The more I think about the First Time Home Buyer Tax Credit, the less I like the program. In one previous post, I concluded that the credit was not creating new buyers as promised, but only borrowing from future sales.
In other words, we are paying for purchases that would have taken place without the incentive. One analysis suggests that 4 out of 5 tax credit recipients would have purchased anyway. This means that each new buyer costs the Treasury $40,000.
In another previous post, I suggested an alternative to the tax credit, which my numbers indicate would cost less, help more, and better target need. This alternative might also help revitalize the MI industry, which was hit as hard as any by the financial crash.
This alternative involves an MI risk subsidy for $8,000.
Today though I am writing about another reason NOT to extent the First Time Home Buyer Tax Credit - TAX FRAUD.
Already, just with tax year 2008, tax fraud associated with the First Time Home Buyer Tax Credit has been rampant.
- 19,000 claims for the credit did not actually purchase a new home
- 74,000 claims for the credit have previously owned a home
So, in addition to not being effective and to having a very high cost, the tax credit is leading to a significant amount of tax fraud and questions are being raised as to whether the program is being managed well.
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Richard Smith Conventional, FHA, FHA 203k, HUD $100 down purchases, VA, Jumbo VA, Rural Development, Jumbo, FannieMae Homepath, Home Equity Line of Credit (HELOC). |
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This blog represents the opinions of Richard Smith. The posts and comments written on the blog do not represent the opinions or positions of Stearns Lending, Inc. |
I heard an article on one of the morning shows about this. Said some were even filed/claimed by children. I say just get the government out of business all the way!
Good thoughts. The credit needs to end.
Another good point that James Barath makes in his post, First time home buyers are not all that, is that buyers are buying foreclosures, short sales and new construction so they are not really helping the move up market that would be getting out there to purchase another home if they could sell their house.
Me too. There was a credit, there was a deadline. I have people coming in assuming it will be extended who now have a lost sense of urgency.
Sad how some people can abuse a good thing. My son is a first time buyer and was able to get into a foreclosure home and because of the tax credit was able to fix the place up.
Richard -
I heard/read/saw a lot about that too. Over 80,000 cases? That is quite a bit of fraud. No wonder it made the news repeatedly.
Thanks for sharing more great information today. I look forward to more posts from you.
It is amazing how there are alway people out to scam the system. This program has helped alot of people get into a home and alot of Realtors survive. Now the scammers get involved and tarnish the program for all.