Home Buyer Tax Credit

Now that the new home buyer tax credit dissipation is winding down it is time to review the results. The claims are 355,000 homes were purchased that would not have been otherwise purchased. That puts the cost to you and I as the taxpayers at about $43,000 for each supposed house sold above expectations. That is a lot.

We probably sold lots of those 355,000 homes to twenty year old people with three jobs and no college plans to buy $155,000 that is immediately underwater at $183,000 after additional government loans for improvements. See more here.

The monthly payments on her debt amount to $1328. Her income is $2470, leaving her with just $285 a week to live on. She's paying 54% of her income to make the mortgage payments. She earns that income by holding down one full time and two part time jobs. Obviously, this woman has a strong work ethic. But it also means her income is precarious. With unemployment still rising, she obviously should be worried about losing one of her three jobs. A loss of one of them would likely leave her unable to make the debt payments.

Emphasis mine.

This loan is almost certain to fail - would you loan a hard working friend that kind of money with those risks? Guess who is holding the bag? The mirror is in the bathroom if you need to clear that up.

As bad as this is we now find the IRS is investigating about 100,000 loans for fraudulent filings for the first time buyers tax credit. It should be interesting to see how this will be clawed back since the FHA let buyers use the credit as the down payment on these homes. Does this mean the government is "nudging" lenders to perform foreclosure avoidance and the IRS to perform foreclosures? Time will tell but it looks bad for the tax payer either way.