited extension urges Congress to include setting a minimum age for home purchase and requiring documentary proof of the purchase in order to receive the credit.
In his testimony, George said several four year olds have received the credit. Other examples of ineligible recipients include borrowers who were not first-time home buyers and people who apparently had no intention of buying a home at all.
Some of the Senate's most powerful members quoted on the matter in recent days, including Sens. Harry Reid, D-Nev.; Mitch McConnell, R-Ken.; and Chris Dodd, D-Conn., have indicated a Senate vote is imminent.
Reid, the Senate majority leader, said on the Senate floor this week that there has been "general agreement" by both Democrat and Republican senators "to get this done." McConnell, the Senate's top Republican, agreed with that sentiment, according to a Reuters report published Wednesday. Dodd told reporters Tuesday that it is a "done deal."
Reid is looking to tie the credit extension into a bill that extends unemployment benefits, but procedural issues have stalled the vote. McConnell says the chamber is "not that far away from an agreement that would allow us to expedite consideration of the bill."
Reports vary in regard to what form the tax-credit extension will take, as all signs indicate lawmakers are still hammering out the details. The Wall Street Journal reports that one version of legislation would extend the $8,000 credit for first-time buyers in addition to offering existing homeowners who have lived in their current residences for five years or more a reduced credit of $6,500. Those credits would cover sales contracts entered into by April 30 and closed by July 1.
Extension of the conforming loan limits, which were temporarily raised through the end of the year, is being considered in the upcoming Continuing Resolution.
According to the chairs of Congress' appropriations committees, Rep. David R. Obey, D-Wis., and Sen. Daniel K. Inouye, D-Hawaii, the Continuing Resolution maintains current loan limits for Federal Housing Administration, government-sponsored enterprise and home equity conversion mortgage single-family mortgages at $729,750 through the end of 2010.
"While those loan limits aren't scheduled to go down to $625,500 until Jan. 1, if not maintained at the higher level now, the mortgage industry will begin to plan for loans at the lower amount," Obey and Inouye wrote. "This could result in major disruptions in the mortgage origination market for large loan sizes as early as November."