Homebuyers Brace For Impact of New IRS Rule & Cutbacks

An upcoming IRS Ruling that eliminates $500 million in relief to over 75,000 homebuyers annually combined with cutbacks in housing assistance from the federal government will likely cause severe problems for low-income and first-time homebuyers nationwide.

Dallas, TX (PRWEB) May 21, 2006 -- An IRS ruling that virtually eliminates down payment assistance (DPA) to low-income and first-time homebuyers is meeting with stiff opposition from consumer, nonprofit and faith based groups. IRS Revenue Ruling 2006-27, which is scheduled to go into effect May 22nd permits federally funded non-profits to help home buyers with taxpayer dollars but prohibits assistance from seller-funded nonprofits to accomplish the same goal.

The move by the IRS has brought on a storm of criticism from a coalition of down payment assistance providers, prominent consumer groups, industry associations and hundreds of real estate and mortgage industry professionals across the nation. These groups are asking the IRS, the Treasury Department and Congress to delay implementation of the ruling so that public hearings can be conducted. Ameridream CEO and DPA coalition spokesperson, Ann Ashburn confirms that, “Over 75,000 home buyers receive over $500 million from nonprofits each year. The arbitrary IRS ruling, if adopted will leave tens of thousands of homebuyers, sellers and industry professionals stranded at closing tables nationwide during the months ahead.”

With millions of Americans affected by the emergency housing and community crisis in the Gulf and over $20 billion in tax dollars allocated to rebuilding Iraq, "The federal government's coordination with local and state governments, non-profit and faith-based organizations will be critical in the ensuing years." This statement was made by U.S. Representative Michael Oxley during a March Congressional committee hearing on oversight of the Department of Housing and Urban Development.

Nevertheless, Congressional budget proposals call for a 27% decrease in Community Development Block Grants, a 50% reduction in housing assistance for the disabled and a 26% cut in funding for senior housing. According to U.S. Representative Nydia Velazquez, “These cuts are especially troubling since HUD itself reports that five million very low-income families face critical housing problems, and the Gulf Coast is in the midst of a housing crisis, one of the worst in our nation's history.” She goes on to say that the President’s proposed budget, “… puts America's housing programs on life support. Not one program receives enough funding to fulfill the needs of those it serves.”

There is a distant hope that FHA’s proposed 100% financing program will alleviate part of the problem but it probably won’t be in effect any time soon. The taxpayer-backed American Dream Down Payment Assistance Program provides assistance to as many as 40,000 homebuyers yet falls short of the hundreds of thousands who can afford a mortgage but not the down payment. Currently, 40% of all FHA borrowers depend on assistance from seller-funded nonprofits.

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