On the House: Yes, the tax credit is really a loan

an angry reader who complains that the Housing and Economic Recovery Act's $7,500 tax credit to first-time buyers is a sham. It's just a zero-interest loan!" the fellow shouts loudly into the receiver, as if I'm responsible for the actions of Congress. "The least they could have done was given us a gift!"

Yes, the tax credit technically is a zero-interest loan that you will repay to the government over 15 years, starting two years after the credit is claimed, at $500 a year.

If you sell the house, you repay the entire amount if there was enough profit to do so. If not, the amount that you don't repay is forgiven.

Why isn't it a gift? You already got a gift this year with the economic-stimulus payment. You think the federal government has a lot of money to spare? Look at the record deficit and tell me Uncle Sam has deep pockets.

Farah Jiminez, executive director of the community development corporation Mount Airy USA, explained it best: If the money didn't have to be repaid or the credit were made a permanent feature of the market, the asking price of houses would be driven up $7,500 by sellers who knew the buyers would be getting it back anyway.

The law is designed to stabilize prices so that values will rise naturally.

I spent a recent afternoon listening to an explanation of the tax credit by some officials from the National Association of Home Builders, and, with some added insight from my cadre of economists and other experts, I offer this:

The $7,500 tax credit is available to first-time buyers (defined as those not having owned a primary residence for three years before the purchase) who close on the sale of a house between April 9, 2008, and July 1, 2009. The house must be the buyer's principal residence.

If you are married and file jointly, the credit is available only if neither you nor your spouse owned a primary residence in the previous three years.

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Falls Church Firm Rolls Out Tool to Keep Up With Loan Modifications

As homeowners have battled to keep up with their mortgages, lenders and their call centers have struggled to handle the number of people hoping to bargain for lower interest rates, principal reductions and longer payment plans.
Borrower Inquiry, lets homeowners who have applied for a loan modification track the status of their requests online. Three major lenders are negotiating contracts to use the software, said Kevin Schlumpf, CSC's managing director of early resolution. He declined to name them or disclose how much they would pay for the service.

"To track the package you go to the Web site, click it and see where it is," he said. "This Borrower Inquiry tool lets you do the same thing."
According to Hope Now, the lenders' initiative meant to address the mortgage crisis, lenders processed 181,000 mortgage workouts in June and a total of 522,000 in the second quarter. That's a major uptick from the beginning of the year, and according to industry members, most loan servicers are having trouble handling the workload.
So I think everybody throughout the system realizes that technology is a pretty important tool to streamline what has been a pretty cumbersome process."

That overload has been a boon for some of CSC's services. Nine major lenders representing 20 percent of the prime mortgage market now use its core software for loan modifications, the company said. Several lenders, including Wells Fargo and bank of america, have also started using its counseling portal, which debuted this year and lets credit counselors instantly estimate the terms that borrowers can renegotiate for.

Rangers defender Andy joins Bristol City on loan

The defender, 26, has been allowed to leave Ibrox in search of first-team football after suffering a series of injuries since his arrival on loan from Wigan in January 2007.
Webster signed a three-year deal with Rangers earlier this summer and manager Walter Smith believes the short-term move to England will help him get his career back on track.
SPL side Motherwell had also confirmed their interest in the former Hearts player, but he will now spend the next six months south of the border instead.

Smith told www.rangers.co.uk: "We have allowed Andy to go on loan to Bristol City until the January transfer window.
"We feel it will be beneficial for him to get first-team football there and we hope he can return to the level we all know he is capable of.
"Andy has had a torrid time since he arrived at Rangers and it will be good for him to get games every week in another environment."

Interest hike of 1% may push home loan repayment by one-fifth

Repayments may increase by over Rs 3.5 lakh over a 20-year period on a Rs 20 lakh home loan, if the bankers hike interest rates by up to one per cent in the wake to tight monetary measures announced by RBI on Tuesday.

Consumers may have to fork out up to Rs 1,500 more every month for a home loan of Rs 20 lakh, as bankers say that interest rates could go up by 0.5-1 per cent after RBI's hawkish policy aimed at containing inflation.

As such private and public sector bank are offering home loans for interest up to 14.75 per cent per cent depending on the quantum and tenure of the credit period. At the lower end of the band, the interest rates start at 9.75 per cent.

An analysis of the repayment computation tables used by banks suggests that the EMI would rise by up to Rs 75 per lakh for a 20-year loan tenure after a one per cent interest rate hike.

This additional burden in the EMI would increase the overall interest cost for a loan taken for a period of 20 years, by a whopping Rs 3,60,000 crore.

After the Reserve Bank today asked the banks to park more cash with it and also increased its short-term key lending rates for them, the bankers across the board said that they would have to increase the lending rates for commercial and consumer loans, including for cars and housing.

The rates could rise by between 0.5-1.0 per cent, the bankers said, after RBI increased the cash reserve ratio by 0.25 per cent and the repo rate by 0.50 per cent.

The floating home loan intrest currently vary between 9.75 per cent to 12.5 per cent, while that for fixed rates are 11.25 per cent to 14.75 per cent for a 20-year loan.